Documentation for Self Employed or Commission Paid Borrowers

Sonia asks via commenting on a post at The Mortgage Porter:

“I’m a first time home buyer, but I am self employed I would like to be preapproved for a mortgage loan and want to know what paper work will be required by the bank…”

Self employed borrowers will most likely need to provide the following documentation:

  • Last two years complete (all schedules) tax returns for both business and personal including W2s or 1099s.
  • Year to day profit and loss statement.
  • Bank statements, asset accounts (all pages).  Be prepared to document you have enough funds to cover your down payment and closing costs at minimum.  You may have to show proof of having reserves (additional savings remaining after closing).

Self employed borrowers need to show at least two years of income for their business.  The borrowers often income is averaged over the past two years.  If the borrowers income shows a decline from the previous year, the lower income may be used and the self employed borrower should be prepared to explain why they are showing less income to the underwriter. 

These guidelines may also apply to:

  • People who are receive commission income that accounts for 25% or more of their annual income.
  • People who own 25% or more of the company they work for.
  • Independent contractors.

If you’re a commission paid sales person, you’ll need to provide your last two years tax returns as well and those un-reimbursed business expenses are factored against you. 

When a borrower has income that has the possibility of fluctuating, they need to be able to review a period of time (two years).   Underwriters are looking for trends with any borrower’s income. 

I recently met with a newly self-employed person who wanted to take advantage of the First Time Home Buyer Tax Credit.  She’s bought her business just shy of a year ago.  Even though it’s showing great profit right now; her first year tax returns report a loss (as many new businesses do).  She does not currently qualify for a mortgage.  After she has two years tax returns (track record) her income will still be averaged with the first year loss factored in. 

The days of “stated income” or “no income verified” are gone (so are many of the lenders who offered those products).  Be prepared to fully document your income and down payment.  You’re showing the lender you have the ability to pay the mortgage with your successful two year track record as a self employed person or commission paid sales person.

I’m happy to work with self-employed or commissioned paid borrowers. Click here if you would like a rate quote for a home located anywhere in Washington.

Get Your Car Washed and Do a Good Deed in Issaquah Today

Dawn Appel is a former employee of The Talon Group.  She has been couragously battling leukemia.  From 8:00 am – 4:00 pm today in Issaquah, you can get your car washed to help raise funds in her honor and to help support her family.

6a00e553ff53358834011570459fa6970b-800wi 

If you can't make it to the car wash but would still like to donate click here.

Mortgage Rates for King, Pierce and Snohomish Counties

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties).  The conforming rate quote below is based on owner occupied, "full doc" purchase with a sales price of $500,000 and a loan amount of $400,000.  Rates are priced based on a low-mid credit score 740 or higher unless otherwise noted.    This scenario includes reserves (taxes & insurance) not being waived.   Rates quoted are priced based on a 45 day lock with no prepayment penalties.  For your personal rate quote with or without points, please contact me.   Refi's are requiring a 60 day lock and therefore, a rate-term refi is approx. 0.125% higher in rate or higher in fee (points)…cash out refi's are a whole other story with Fannie/Freddie price hits.

30 Year Fixed Priced w/1 Pt:  4.625% (APR 4.762%) ~ priced with 0 points: 4.875% (APR 4.923%).   

15 Year Fixed Priced w/1 Pt:  4.375% (APR 4.612%) ~ priced with 0 points: 4.625% (APR 4.713%).

5/1 ARM LIBOR 5/2/5 CAPS w/1 Pt:  4.000% (APR 6.540%)

Conforming High Balance. Pricing is based on the same criteria above (including zero points) except where the loan amount is $417,001 – $506,000 for properties in King, Snohomish or Pierce Counties; specifically priced for a sales price of $625,000 and a $506,000 loan amount.  NOTE: loan limits for certain "high cost" areas have been returned to the 2008 higher limitsHowever, Fannie Mae and Freddie Mac have not yet implemented this.  Fannie Mae has announced they will begin to purchase the revised 2009 loan limits on May 1, 2009–lenders SHOULD start allowoing the higher limits soon.

30 Year Fixed @ 1 Pt: 4.750% (APR 4.879%) ~ Priced w/0 Pts: 5.125% (APR 5.168%) 

FHA.  Pricing based on credit score of 620 or better and loan amount of $417,000 for FHA in King, Snohomish and Pierce Counties.

30 Year Fixed @ 1 Pt:  4.875% (APR 5.698%) ~ Priced w/0 Pts: 5.000 (APR 5.732).

FHA-High Balance. Pricing based on 1 discount/origination point and loan amounts from $417,001 – $567,500 for King, Snohomish and Pierce Counties.  NOTE: Revised 2009 FHA loan limits are posted here for Washington State.  FHA has implemented the higher limits.

30 Year Fixed @ 1 Pt: 5.000% (APR 5.663%).

VA. Pricing based on credit scores of 620 or better based on loan amount of $417,000.   For VA loan amounts over $417,000, please contact me.

30 Year Fixed @ 1 Pt:  4.875% (APR 4.981%) ~ Priced w/0 Pts: 5.250% (APR 5.270%).

Non-owner/Investment Property.  Pricing based on credit scores 740 with a loan amount of $300,000 and a loan to value of 75% or lower.

30 Year Fixed @ 1.5 Pts:  5.625% (APR 5.841%).

Prime Rate (what HELOCs are based on):  3.250%.   

Rates are as of Friday, April 24, 2009 at 10:30 a.m. and may change at any time.  Available programs may change at anytime as well.   This is not a guarantee nor is it a commitment of interest rate. 

Stay tuned with what's going on in the market by subscribing to Mortgage Porter (upper left corner) and Mortgage Porter Twitter for live rate updates (click Follow).

Why I’m Thankful I Don’t Work for a Bank or a Mortgage Broker

Mortgage Master Service Corporation, my employer for the past nine years, is a Correspondent Lender–which is kind of like a blend of a bank and a broker.  I think it's the best of both worlds because like a broker, we have the ability to select which bank/lender we're going to work with and like a bank, we fund the mortgage.  We also process, underwrite and prepare loan documents at our location in South King County (this may be unlike a bank who'd processing center can be located in another State).

I've recently been provided a few examples of why it's advantageous to be a Correspondent Lender.   Ardell wrote a post at Rain City Guide about home buyers (or borrowers) being informed of when loan docs are "ordered", "sent" and "in".  A mortgage broker has to "order" loan documents from the wholesale lender/bank.   A form is submitted on paper or on-line requesting the loan documents be drafted.   The wholesale lender/bank where the loan is being brokered to will notify the mortgage broker once loan documents have been "sent" to the escrow company.  The escrow company will then send a confirmation to the mortgage broker that they have received loan documents–docs are "in". 

At our office, once conditions are met and we have final loan approval from our in-house underwriters, my processor prepares loan documents.  They are reviewed and then delivered electronically to the escrow company.  I receive notification from my processor that loan docs have been delivered to escrow and escrow confirms.  Our loan doc steps are "sent" and "in".

This creates a much smoother transaction since we remain in control of these vital steps.  Especially if there are any modifications or corrections that need to be made to the loan documents.  Instead of having to order a correction from the wholesale lender, our company is able to quickly react to any required changes.

The reason why I'm thanking my lucky stars I work for a correspondent lender and not a bank is because the bank is generally limited to their products and guidelines.   (A bank loan officer will tell you that they can broker or use outside lenders–just ask them how often they do–they're often compensated at a lower split if they send a mortgage outside of the bank).   Recently Wells Fargo decided they are going to start requiring appraisals on VA Streamline refinances.  (Hopefully other banks don't follow).  One of the benefits of a VA (or FHA) Streamline refinance is that an appraisal may not be required.   If I was a mortgage originator employed at this bank, then I would be stuck with their underwriting overlays (guidelines in addition to what VA is requiring); my clients who are Veterans would be required to prove their homes values and may not receive the benefit of reducing their mortgage rate.

As a correspondent lender (or mortgage broker), I know that odds are, if I have a VA Streamline refi (aka IRRL: Interest Rate Reduction Loan) I'm going to use another source for my client where an appraisal is not required.  

During these times, many banks/wholesale lenders have their own underwriting overlays in addition to what is being required by Fannie Mae, Freddie Mac, HUD or VA.  Correspondent lenders and mortgage brokers have the ability to review wholesale lending guidelines to help direct their clients to a product best suited for their needs.

It's nice to have options and control–it's nice to be a correspondent lender.

I’m here!

I can't remember since Mortgage Porter's inception going so many days without writing a post…the simple fact is I have to prioritize where I spend my time and these days, it's working with people who need assistance with a mortgage for a home located in Washington State.   With fewer loan originators and increased volumes, any mortgage originator who's worth their salt is inundated in business.

In addition to what's going on during this historic time in the mortgage industry, I was recently "tapped" to help the Washington Association of Mortgage Professionals to serve as their Chair of the Social Media Networking Committee.  Why would I do this now?  Quite simply, I believe consumers deserve the freedom to choose who they want to work with.  WAMP needs help getting their message out to Washington State mortgage originators and consumers.  There is so much mis-information out there about mortgage originators (especially mortgage brokers) that I feel I must dedicate a few hours a month to help my fellow Washington State mortgage originator sisters and brothers.  In the end, it helps you, the consumer.  Without the mortgage broker industry, you would primarily have big banks and credit unions for your mortgage selections.   Mortgage brokers and correspondent lenders create competition which is always good for the consumer.   I've always believed that you shouldn't sit back and complain about situations that disturb you–we must take action.  Hopefully my bit to help the Washington Association of Mortgage Professionals reach out to loan originators and consumers will make some sort of positive difference.

On that note…today I'm at the Washington Real Estate Industry Summit which is featuring Dave Reichert as the Key Note Speaker.   This is an all day event so I will not be posting rates today.  It should be interesting event and I look forward to reporting back to you with the nitty gritty.

An Awkward Time of Year for Closing Refinances: 1st Half Taxes Due

On April 30th, first half of real estate taxes are due for properties located in Washington State.   For those homeowners who are refinancing with a closing in April to mid-May, this can cause an inconvenience.   Lenders, the title insurance company and the escrow company need evidence from the County that the taxes for the first half of the year have indeed been paid. 

Unless your reserve account is waived, taxes are collected on a monthly basis in your mortgage payment and then paid when they are due: first half is due by April 30th and the second half is due by October 31st.  

The County typically has a lag time before the processed payments appear once they receive the payment from the mortgage servicer.  King County’s website states:

“It may take up to two weeks for your property tax payment to be reflected in our records after receiving your payment”.

For refinances closing before it is reflected in County records that taxes have been paid; they have a few options:

  • Pay six months of taxes at closing towards your payoff.  The mortgage servicer will refund the balance (overage) a few weeks after closing with their existing reserve account balance.
  • Pay six months taxes at closing; the escrow company might hold funds for the 6 months taxes as an escrow hold-back and refund them to you once County records show the taxes are paid.
  • Delay the closing until the taxes show as being paid per County records (this could cause an extension fee).

Folks closing their refi’s in October to mid-November will be in the same boat with their property taxes. 

Mortgage Rate Update

Note:  The bond market is closed tomorrow so I'm providing rates today.  Rates will return to Friday on April 17, 2009. 

It's also important to note that King County's recorders office is also closed tomorrow (no recordings/closings will be taking place).

Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties).  The conforming rate quote below is based on owner occupied, "full doc" purchase with a sales price of $500,000 and a loan amount of $400,000.  Rates are priced based on a low-mid credit score 740 or higher unless otherwise noted.    This scenario includes reserves (taxes & insurance) not being waived.   Rates quoted are priced based on a 45 day lock with no prepayment penalties.  For your personal rate quote with or without points, please contact me.   Refi's are requiring a 60 day lock and therefore, a rate-term refi is approx. 0.125% higher in rate…cash out refi's are a whole other story with Fannie/Freddie price hits.

30 Year Fixed Priced w/1 Pt:  4.625% (APR 4.762%) ~ priced with 0 points: 5.000% (APR 5.057%).   

15 Year Fixed Priced w/1 Pt:  4.375% (APR 4.612%) ~ priced with 0 points: 4.625% (APR 4.713%).

5/1 ARM LIBOR 5/2/5 CAPS w/1 Pt:  4.000% (APR 6.540%)

Conforming High Balance. Pricing is based on the same criteria above (including zero points) except where the loan amount is $417,001 – $506,000 for properties in King, Snohomish or Pierce Counties; specifically priced for a sales price of $625,000 and a $506,000 loan amount.  NOTE: loan limits for certain "high cost" areas have been returned to the 2008 higher limitsHowever, Fannie Mae and Freddie Mac have not yet implemented this.  Fannie Mae has announced they will begin to purchase the revised 2009 loan limits on May 1, 2009–lenders SHOULD start allowoing the higher limits soon.

30 Year Fixed @ 1 Pt: 4.875% (APR 5.008%) 

FHA.  Pricing based on credit score of 620 or better and loan amount of $417,000 for FHA in King, Snohomish and Pierce Counties.

30 Year Fixed @ 1 Pt:  4.875% (APR 5.698%).

FHA-High Balance. Pricing based on 1 discount/origination point and loan amounts from $417,001 – $567,500 for King, Snohomish and Pierce Counties.  NOTE: Revised 2009 FHA loan limits are posted here for Washington State.  FHA has implemented the higher limits.

30 Year Fixed @ 1 Pt: 5.000% (APR 5.663%).

VA. Pricing based on credit scores of 620 or better based on loan amount of $417,000.   For VA loan amounts over $417,000, please contact me.

30 Year Fixed @ 1 Pt:  5.000% (APR 5.107%).

Non-owner/Investment Property.  Pricing based on credit scores 740 with a loan amount of $300,000 and a loan to value of 75% or lower.

30 Year Fixed @ 1.5 Pts:  5.625% (APR 5.841%).

Prime Rate (what HELOCs are based on):  3.250%.   

Rates are as of Thursday, April 9, 2009 at 10:30 a.m. and may change at any time.  Available programs may change at anytime as well.   This is not a guarantee nor is it a commitment of interest rate. 

Stay tuned with what's going on in the market by subscribing to Mortgage Porter (upper left corner) and Mortgage Porter Twitter for live rate updates (click Follow).

Making Home Affordable Refinance – Can I Help You? Maybe…Maybe Not.

UPDATE JUNE 19, 2010:  The Home Affordable Refinance Program has become much easier to do since writing this post with both Fannie Mae and Freddie Mac securitized mortgages.  This post is pretty outdated (the hazards of writing about mortgages on a blog!)  If you need help with refinancing your home in Washington, please contact me.

Here is an updated information on Fannie Mae's Home Affordable Refi.

NOTE:  This program is still "evolving". Wholesale lenders/banks and private mortgage insurance companies are still issuing and revising their guidelines.  I'll try to update this post with current information as I receive it.

Fannie Mae will be implementing the Making Home Affordable Refi starting April 4, 2009.  Some home owners will be free to use any mortgage professional (as long as they are Fannie Mae approved) and others will be forced to return to their mortgage servicer.

First of all, I am only licensed to provide residential mortgages for homes located in Washington State.

UPDATE: IF YOUR MORTGAGE IS OWNED BY FREDDIE MAC, I MAY BE ABLE TO HELP YOU.  YOU DO NOT HAVE TO GO TO YOUR MORTGAGE SERVICER (WHO YOU MAKE YOUR PAYMENTS TO).

Currently, for the Home Affordable Refinance, Freddie Mac is requiring that home owners return to their mortgage servicer.  To determine if your mortgage is owned by Freddie Mac, click here. If your mortgage is owned by Freddie Mac, I probably cannot help you with an Making Home Affordable refinance.   However if your current mortgage is owned by Freddie Mac and you have home equity (you're not upside down); I may be able to help you.   Fannie Mae has a larger market-share than Freddie Mac…odds are in your favor, but check Freddie Mac first.  UPDATE:  Since writing this post, one major bank has informed us they will allow us to originate Home Affordable/Freddie Mac mortgages as long as we broker the loan back to them

If your mortgage is not owned by Freddie Mac, the next step is to see if it's owned by Fannie Mae. You can determine that by clicking here.   Unlike Freddie Mac, Fannie Mae is allowing home owners to use eligible mortgage brokers, bankers and correspondent lenders of their choice.  If your mortgage is owned by Fannie Mae (and your home is in WA); I may be able to assist you with your Home Affordable refinance.

Here are some important pointers about Fannie Mae's Home Affordable refinance (homes at a higher loan to value):

  • Second mortgages must be subordinated.  They may not be included (paid off) with the home affordable refinance.
  • Borrowers on the existing mortgage must match the new mortgage.  Borrowers may be added but they may not be removed.   UPDATE:  Borrowers can be removed under certain circumstances.
  • If a borrower currently has lender paid mortgage insurance (a slightly higher rate that financed private mortgage insurance) they may have to return to their mortgage servicer (who they make their mortgage payments to) for a Home Affordable refinance.  

What if your existing mortgage is FHA or VA?  You may qualify for a FHA or VA Streamline refinance which may not require an appraisal or income verification (you will need a mid-credit score of 620 or higher).

Lenders are currently inundated with refinance and purchase business due to the current low mortgage rates.   I encourage you to apply early and be very patient.   Washington State home owners can apply using my secure on-line application under "Favorite Links".

The bottom line is, if your home is in Washington I can at the very least help point you in the right direction and at the most, I can help you with your new refinance.