July 11, 2024 • 36 mins
In this episode of Loan Officer Training, we delve into the art of structuring first-time home buyer loans. Guiding new and experienced loan officers alike, we explore the nuances of creating tailored loan packages that meet the unique needs of first-time buyers. From understanding government-backed loan programs like FHA and VA loans to navigating down payment assistance and credit score considerations, we cover everything you need to know to guide your clients through their first home purchase.
Join us as we discuss strategies for qualifying buyers, negotiating terms, and ensuring a smooth loan approval process. Whether you're looking to expand your expertise or enhance client satisfaction, this episode provides essential insights to help you structure successful first-time home buyer loans.
Tune in and empower your clients to achieve their homeownership
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Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!
Our team of over 350 licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank Statement Mortgages, P&L Mortgages, Asset Based Mortgage Programs, No Ratio CDFI Loan Pro
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The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as thousands of Non-QM mortgage loan program variations using alternative income documentation!
Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!
Our team of licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Restream recording Jul 11, (00:00):
All right.
So welcome everyone.
My name is Kyle Hiersche.
I'm the COO of the MortgageCalculator joined here by
President Nick Hiersche and oursales manager, Jose Gonzalez.
And we're a lender thatspecializes in non QM loans.
And what we do every Tuesday,Wednesday, and Thursday evening
at 7 p.
m.
Eastern on this show is gothrough an in depth loan officer
training topic.
And tonight's going to be agreat one, which is how to
(00:22):
structure first time home buyerloans.
So definitely somemisconceptions out there,
definitely something that,again, This last couple of
weeks, we've been taking it kindof back to the basics.
So this goes right along withthat.
So with that being said, Jose, Iwill let you go ahead and take
over and get into yourpresentation.
And if you have any questions,you can drop them in the chat
(00:42):
there.
And Jose would be happy toanswer them.
How's everybody doing tonight?
for joining us for tonight'straining on how to structure
first time home buyer loans.
So what we're going to breakdown today is, Break through
some barriers on themisconceptions that we have
about what are first time homebuyers, who's eligible for all
(01:06):
these great programs out there.
Um, so let's jump right into itbecause all the information is
in the presentation.
So first, let's discuss whatexactly is A first time
homebuyer.
The literal definition is aborrower who has not owned a
(01:28):
property in the last threeyears.
That's the critical componentthere because many people are
under the impression that, aborrower to be a first time
homebuyer could never have owneda property.
A property, and that's just notso.
That's why in the loanapplication, there's one of the
(01:49):
questions there that asks, haveyou owned a property in the last
3 years?
Yes or no.
If you did, what type ofproperty did you own and who did
you own it with?
Right?
So that's how we establish.
If the borrower is a first timehome buyer now, prior home
ownership is acceptable as longas more than three years have
(02:14):
elapsed since the borrower cameoff title.
Now, it's essential to note anyfirst time homebuyer option out
there is going to be for primaryresidences only, no second
homes, and definitely noinvestment property.
(02:36):
Now, it's very important to notethat the multitude of first time
homebuyer programs Out therehave been created to help
families of all income rangesachieve the dream of home
ownership.
You have the first timehomebuyer programs that are just
for first time homebuyers.
(02:57):
Then you have the first timehomebuyer programs that have
income limitations.
And then you have affordableOption loan programs that are
perfect for first timehomebuyers right now, that's,
that's a lot of what we're goingto concentrate on here because
(03:18):
the first time homebuyerprograms that are income based,
those that offer, differenttypes of, forgivable second
mortgages, some in largeamounts.
Tend to be very limited inscope, which I'm going to break
down to break down in a minute,but what we're trying to get at
(03:39):
here is that a first time homebuyer is at a disadvantage,
right?
And that's really, what we wantto explain here is the first
time home buyer is usually at adisadvantage because they are
not.
Selling a property that hasbuilt up equity, right?
So the first time home buyer isgoing to have to save the money
for their down payment and theirclosing costs.
(04:01):
I mean, yes, mind you, they mayget some, gift.
They may get some seller creditand other different types of,
methods to try to garner up.
Your down payment and all thefunds you need basically for the
cash to close, but the firsttime home buyer, like I was
(04:21):
mentioning, is at thedisadvantage because they don't
have that home.
They're selling that.
Maybe they've built up 50,dollars in equity.
Now they're going to sell that,you know, that, yeah.
A buyer would sell that propertyand have that money to put down
maybe 10, 20, 30 percent, whichis a totally different situation
than if you're basically savingup every dime that, that you can
(04:45):
scrounge up just so that youcan, put the down payment.
And it becomes a little bit moredifficult in some markets, with
really tight inventory that havehigh prices, where you have
markets out there where you'reentry level home.
Is 5, 6, 700, 000 for just astandard 3 bedroom, 2 bathroom,
(05:05):
12 to 14, 1, 500 square foothome.
Right?
So just imagine that's a lot ofsaving up that you got to do for
down payment and closing costscould be 20, 30, 40, 000 just to
try to come in.
With the minimum down payment.
So what we're trying to achievehere is offer strategies, not
(05:27):
just programs, right?
Cause I don't want to reallyconcentrate on programs.
I want to concentrate onstrategies to help first time
home buyers.
Get into a home.
So that's why we're talkingabout how to structure first
time home buyer loans, loans fora person buying their first home
(05:49):
that has most likely limitedresources.
And is looking for all the, ofthe different ways to, they can
get assistance with the cash toclose.
So let's discuss the true firsttime home buyer program options,
(06:12):
right?
So the true.
Fannie and Freddie Mac firsttime homebuyer allows for as
little as 3 percent down paymentand does not have any income
limitations.
That's really what I wasreferring to in that prior slide
there.
All you got to do is be a firsttime homebuyer and you can come
(06:33):
in with that 3 percent down.
Now that doesn't mean that therearen't 3 percent down options
for non first time homebuyers.
But I'm getting ahead of myselfthere.
That's in the next slide.
Now, one of the key.
Components of a first timehomebuyer loan.
This is what makes them special.
(06:54):
This is what makes the 3 percentdown first time homebuyer loan
special is that it can becombined with community seconds.
Up to 105% CLTV, right?
There are different, sources forthe community Seconds.
Could be an employer offering,it could be a municipality
(07:17):
offering it.
You can definitely check withyour AEs, regarding these
community seconds because we dohave investors that work with
community Seconds and they willbe able to direct us.
To the community.
Second, that would be applicablefor that loan, but in order to
be able to go that route, therehas to be, it has to be a true
(07:40):
first time home buyer, nothaving in the last three years.
Now, please note that the,maximum DTI and minimum credit
score is really going to bedetermined by your automated
underwriting findings, whetheryou use, DU, which is for Fannie
Mae.
Or whether, whether you use LP,which is for Freddie Mac,
(08:04):
however, the matrix lists six 20as the minimum credit score for
the convention alone.
But please note, don't thinkjust because the bar has a six
20 that they're going to qualifybecause you do have to run that
through automated underwriting.
Now, there are municipalprograms out there for first
(08:26):
time home buyers.
But these programs are localizedin nature, and they tend to
limit their assistance to thecity, county, or state where the
borrower resides.
The loan originator and the loanoriginators, employer both need
to be approved to offer theprogram.
The programs are sometimesdifficult to fund because
(08:50):
they're dependent on.
Funding availability.
The program doesn't have anyfunds at the moment.
You have to wait to be able toclose the loan and on these
types of municipal programs.
Also, the assistance is based onincome.
with the lowest income earnersqualifying for the most
assistance.
(09:11):
So I bring these municipalprograms up only because I'm
sure you're thinking about them,but they are usually not going
to be the method that yourborrower will be able to use to
close on a home.
I'm not saying they they're not.
out there.
They don't work, but they dohave a lot of limitations and
(09:35):
restrictions like I havementioned here.
So usually what you're going tohave is the borrower is going to
do a true three percent downfirst time homebuyer program,
maybe with a community second,or they're going to go with
programs that benefit first timehomebuyers.
Due to their low down paymentand some of these would be,
(09:58):
these programs I'm talking aboutdo not require the borrower to
be a first time home buyer, butdue to their low down payment,
reduced interest rates andreduced PMI or low credit score
requirements, they are perfectlysuited for first time home
buyers.
We're talking about, forexample, Fannie Mae's Home
(10:19):
Ready.
Which has a 97 percent LTV, 3percent down payment.
But for this program, just likefor the Freddie Mac home
possible program, which is thesister program of the Fannie Mae
home ready, same LTV.
Both of these programs requirethe income to be at 80 percent
(10:41):
or less than the HUD area medianincome for that census tract,
unless The property is in a lowto moderate income census tract
or in a minority census tract orin a disaster affected area.
You would only find that outonce you run the address through
(11:01):
the geocoder, either the FreddieMac geocoder for Home Possible
or the Fannie Mae geocoder forHome Ready.
Then you'll get what the, HUDMedian Inc income is, what 80%
of the HUD median income is, andif it is a minority sense,
census tract, low to moderateincome, census, census tract, or
if it is a disaster area.
(11:23):
Now, FHA is another very popularprogram that benefits first time
home buyers because FHA providesa 3% down ops three, 3.5%.
down payment option and mostimportantly with more lenient
credit and mortgage insurancerequirements.
(11:47):
So, let's break down each ofthese options right now.
So, I put there the importantpoints to consider for the
Fannie Mae home ready option.
So, what's been Pretty coolabout that is you got the one
unit, 97 percent LTV, two tofour units, 95 percent LTV,
(12:09):
double wide manufactured homes,97 percent LTV.
Warrantable condos, 97 percentLTV, as well as modular homes,
97 percent LTV.
Now, a modular home is not amanufactured home.
A modular home is a site builthome.
It's just that all of theindividual pieces are partially
(12:31):
assembled in a factory.
Maybe you have walls withelectrical and plumbing already
run inside as part of the wallitself.
It's Then they just put ittogether, connect some, some,
some brackets there and youhave.
The home, you may see those alsowhen you see like commercial
(12:51):
properties with like the polesthat are holding up a wall, and
then they bracket in togetherand in two to three weeks, they
have it built, which is thebenefit of the modular home, but
it's a site built home.
Now please note that the two tofour unit property purchase
under this program does requirea minimum 3 percent contribution
(13:11):
from the borrower's personalfunds versus the one unit.
That doesn't have anyrequirement.
It's a 3 percent down paymenttechnically, but if you get,
different contributions fromdifferent places, there is no
minimum, funds contribution forthe borrower.
Again, like I mentioned, theincome is limited to 80 percent
of the area median income,unless it falls into the
(13:33):
exceptions.
And then I have there the, URL.
For the, AMI lookup for FannieMae.
Now this program does allowgifts, grants, community
seconds, and up to 3 percentinterested party contribution
for LTVs between 90.
01 to 97%.
Homebuyer education is required.
(13:56):
For this program, when theborrower is a first time
homebuyer, however, like Imentioned, this program is not
limited to first timehomebuyers, like the regular 3
percent down option I mentionedfirst, which is a true first
time homebuyer, because itaccepts all All income ranges,
(14:18):
regardless of location, minoritydisaster, or none of that
matters, all that matters is forthe first option that you are a
true first time home buyer.
Now, this one, you do not haveto be a first time home buyer,
but you do have the incomerestrictions.
Now the Freddie Mac.
(14:39):
A home possible option.
Now let me back up a second.
Why would you choose one overthe other?
You got to look at theguidelines a little bit.
There are some slightdifferences in the two.
So that's why you would do it.
Like for example, you know, it'swhen you're looking at Freddie
and Fannie, right?
And one of the obviousdifferences is deferred student
(15:02):
loans, right?
Freddie Mac on a deferredstudent loan.
Is, half a percent of the totalbalance is what they use to
compute the monthly payment, forDTI calculation purposes.
Right?
So deferred says zero on thecredit report, but we can't put
(15:24):
zero.
We have to use half a percent.
Of the balance versus, FannieMae that uses 1 percent of the
balance.
So that's a 100 percentdifference.
So, you know, sometimes, verycommon to have borrowers with
50, a hundred thousand dollarsin student loans.
If it's 100, 000, that's a 500 amonth difference in the DTI,
(15:49):
right in the payments whenyou're calculating the DTI and
that that could make or breakyour deal.
I mean, other than that, they'revery similar in terms of the
eligible properties.
and all of the other componentsare all similar.
The other component of FreddieMac LP submission over, Fannie
(16:12):
Mae is going to be your selfemployed borrowers.
On the LP findings, it isbasically Preprinted verbiage in
the findings that if theborrower has been in business,
at least 5 years, if they'vebeen self employed, right?
At least 5 years, then you willprobably be able to go with a 1
(16:36):
year income finding, as opposedto the 2 year.
That's another reason why you'regoing to go LP.
Fannie Mae does offer in DU thatfinding, but it's not, let's say
pre printed in the findings.
It's not an automatic.
If the borrower is in businessfive years or more, you
basically have to, That findinghas to be offered to you in your
(17:00):
results.
So sometimes you get it,sometimes you don't.
It's really going to depend onthe risk factor of the file.
And when the algorithm analyzesthe risk, if it thinks the risk
is low, DU may give you the oneyear findings on a, on a
borrower who's been in businessless than five years.
You're not going to know untilyou submit it.
(17:21):
But those would be the two mainreasons why, you would use
Freddie Mac over Fannie Mae.
Now, another reason might, maybe, and we see this happen all
the time as well, you submit toDU, you don't get, you're
approved eligible, you submit toLP, you do, and LP is actually
called an accept, and viceversa.
(17:42):
You submit the LP, you don't getyour accept, which is your
approval, but then you submit toD U and you do.
So it's, it's up to thealgorithm because there are
separate, separate algorithm,separate data.
So these two are conventional.
Now, one thing before I go intothe last slide and talk about
FHA is a very important whenyou're out there in the real
(18:06):
estate market, assisting yourborrowers, with pre approvals.
Please know that in somemarkets, the, in the tighter
real estate markets whereinventory is really tight, there
seem to be preconceived notions,regarding conventional loans and
FHA loans.
And for a lot of reasons, manyof them possibly not valid,
(18:30):
there, the listing agents tendto have a preference for
conventionally financed offers.
Versus FHA financed offers,right?
So keep that in mind.
You always want to discuss withyour realtor partners, what it
is that they're looking for,what it is that's going to be
needed in order to help theborrower land that deal, right?
(18:52):
No sense pre approving them forsomething that then they're just
throwing out offers and nobodywants to accept it.
So that's a really important tonote because both of these
options are going to beconventional.
Right.
Conventional finance offers andmay allow your borrower to be
more competitive, especiallyremember if you're not getting
(19:13):
any asking for any sellercontribution, that's another
very important deal when you'renegotiating.
Now our last option, which isthe one that is a more readily
known for first time homebuyersor among first time homebuyers
(19:33):
is FHA.
Now here's where I'm clearing upsome more misconceptions, right?
Because FHA is not for firsttime homebuyers.
I mean, I don't know how manytimes I can count as more than I
can count.
Let's put it that way, whereI've been asked about, you know,
hey, I'm a first time homebuyerand I want to take advantage of
FHA.
(19:53):
Right.
And then you, you got to backthem up and say, well, great.
I can help you with an FHA loan,but just want to let you know,
it's not for a first time homebuyer.
It's for a primary residenceonly.
Then usually it's for your onlyhome, right?
That's not saying you can't getan FHA loan if you have another,
(20:13):
let's say a conventional loanalready.
But if you have an FHA loanalready, it's going to be tough
to get another FHA loan unlessyou meet the requirements of
usually the property has to be acertain distance away from the
existing FHA loan or the familyhas to have grown where you need
a larger, much larger home.
(20:34):
So you could document that.
So there's a lot of differentways you could try to get around
that.
But the main point to note hereis that FHA is not for first
time homebuyers.
It's mainly for a primaryresidence.
But why do first time homebuyerslook so much to FHA loans,
(20:55):
right, as their go to?
And, you know, it's mainly goingto be about income and about
credit, right?
And obviously low down payment.
Max LTV of 96.
5 down to a 580 credit score,meaning 3.
5 percent down payment with acredit score as low as 580.
(21:18):
Now, if the credit score doesdrop below 580 and down to a
500, we do have options up to 90percent LTV.
So 90, you know, 10 percentdown, minimum.
Would be required if the creditscore is below 580, but we have
(21:38):
options, right?
I mean, that's definitely notsomething that you can do with a
conventional loan.
The other, important note on FHAloans.
Is that the mortgage insuranceis based on a factor of 0.
55 percent of the loan amountdivided by 12 months because 12
months of the year, that's goingto give you your monthly
(22:01):
mortgage insurance payment.
And it's not based on theborrower's credit score.
Now that's really important,right?
Cause you have that borrowerwith a six 20, for example, and
you're thinking, Oh man, no,That borrower wants to do a
conventional 3 percent downbecause eventually down the
road, they want to get rid ofthe mortgage insurance.
(22:22):
Okay.
I mean, sounds good in theoryuntil you set your file up and
try to get an approval at a 97percent for that 620 borrower.
There's a good probability.
You're not going to get theapproval for that 620 borrower
from automated underwriting.
And then if you do.
Get that, that, a U S approvalat your six 20, then you gotta
(22:47):
get mortgage insurance.
And the mortgage insurance onconventional loans, for example,
is based on the credit score.
The lower the credit score, thehigher the cost on the mortgage
insurance.
And that's a big.
That's a big negative becauseyou could get a borrower with a
650 score, perfectly acceptablefor FHA, you know, maybe a 200,
(23:11):
000 loan where you're going topay, what would that be like,
like 110 a month in mortgageinsurance, I think for a 200,
000 loan FHA versus.
Conventional, which could be,you know, 300, 350, 380 or more.
(23:35):
If you're trying to get that 97percent or that 95 percent MI
coverage with a 650 score.
So then we, and on top of that.
The rate is going to be lowerfor FHA than conventional on
that same credit score barbecause at a 650, 660 in those
ranges, you don't really get anyloan level price adjustments on
(23:57):
FHA, but you definitely anythingbelow a 740 and a conventional
loan, you start getting loanlevel price adjustments.
For the lower score.
So then that borrower that'sthinking, yeah, but I want to
get rid of the M I man.
You know, how many years is itgoing to take you to get rid of
that?
Am I, if you do get it, how muchmore are you paying in principal
(24:21):
and interest?
And, or basically an interestand in mortgage insurance, just
for the benefit of maybe tryingto get rid of that mortgage
insurance, there's a goodprobability you may sell the
home or refinance out of thatloan because your credit score
got better and, you know, ratesgot lower than you would getting
rid of the mortgage insurance onthat loan because you need to
(24:43):
get to an 80%.
Loan to value or less with nomispayments.
So you really got to break itdown for your borrowers.
Well, and, you know, consultthem, you know, you're the
licensee, you're the expert.
You have to be able to consultthem with all in all of these
matters.
The other point, another pointto consider here, one, the four
(25:05):
unit properties all have thesame pricing on an FHA loan.
So this is especially importantfor our first time home buyer.
That wants to also be a househacker, because this may be your
only chance to do that right ata 3.
5 percent down payment, forexample, and on the conventional
(25:28):
at a 5 percent down payment.
But this is, you know, this isawesome because then down the
road, once you are in a positionto get that second property, you
can then turn this property intoa full rental.
But in the meantime, you'regetting rental income from the
other two One, two, or threeunits that you may have
(25:48):
depending on if you're in aduplex, triplex, or fourplex.
And most importantly for the FHAloans is that they can be
combined with down paymentassistance options for the
maximum benefit of first timehomebuyers.
Remember we're talking aboutfirst time homebuyers are
usually going to have limitedresources because they have to
(26:11):
save up every dime, save up allthe money to be able to come up.
With the cash to closerequirements.
So definitely, if we can do alow down payment option, like
FHA, and then combine that withdown payment assistance as well,
we recently went went over thoseoptions.
And, you know, we have downpayment, we have cl down payment
(26:33):
assistance of 3.5% of the salesprice, 5% of the sales price.
And then we even have what wecall closing cost assistance,
3%, 4% or 5%.
And on the down paymentassistance, we have both
forgivable option, which nopayment is required.
That's the free money option,right?
That's that for D Act.
(26:54):
And then we have the repayableoption.
And the difference between thetwo, besides one being free,
basically, and the other one yougot to pay back is the interest
rate because nothing is reallyfree, right?
They built in a cost somewherethere and the cost is that the
forgivable option with downpayment assistance has usually a
(27:17):
one percent or more higherinterest rate at the same cost
than the repayable option.
So in your standard loan youcould have a difference in
payment of a couple hundreddollars with these home prices
that we have now.
So, so even if you're making apayment On that repayable second
(27:38):
mortgage.
That's a really small loan.
It's 9.
99%.
Amortized over 30 year with aballoon payment in 10 years.
I mean, in 10 years, you've gotto pay it off.
Chances are, you've refinancedout of that loan by that anyhow,
out of the FHA and the secondmortgage consolidated into a
convention alone at a lowerrate.
(27:59):
You got rid of the EMI.
That's really the best way toget rid of the EMI.
when your credit goes up or whenthe equity of the property also
goes up.
But that's how you're going toget the maximum benefit.
But in comparing the payment ofthe two, usually it's about 120,
130 combined net, lower netpayment for the repayable option
(28:22):
than the forgivable option aftertaking into consideration the
payment on that second.
And it could be that you don'tqualify for that payment.
At the higher interest rate, andalso considering the, forgivable
option, to get the lowest cost,the interest rate differential
(28:45):
is probably going to be morethan 1%.
Could be one and a quarter to 1.
5 percent between the rateyou're going to get trying to
pay the lowest cost for theforgivable option versus the
rate you're That you're going topay for the repayable options.
And one final note here, I wantto mention, I know we were
(29:05):
talking about low down paymentoptions, right?
And I really haven't, haveadditional restrictions, that,
you know, make them notavailable for everybody.
Because here we're trying tohelp assist as many borrowers as
possible.
Because as you know, the USDAloans, for example, are for
rural areas only.
(29:27):
And the property address, Has tofall within a USDA designated
zone.
So you would go to the USDAgeocoder, plug in the property
address and see if the property,falls within those boundaries.
And also for VA loans, the VAloans are only for our veterans
(29:51):
or active military.
So again, a limited group there,not like all of these other
programs.
That are really open to, a muchwider spectrum of the,
population.
All right.
Thank you, Jose.
(30:12):
Looks like we do have somequestions that came in here.
I think we'll, pull them up onthe screen here.
So, first question is, do theystill need to be under income
limits if it's a minoritydisaster, low income, or do
these have exceptions?
Nope, those are the exceptions.
The exceptions for the incomelimitations for these programs
(30:34):
are exactly those.
It's either a minority censustract, a low to moderate income
census tract, or a designateddisaster area.
You'll find that out when youplug in the address.
In the geocoder, and it'll letyou know right away, the
verbiage will be right there,and you'll know what you need to
do depending on your borrower'sincome.
(30:55):
Alright, next question.
If they're using a co borrower,does everyone have to be under
the 80 percent rule?
Oh, absolutely.
At that point, borrower, youhave to look at the combined
income of the two.
Right, so you, you, you can'tjust get a borrower that's
making 30, 000 because, youknow, they'll definitely qualify
(31:17):
for every, census tracked in theUnited States at 30, 000, but
you're not going to get verymany homes in, in all the
different, real estate markets.
And then bring in 100, 000 ayear COBAR and now have 130, 000
a year income.
Yeah, they qualify now, but nowthey've been priced out or
income doubt, I guess you couldsay, out of the area median
(31:41):
income, usually because mostareas I see out there like 60,
70, 80, 000.
I mean, there may be some Ofthose high RITC areas in some
markets, but typically that'sthe range that you're going to
see.
That's the 80%.
All right.
Next question.
(32:01):
FHA mortgage insurance nevergoes away unless refinanced no
matter what the LTV.
Nope.
There's actually scenarios whereyou can eventually move, remove
the FHA mortgage insurance.
It is when the initial loan tovalue Of the loan is 90 percent
(32:23):
or less.
So if you start at 90 percent orless, you are given the option
down the road.
And by down the road, I think ifI remember reading this in the
FHA handbook, it's somethinglike 11 years down the road, and
I think it's 78 percent LTV orless.
And then they let you remove themortgage insurance.
(32:47):
All right.
Another question here.
Does 30 and 60 day lates oncredit cards create issues for
closing if they still have agood score?
A client has 740 middle scorebut lower 540 because of the
lates.
Well, you know, apparently thereyou're, you're getting, that's a
credit report of a borrow wheresome of the bureaus, those lates
(33:09):
are being reported to some ofthe bureaus and not, Others,
that's why we have three creditbureaus, but at that point, you
got to remember the following,unless the loan is manual
underwriting and the only manualunderwriting options we really
have available to us are FHA.
You do have VA, I think USDA,but not conventional.
(33:32):
We have.
Non QM.
So if you're dealing with amanually underwritten loan,
then, you'd have to see what theguidelines state and the,
underwriters discretion.
But on the majority of thecases, if it's an agency loan,
(33:52):
right?
FHA, USDA, VA, VA orconventional, that's what we
call our agency loans.
It's going to depend onautomated underwriting.
Right.
So that's why I mentioned inthe, in the beginning, for
example, yeah, theoretically,the matrix says 620 for
conventional, but it's reallygoing to be up to AUS, right?
AUS is going to analyze the riskassociated with the file and
(34:15):
all, and credit is one of therisk factors.
And then you have, you know, theincome, right?
The DTI, how long they've beenworking, how at that job, how
long they've been working ingeneral, how, how, how old is
their credit, right?
The depth of the credit.
The age of the credit, and then,you know, see what happens.
(34:35):
But I mean, if you have a 60 and90 day lates in there and all
that kind of stuff, AUS is goingto pick up on that.
AUS is going to look at thecredit history, not just the
credit score.
So you really won't know on thatuntil you run it through
automated underwriting and seewhat kind of findings you get.
That's why at the mortgagecalculator on our agency loans,
(34:57):
we don't issue pre qual letters.
We issue pre approval lettersafter we have thoroughly vetted
the borrower.
With a complete loanapplication, full credit report,
reviewing the income documentsas applicable, reviewing the
asset documents as applicable,and any other documentation that
(35:17):
should be reviewed, thensubmitting to automated
underwriting, getting hopefullyare approved, eligible or
accept.
For LP and then we issue our preapproval letter.
Okay That was the last question.
So great topic there here todayRemember we do this on tuesdays
(35:39):
wednesdays and thursday eveningsat 7 p.
m.
Eastern so we will be back herenext week with some new topics
yeah, no more questions.
Okay, cool All right Well, thankyou everybody for tuning in and
we will see you next tuesday 7p.
m Eastern for the next episodeof the loan office
All right.
So welcome everyone.
My name is Kyle Hiersche.
I'm the COO of the MortgageCalculator joined here by
President Nick Hiersche and oursales manager, Jose Gonzalez.
And we're a lender thatspecializes in non QM loans.
And what we do every Tuesday,Wednesday, and Thursday evening
at 7 p.
m.
Eastern on this show is gothrough an in depth loan officer
training topic.
And tonight's going to be agreat one, which is how to
(00:22):
structure first time home buyerloans.
So definitely somemisconceptions out there,
definitely something that,again, This last couple of
weeks, we've been taking it kindof back to the basics.
So this goes right along withthat.
So with that being said, Jose, Iwill let you go ahead and take
over and get into yourpresentation.
And if you have any questions,you can drop them in the chat
(00:42):
there.
And Jose would be happy toanswer them.
How's everybody doing tonight?
for joining us for tonight'straining on how to structure
first time home buyer loans.
So what we're going to breakdown today is, Break through
some barriers on themisconceptions that we have
about what are first time homebuyers, who's eligible for all
(01:06):
these great programs out there.
Um, so let's jump right into itbecause all the information is
in the presentation.
So first, let's discuss whatexactly is A first time
homebuyer.
The literal definition is aborrower who has not owned a
(01:28):
property in the last threeyears.
That's the critical componentthere because many people are
under the impression that, aborrower to be a first time
homebuyer could never have owneda property.
A property, and that's just notso.
That's why in the loanapplication, there's one of the
(01:49):
questions there that asks, haveyou owned a property in the last
3 years?
Yes or no.
If you did, what type ofproperty did you own and who did
you own it with?
Right?
So that's how we establish.
If the borrower is a first timehome buyer now, prior home
ownership is acceptable as longas more than three years have
(02:14):
elapsed since the borrower cameoff title.
Now, it's essential to note anyfirst time homebuyer option out
there is going to be for primaryresidences only, no second
homes, and definitely noinvestment property.
(02:36):
Now, it's very important to notethat the multitude of first time
homebuyer programs Out therehave been created to help
families of all income rangesachieve the dream of home
ownership.
You have the first timehomebuyer programs that are just
for first time homebuyers.
(02:57):
Then you have the first timehomebuyer programs that have
income limitations.
And then you have affordableOption loan programs that are
perfect for first timehomebuyers right now, that's,
that's a lot of what we're goingto concentrate on here because
(03:18):
the first time homebuyerprograms that are income based,
those that offer, differenttypes of, forgivable second
mortgages, some in largeamounts.
Tend to be very limited inscope, which I'm going to break
down to break down in a minute,but what we're trying to get at
(03:39):
here is that a first time homebuyer is at a disadvantage,
right?
And that's really, what we wantto explain here is the first
time home buyer is usually at adisadvantage because they are
not.
Selling a property that hasbuilt up equity, right?
So the first time home buyer isgoing to have to save the money
for their down payment and theirclosing costs.
(04:01):
I mean, yes, mind you, they mayget some, gift.
They may get some seller creditand other different types of,
methods to try to garner up.
Your down payment and all thefunds you need basically for the
cash to close, but the firsttime home buyer, like I was
(04:21):
mentioning, is at thedisadvantage because they don't
have that home.
They're selling that.
Maybe they've built up 50,dollars in equity.
Now they're going to sell that,you know, that, yeah.
A buyer would sell that propertyand have that money to put down
maybe 10, 20, 30 percent, whichis a totally different situation
than if you're basically savingup every dime that, that you can
(04:45):
scrounge up just so that youcan, put the down payment.
And it becomes a little bit moredifficult in some markets, with
really tight inventory that havehigh prices, where you have
markets out there where you'reentry level home.
Is 5, 6, 700, 000 for just astandard 3 bedroom, 2 bathroom,
(05:05):
12 to 14, 1, 500 square foothome.
Right?
So just imagine that's a lot ofsaving up that you got to do for
down payment and closing costscould be 20, 30, 40, 000 just to
try to come in.
With the minimum down payment.
So what we're trying to achievehere is offer strategies, not
(05:27):
just programs, right?
Cause I don't want to reallyconcentrate on programs.
I want to concentrate onstrategies to help first time
home buyers.
Get into a home.
So that's why we're talkingabout how to structure first
time home buyer loans, loans fora person buying their first home
(05:49):
that has most likely limitedresources.
And is looking for all the, ofthe different ways to, they can
get assistance with the cash toclose.
So let's discuss the true firsttime home buyer program options,
(06:12):
right?
So the true.
Fannie and Freddie Mac firsttime homebuyer allows for as
little as 3 percent down paymentand does not have any income
limitations.
That's really what I wasreferring to in that prior slide
there.
All you got to do is be a firsttime homebuyer and you can come
(06:33):
in with that 3 percent down.
Now that doesn't mean that therearen't 3 percent down options
for non first time homebuyers.
But I'm getting ahead of myselfthere.
That's in the next slide.
Now, one of the key.
Components of a first timehomebuyer loan.
This is what makes them special.
(06:54):
This is what makes the 3 percentdown first time homebuyer loan
special is that it can becombined with community seconds.
Up to 105% CLTV, right?
There are different, sources forthe community Seconds.
Could be an employer offering,it could be a municipality
(07:17):
offering it.
You can definitely check withyour AEs, regarding these
community seconds because we dohave investors that work with
community Seconds and they willbe able to direct us.
To the community.
Second, that would be applicablefor that loan, but in order to
be able to go that route, therehas to be, it has to be a true
(07:40):
first time home buyer, nothaving in the last three years.
Now, please note that the,maximum DTI and minimum credit
score is really going to bedetermined by your automated
underwriting findings, whetheryou use, DU, which is for Fannie
Mae.
Or whether, whether you use LP,which is for Freddie Mac,
(08:04):
however, the matrix lists six 20as the minimum credit score for
the convention alone.
But please note, don't thinkjust because the bar has a six
20 that they're going to qualifybecause you do have to run that
through automated underwriting.
Now, there are municipalprograms out there for first
(08:26):
time home buyers.
But these programs are localizedin nature, and they tend to
limit their assistance to thecity, county, or state where the
borrower resides.
The loan originator and the loanoriginators, employer both need
to be approved to offer theprogram.
The programs are sometimesdifficult to fund because
(08:50):
they're dependent on.
Funding availability.
The program doesn't have anyfunds at the moment.
You have to wait to be able toclose the loan and on these
types of municipal programs.
Also, the assistance is based onincome.
with the lowest income earnersqualifying for the most
assistance.
(09:11):
So I bring these municipalprograms up only because I'm
sure you're thinking about them,but they are usually not going
to be the method that yourborrower will be able to use to
close on a home.
I'm not saying they they're not.
out there.
They don't work, but they dohave a lot of limitations and
(09:35):
restrictions like I havementioned here.
So usually what you're going tohave is the borrower is going to
do a true three percent downfirst time homebuyer program,
maybe with a community second,or they're going to go with
programs that benefit first timehomebuyers.
Due to their low down paymentand some of these would be,
(09:58):
these programs I'm talking aboutdo not require the borrower to
be a first time home buyer, butdue to their low down payment,
reduced interest rates andreduced PMI or low credit score
requirements, they are perfectlysuited for first time home
buyers.
We're talking about, forexample, Fannie Mae's Home
(10:19):
Ready.
Which has a 97 percent LTV, 3percent down payment.
But for this program, just likefor the Freddie Mac home
possible program, which is thesister program of the Fannie Mae
home ready, same LTV.
Both of these programs requirethe income to be at 80 percent
(10:41):
or less than the HUD area medianincome for that census tract,
unless The property is in a lowto moderate income census tract
or in a minority census tract orin a disaster affected area.
You would only find that outonce you run the address through
(11:01):
the geocoder, either the FreddieMac geocoder for Home Possible
or the Fannie Mae geocoder forHome Ready.
Then you'll get what the, HUDMedian Inc income is, what 80%
of the HUD median income is, andif it is a minority sense,
census tract, low to moderateincome, census, census tract, or
if it is a disaster area.
(11:23):
Now, FHA is another very popularprogram that benefits first time
home buyers because FHA providesa 3% down ops three, 3.5%.
down payment option and mostimportantly with more lenient
credit and mortgage insurancerequirements.
(11:47):
So, let's break down each ofthese options right now.
So, I put there the importantpoints to consider for the
Fannie Mae home ready option.
So, what's been Pretty coolabout that is you got the one
unit, 97 percent LTV, two tofour units, 95 percent LTV,
(12:09):
double wide manufactured homes,97 percent LTV.
Warrantable condos, 97 percentLTV, as well as modular homes,
97 percent LTV.
Now, a modular home is not amanufactured home.
A modular home is a site builthome.
It's just that all of theindividual pieces are partially
(12:31):
assembled in a factory.
Maybe you have walls withelectrical and plumbing already
run inside as part of the wallitself.
It's Then they just put ittogether, connect some, some,
some brackets there and youhave.
The home, you may see those alsowhen you see like commercial
(12:51):
properties with like the polesthat are holding up a wall, and
then they bracket in togetherand in two to three weeks, they
have it built, which is thebenefit of the modular home, but
it's a site built home.
Now please note that the two tofour unit property purchase
under this program does requirea minimum 3 percent contribution
(13:11):
from the borrower's personalfunds versus the one unit.
That doesn't have anyrequirement.
It's a 3 percent down paymenttechnically, but if you get,
different contributions fromdifferent places, there is no
minimum, funds contribution forthe borrower.
Again, like I mentioned, theincome is limited to 80 percent
of the area median income,unless it falls into the
(13:33):
exceptions.
And then I have there the, URL.
For the, AMI lookup for FannieMae.
Now this program does allowgifts, grants, community
seconds, and up to 3 percentinterested party contribution
for LTVs between 90.
01 to 97%.
Homebuyer education is required.
(13:56):
For this program, when theborrower is a first time
homebuyer, however, like Imentioned, this program is not
limited to first timehomebuyers, like the regular 3
percent down option I mentionedfirst, which is a true first
time homebuyer, because itaccepts all All income ranges,
(14:18):
regardless of location, minoritydisaster, or none of that
matters, all that matters is forthe first option that you are a
true first time home buyer.
Now, this one, you do not haveto be a first time home buyer,
but you do have the incomerestrictions.
Now the Freddie Mac.
(14:39):
A home possible option.
Now let me back up a second.
Why would you choose one overthe other?
You got to look at theguidelines a little bit.
There are some slightdifferences in the two.
So that's why you would do it.
Like for example, you know, it'swhen you're looking at Freddie
and Fannie, right?
And one of the obviousdifferences is deferred student
(15:02):
loans, right?
Freddie Mac on a deferredstudent loan.
Is, half a percent of the totalbalance is what they use to
compute the monthly payment, forDTI calculation purposes.
Right?
So deferred says zero on thecredit report, but we can't put
(15:24):
zero.
We have to use half a percent.
Of the balance versus, FannieMae that uses 1 percent of the
balance.
So that's a 100 percentdifference.
So, you know, sometimes, verycommon to have borrowers with
50, a hundred thousand dollarsin student loans.
If it's 100, 000, that's a 500 amonth difference in the DTI,
(15:49):
right in the payments whenyou're calculating the DTI and
that that could make or breakyour deal.
I mean, other than that, they'revery similar in terms of the
eligible properties.
and all of the other componentsare all similar.
The other component of FreddieMac LP submission over, Fannie
(16:12):
Mae is going to be your selfemployed borrowers.
On the LP findings, it isbasically Preprinted verbiage in
the findings that if theborrower has been in business,
at least 5 years, if they'vebeen self employed, right?
At least 5 years, then you willprobably be able to go with a 1
(16:36):
year income finding, as opposedto the 2 year.
That's another reason why you'regoing to go LP.
Fannie Mae does offer in DU thatfinding, but it's not, let's say
pre printed in the findings.
It's not an automatic.
If the borrower is in businessfive years or more, you
basically have to, That findinghas to be offered to you in your
(17:00):
results.
So sometimes you get it,sometimes you don't.
It's really going to depend onthe risk factor of the file.
And when the algorithm analyzesthe risk, if it thinks the risk
is low, DU may give you the oneyear findings on a, on a
borrower who's been in businessless than five years.
You're not going to know untilyou submit it.
(17:21):
But those would be the two mainreasons why, you would use
Freddie Mac over Fannie Mae.
Now, another reason might, maybe, and we see this happen all
the time as well, you submit toDU, you don't get, you're
approved eligible, you submit toLP, you do, and LP is actually
called an accept, and viceversa.
(17:42):
You submit the LP, you don't getyour accept, which is your
approval, but then you submit toD U and you do.
So it's, it's up to thealgorithm because there are
separate, separate algorithm,separate data.
So these two are conventional.
Now, one thing before I go intothe last slide and talk about
FHA is a very important whenyou're out there in the real
(18:06):
estate market, assisting yourborrowers, with pre approvals.
Please know that in somemarkets, the, in the tighter
real estate markets whereinventory is really tight, there
seem to be preconceived notions,regarding conventional loans and
FHA loans.
And for a lot of reasons, manyof them possibly not valid,
(18:30):
there, the listing agents tendto have a preference for
conventionally financed offers.
Versus FHA financed offers,right?
So keep that in mind.
You always want to discuss withyour realtor partners, what it
is that they're looking for,what it is that's going to be
needed in order to help theborrower land that deal, right?
(18:52):
No sense pre approving them forsomething that then they're just
throwing out offers and nobodywants to accept it.
So that's a really important tonote because both of these
options are going to beconventional.
Right.
Conventional finance offers andmay allow your borrower to be
more competitive, especiallyremember if you're not getting
(19:13):
any asking for any sellercontribution, that's another
very important deal when you'renegotiating.
Now our last option, which isthe one that is a more readily
known for first time homebuyersor among first time homebuyers
(19:33):
is FHA.
Now here's where I'm clearing upsome more misconceptions, right?
Because FHA is not for firsttime homebuyers.
I mean, I don't know how manytimes I can count as more than I
can count.
Let's put it that way, whereI've been asked about, you know,
hey, I'm a first time homebuyerand I want to take advantage of
FHA.
(19:53):
Right.
And then you, you got to backthem up and say, well, great.
I can help you with an FHA loan,but just want to let you know,
it's not for a first time homebuyer.
It's for a primary residenceonly.
Then usually it's for your onlyhome, right?
That's not saying you can't getan FHA loan if you have another,
(20:13):
let's say a conventional loanalready.
But if you have an FHA loanalready, it's going to be tough
to get another FHA loan unlessyou meet the requirements of
usually the property has to be acertain distance away from the
existing FHA loan or the familyhas to have grown where you need
a larger, much larger home.
(20:34):
So you could document that.
So there's a lot of differentways you could try to get around
that.
But the main point to note hereis that FHA is not for first
time homebuyers.
It's mainly for a primaryresidence.
But why do first time homebuyerslook so much to FHA loans,
(20:55):
right, as their go to?
And, you know, it's mainly goingto be about income and about
credit, right?
And obviously low down payment.
Max LTV of 96.
5 down to a 580 credit score,meaning 3.
5 percent down payment with acredit score as low as 580.
(21:18):
Now, if the credit score doesdrop below 580 and down to a
500, we do have options up to 90percent LTV.
So 90, you know, 10 percentdown, minimum.
Would be required if the creditscore is below 580, but we have
(21:38):
options, right?
I mean, that's definitely notsomething that you can do with a
conventional loan.
The other, important note on FHAloans.
Is that the mortgage insuranceis based on a factor of 0.
55 percent of the loan amountdivided by 12 months because 12
months of the year, that's goingto give you your monthly
(22:01):
mortgage insurance payment.
And it's not based on theborrower's credit score.
Now that's really important,right?
Cause you have that borrowerwith a six 20, for example, and
you're thinking, Oh man, no,That borrower wants to do a
conventional 3 percent downbecause eventually down the
road, they want to get rid ofthe mortgage insurance.
(22:22):
Okay.
I mean, sounds good in theoryuntil you set your file up and
try to get an approval at a 97percent for that 620 borrower.
There's a good probability.
You're not going to get theapproval for that 620 borrower
from automated underwriting.
And then if you do.
Get that, that, a U S approvalat your six 20, then you gotta
(22:47):
get mortgage insurance.
And the mortgage insurance onconventional loans, for example,
is based on the credit score.
The lower the credit score, thehigher the cost on the mortgage
insurance.
And that's a big.
That's a big negative becauseyou could get a borrower with a
650 score, perfectly acceptablefor FHA, you know, maybe a 200,
(23:11):
000 loan where you're going topay, what would that be like,
like 110 a month in mortgageinsurance, I think for a 200,
000 loan FHA versus.
Conventional, which could be,you know, 300, 350, 380 or more.
(23:35):
If you're trying to get that 97percent or that 95 percent MI
coverage with a 650 score.
So then we, and on top of that.
The rate is going to be lowerfor FHA than conventional on
that same credit score barbecause at a 650, 660 in those
ranges, you don't really get anyloan level price adjustments on
(23:57):
FHA, but you definitely anythingbelow a 740 and a conventional
loan, you start getting loanlevel price adjustments.
For the lower score.
So then that borrower that'sthinking, yeah, but I want to
get rid of the M I man.
You know, how many years is itgoing to take you to get rid of
that?
Am I, if you do get it, how muchmore are you paying in principal
(24:21):
and interest?
And, or basically an interestand in mortgage insurance, just
for the benefit of maybe tryingto get rid of that mortgage
insurance, there's a goodprobability you may sell the
home or refinance out of thatloan because your credit score
got better and, you know, ratesgot lower than you would getting
rid of the mortgage insurance onthat loan because you need to
(24:43):
get to an 80%.
Loan to value or less with nomispayments.
So you really got to break itdown for your borrowers.
Well, and, you know, consultthem, you know, you're the
licensee, you're the expert.
You have to be able to consultthem with all in all of these
matters.
The other point, another pointto consider here, one, the four
(25:05):
unit properties all have thesame pricing on an FHA loan.
So this is especially importantfor our first time home buyer.
That wants to also be a househacker, because this may be your
only chance to do that right ata 3.
5 percent down payment, forexample, and on the conventional
(25:28):
at a 5 percent down payment.
But this is, you know, this isawesome because then down the
road, once you are in a positionto get that second property, you
can then turn this property intoa full rental.
But in the meantime, you'regetting rental income from the
other two One, two, or threeunits that you may have
(25:48):
depending on if you're in aduplex, triplex, or fourplex.
And most importantly for the FHAloans is that they can be
combined with down paymentassistance options for the
maximum benefit of first timehomebuyers.
Remember we're talking aboutfirst time homebuyers are
usually going to have limitedresources because they have to
(26:11):
save up every dime, save up allthe money to be able to come up.
With the cash to closerequirements.
So definitely, if we can do alow down payment option, like
FHA, and then combine that withdown payment assistance as well,
we recently went went over thoseoptions.
And, you know, we have downpayment, we have cl down payment
(26:33):
assistance of 3.5% of the salesprice, 5% of the sales price.
And then we even have what wecall closing cost assistance,
3%, 4% or 5%.
And on the down paymentassistance, we have both
forgivable option, which nopayment is required.
That's the free money option,right?
That's that for D Act.
(26:54):
And then we have the repayableoption.
And the difference between thetwo, besides one being free,
basically, and the other one yougot to pay back is the interest
rate because nothing is reallyfree, right?
They built in a cost somewherethere and the cost is that the
forgivable option with downpayment assistance has usually a
(27:17):
one percent or more higherinterest rate at the same cost
than the repayable option.
So in your standard loan youcould have a difference in
payment of a couple hundreddollars with these home prices
that we have now.
So, so even if you're making apayment On that repayable second
(27:38):
mortgage.
That's a really small loan.
It's 9.
99%.
Amortized over 30 year with aballoon payment in 10 years.
I mean, in 10 years, you've gotto pay it off.
Chances are, you've refinancedout of that loan by that anyhow,
out of the FHA and the secondmortgage consolidated into a
convention alone at a lowerrate.
(27:59):
You got rid of the EMI.
That's really the best way toget rid of the EMI.
when your credit goes up or whenthe equity of the property also
goes up.
But that's how you're going toget the maximum benefit.
But in comparing the payment ofthe two, usually it's about 120,
130 combined net, lower netpayment for the repayable option
(28:22):
than the forgivable option aftertaking into consideration the
payment on that second.
And it could be that you don'tqualify for that payment.
At the higher interest rate, andalso considering the, forgivable
option, to get the lowest cost,the interest rate differential
(28:45):
is probably going to be morethan 1%.
Could be one and a quarter to 1.
5 percent between the rateyou're going to get trying to
pay the lowest cost for theforgivable option versus the
rate you're That you're going topay for the repayable options.
And one final note here, I wantto mention, I know we were
(29:05):
talking about low down paymentoptions, right?
And I really haven't, haveadditional restrictions, that,
you know, make them notavailable for everybody.
Because here we're trying tohelp assist as many borrowers as
possible.
Because as you know, the USDAloans, for example, are for
rural areas only.
(29:27):
And the property address, Has tofall within a USDA designated
zone.
So you would go to the USDAgeocoder, plug in the property
address and see if the property,falls within those boundaries.
And also for VA loans, the VAloans are only for our veterans
(29:51):
or active military.
So again, a limited group there,not like all of these other
programs.
That are really open to, a muchwider spectrum of the,
population.
All right.
Thank you, Jose.
(30:12):
Looks like we do have somequestions that came in here.
I think we'll, pull them up onthe screen here.
So, first question is, do theystill need to be under income
limits if it's a minoritydisaster, low income, or do
these have exceptions?
Nope, those are the exceptions.
The exceptions for the incomelimitations for these programs
(30:34):
are exactly those.
It's either a minority censustract, a low to moderate income
census tract, or a designateddisaster area.
You'll find that out when youplug in the address.
In the geocoder, and it'll letyou know right away, the
verbiage will be right there,and you'll know what you need to
do depending on your borrower'sincome.
(30:55):
Alright, next question.
If they're using a co borrower,does everyone have to be under
the 80 percent rule?
Oh, absolutely.
At that point, borrower, youhave to look at the combined
income of the two.
Right, so you, you, you can'tjust get a borrower that's
making 30, 000 because, youknow, they'll definitely qualify
(31:17):
for every, census tracked in theUnited States at 30, 000, but
you're not going to get verymany homes in, in all the
different, real estate markets.
And then bring in 100, 000 ayear COBAR and now have 130, 000
a year income.
Yeah, they qualify now, but nowthey've been priced out or
income doubt, I guess you couldsay, out of the area median
(31:41):
income, usually because mostareas I see out there like 60,
70, 80, 000.
I mean, there may be some Ofthose high RITC areas in some
markets, but typically that'sthe range that you're going to
see.
That's the 80%.
All right.
Next question.
(32:01):
FHA mortgage insurance nevergoes away unless refinanced no
matter what the LTV.
Nope.
There's actually scenarios whereyou can eventually move, remove
the FHA mortgage insurance.
It is when the initial loan tovalue Of the loan is 90 percent
(32:23):
or less.
So if you start at 90 percent orless, you are given the option
down the road.
And by down the road, I think ifI remember reading this in the
FHA handbook, it's somethinglike 11 years down the road, and
I think it's 78 percent LTV orless.
And then they let you remove themortgage insurance.
(32:47):
All right.
Another question here.
Does 30 and 60 day lates oncredit cards create issues for
closing if they still have agood score?
A client has 740 middle scorebut lower 540 because of the
lates.
Well, you know, apparently thereyou're, you're getting, that's a
credit report of a borrow wheresome of the bureaus, those lates
(33:09):
are being reported to some ofthe bureaus and not, Others,
that's why we have three creditbureaus, but at that point, you
got to remember the following,unless the loan is manual
underwriting and the only manualunderwriting options we really
have available to us are FHA.
You do have VA, I think USDA,but not conventional.
(33:32):
We have.
Non QM.
So if you're dealing with amanually underwritten loan,
then, you'd have to see what theguidelines state and the,
underwriters discretion.
But on the majority of thecases, if it's an agency loan,
(33:52):
right?
FHA, USDA, VA, VA orconventional, that's what we
call our agency loans.
It's going to depend onautomated underwriting.
Right.
So that's why I mentioned inthe, in the beginning, for
example, yeah, theoretically,the matrix says 620 for
conventional, but it's reallygoing to be up to AUS, right?
AUS is going to analyze the riskassociated with the file and
(34:15):
all, and credit is one of therisk factors.
And then you have, you know, theincome, right?
The DTI, how long they've beenworking, how at that job, how
long they've been working ingeneral, how, how, how old is
their credit, right?
The depth of the credit.
The age of the credit, and then,you know, see what happens.
(34:35):
But I mean, if you have a 60 and90 day lates in there and all
that kind of stuff, AUS is goingto pick up on that.
AUS is going to look at thecredit history, not just the
credit score.
So you really won't know on thatuntil you run it through
automated underwriting and seewhat kind of findings you get.
That's why at the mortgagecalculator on our agency loans,
(34:57):
we don't issue pre qual letters.
We issue pre approval lettersafter we have thoroughly vetted
the borrower.
With a complete loanapplication, full credit report,
reviewing the income documentsas applicable, reviewing the
asset documents as applicable,and any other documentation that
(35:17):
should be reviewed, thensubmitting to automated
underwriting, getting hopefullyare approved, eligible or
accept.
For LP and then we issue our preapproval letter.
Okay That was the last question.
So great topic there here todayRemember we do this on tuesdays
(35:39):
wednesdays and thursday eveningsat 7 p.
m.
Eastern so we will be back herenext week with some new topics
yeah, no more questions.
Okay, cool All right Well, thankyou everybody for tuning in and
we will see you next tuesday 7p.
m Eastern for the next episodeof the loan office
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