Our true digital mortgage, borrowers begin the process by submitting their application online. Choose Our Live Rates from our wholesale partners, Fill out a digital application, after our system has performed tasks appropriate to the borrowers’ situation, quickly taking actions that move the mortgage as close as possible to closing. Closing takes place in a virtual signing room using an eNotary. Delivery of the loan file to investors, or back to the lender, takes place through the wonders of the Internet. Voila! A true digital mortgage is now complete and has moved electronically into its home in the servicing system where it will live out its life, hopefully peacefully.
Our Digital Mortgage allows borrowers to use our advanced mortgage technology coupled with a seasoned loan officer to close your loans faster while offering the lowest rate and best loan programs tailored to your financial goals.
A bank statement program is a home loan program that uses bank statements to calculate a borrower’s income. This is an alternative documentation loan type instead of using tax returns and W-2s in the qualification process. These loans are for self-employed borrowers who typically have substantial tax write-offs that make it challenging to demonstrate the necessary income to prove their ability to repay the loan. The bank statement loan programs use either personal or business bank statements to qualify borrowers.
Yes, a self-employed borrower can get a mortgage loan using industry leading non-QM mortgage programs. Each self-employed borrower will be assessed individually to determine if they qualify for a home loan. Credit scores, income / profits, and other factors will determine the appropriate loan type. Given a self-employed borrower’s unique financial situation, alternative documentation may be needed to calculate a borrower’s income. Areal Lending bank statement loan program is designed to help self-employed borrowers, small business owners, and entrepreneurs qualify for a mortgage.
Yes, rate and term refinancing is available using OUR bank statement program. Contact an account executive for more information.
Yes, utilizing our Investor Cash Flow product allows for cash flow on the property to be used to qualify for the loan. No tax returns or employment information required.
No personal income is required to qualify. This saves you from submitting complicated income statements and tax returns.
Typically these loans do close quicker than others but this can vary. Contact our Loan Consultant to discuss your loan scenario.
A Jumbo loan exceeds the limits set by the Federal Housing Finance Agency. A Jumbo loan cannot be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac. We offer a competitively priced Jumbo product
A Jumbo product is used for a loan amount that exceeds the conforming loan limit in your area. It varies across the country and you confirm the amount with Our Mortgage Consultant account executive. A jumbo loan (or jumbo mortgage) is a type of financing where the loan amount is higher than the conforming loan limits set by the Federal Housing Finance Agency (FHFA).
The 2021 loan limit on conforming loans is $548,250 in most areas and $822,375 in high-cost areas. For borrowers interested in purchasing more expensive properties, jumbo loans are a valuable alternative.
A Jumbo loan allows you to borrow a larger sum of money for a property than with a conventional loan. A conforming loan meets Fannie Mae and Freddie Mac requirements regarding credit, debt and loan size
Time horizon refers to the amount of time a person has to save for a particular event. For example, the time horizon for a college savings account might be 10 years for the parents of an eight-year old child, but 15 years for the parents of a three-year old. Likewise, the time horizon for a 30-year old saving for retirement might be 35 years, whereas it might be 15 years for a 60-year old who started saving late in life.
The Federal Housing Administration doesn’t actually lend you the money for a mortgage. The loan comes from an FHA-approved lender, and the FHA guarantees it. Borrower pays for the guarantee through mortgage insurance premium payments to the FHA. The lender takes on less risk because the FHA will pay a claim to the lender if you default on the mortgage. Due to this insurance, credit and income requirements for an FHA Loan are more lenient
With and FHA mortgage, you can buy a home with a low down payment. Additionally, FHA loan can provide flexible loan repayment options. Credit requirements and qualifications are less strict. You can use Instant Pre-Quall tool www.localalpemortgage.com/getcredit; Furthermore, other financial difficulties including bankruptcy may still qualify you for the loan.
In order to get the best financing option, you must shot around. A mortgage is a product. Therefore, it’s price and terms can be negotiable. You should compare all the costs involved in obtaining a mortgage. You can save thousands of dollars by shopping, comparing, and negotiating. We help you by shopping your loan with several lenders in order to find you the best deal!
You should not assume that minor credit problems or difficulties in your current circumstances will limit your loan choices to only high-cost lenders. Your credit report might have negative or inaccurate information. However, there might be an explanation such as illness or temporary loss of income, be sure to tell us. We can certainly help you provide that explanation to the bank to see if an exception can be made.
If your credit problems cannot be explained, you will probably have to pay more than borrowers who have good credit histories. Don’t assume that the only way to get credit is to pay a high price. You should ask how your past credit history affects the price of your loan and what you can do to improve. Our firm will negotiate the best deal for you. At Area Lending LLC we have helped borrowers with challenging situations get approved, and we can help you too. By examining each consumer based on their individual needs, we are able to provide results. We have the relationship with lenders that work with challenging scenarios. Looking for FHA Loans in Pennsylvania,Florida? We can help! Get a free quote to see the monthly savings you qualify for. We will happily help you find out more. Let us help you navigate this maze.
In addition to traditional first mortgages, the FHA offers several other loan programs, including:
Conventional loans are not insured by the government. They typically require a higher down payment. Whereas, FHA loans can have as little as 3.5% down. Funds must come only from approved sources, such as your savings account, money saved at home, investments you have cashed in, gift funds, etc. Additionally, Conventional mortgage also requires a higher credit score and solid income
Conventional loans usually require the borrower to carry Private Mortgage Insurance if borrowers don’t provide a minimum 20% down payment. FHA mortgages on the other hand, require the payment of an Up Front Mortgage Insurance Premium and an annual Mortgage Insurance Premium (MIP).
FHA guidelines have been established to require borrowers and/or their spouse to qualify according to set debt-to-income ratios. The ratios are used to calculate whether or not the potential borrower is in a financial position that would allow them to owning a home.
The FHA loans are a good option for first-time home buyers who may not have saved enough for a large down payment. Borrowers who have suffered from bankruptcy or foreclosures may also qualify for an FHA-backed mortgage. Above all, Innovative Mortgage Brokers we help you figure out which option fits your needs. We assist our borrowers in finding the loan options for their specific situation. Our team understands that one loan does not fit all. We would like to understand your problems and take a closer look at your options. We want to provide you with the most cost effective solution
One of the provisions of FACTA, passed in 2003 as an amendment to the Fair Credit Reporting Act (FCRA), was a requirement that each of the three credit reporting agencies provide, upon request, a free credit report every twelve months to every consumer. The goal was to allow consumers a way to ensure their credit information is correct and to guard against identity theft.
AnnualCreditReport.com requires users to register with the site and provide their basic identification information, such as name, address, and Social Security number. The user is then sent to the website of the individual credit reporting agency they select, where they are asked additional security questions to confirm their identity before getting their report.. A consumer can request reports from all three agencies at the same time or stagger the requests throughout the twelve-month period as a way to self-monitor their credit data. In order to obtain a free credit report, users are not required to give a credit card number but establishing an account is required by some of the agencies. Any inaccuracies or signs of identity theft may be dealt with using the mechanisms provided for under the FCRA and FACTA.
Credit scores are not included in free credit reports obtained from
AnnualCreditReport.com. For a fee, each of the credit bureaus offer credit scores as an add-on feature of the report.
Hard Pulls VS Soft Pulls
When a lender or creditor asks a credit bureau to look at your credit report, that inquiry may get noted as part of your credit history. There are two types of inquiries—hard and soft.
SoftPull instant credit check is a soft inquiry technology that allows mortgage lenders to give a customer an instant credit pre-qualification as a soft inquiry or ‘soft pull’ right on their mobile phone or on the originator’s website.
SoftPull a low commitment way for customers to engage with a lender early in the process, prior to an application or point of sale solution.
The SoftPull technology is a consumer-initiated soft credit pull so it does not affect the consumer’s credit score like a hard credit pull. The consumer instantly can see which of the lender’s products they meet credit criteria for and the lender receives a credit report for the consumer so that they can engage and get started on the application process.
Get your free True FICO 5 score in minutes!
No credit card needed – ever. Soft pull will not affect your credit score .Secure process from Equifax®
The first thing to know is how the scores compare. According to Credit.com, the scores roughly correlate as follows:
|FICO Score||Vantage Score|
The VantageScore system has some other differences as well. The credit bureaus say it does a better job of assessing risk for consumers who don’t use credit frequently, claiming that someone who doesn’t use an account for six months risks having that record dropped from their FICO rating. The VantageScore system covers a 24-month range, which they say provides a fuller picture.
The two also differ in the factors they weigh in producing a credit score, with VantageScore placing greater emphasis on a borrower’s debt-to-credit ratio and recent credit inquiries and new accounts. FICO places greater emphasis on types of credit used and puts slightly more importance on payment history and total debt.
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Did you know you don’t have only one credit score? There are many different credit scoring companies and credit scoring models, or differing methods of calculating credit scores. Credit scores are calculated based on the information in your credit reports.
Depending on which model, or even which credit bureau furnishes the information used in calculations, your credit scores may vary. Lenders and creditors may use your credit scores to help determine whether to approve your application for credit. Before approving you, they want to know: What’s the likelihood you’ll pay your bills on time? Lenders generally also have their own lending criteria, which may include other factors, such as your income.
Two of the biggest companies when it comes to credit scoring models are Fair Isaac Corporation, or FICO, and VantageScore. VantageScore is the result of a collaboration between the three nationwide credit bureaus – Equifax, Experian and TransUnion.
Both FICO and VantageScore assign higher credit scores to consumers deemed as lower-risk borrowers, and both currently range from 300 to 850.
FICO scores are generally calculated using five categories of information contained in your credit reports, with varying weight given to each:
VantageScore is calculated with six categories of information contained in your credit reports. It doesn’t assign percentages to how much weight the categories are given, but instead describes their level of influence:
However, there are some differences between the two to highlight:
Length of credit history – To have a FICO score, consumers must have one or more credit accounts that have been open for at least six months and has been reported to the three nationwide credit bureaus within six months. VantageScore credit scores can be calculated if consumers have one or more credit accounts that have been open for at least one month and one account reported within the past two years.
What does this mean for you? If you’re new to credit or haven’t used your credit accounts in a while, you may not have a FICO credit score, but you may have a VantageScore credit score.
impact on credit scores. The time period, however, generally differs. FICO uses a 45-day span, while VantageScore uses 14 days. And while FICO only includes mortgages, vehicle loans and student loan inquiries, VantageScore will do the same for hard inquiries dealing with other types of credit, including credit cards.
One note: All mortgage loan inquiries within about 45 days count as one inquiry, according to the Consumer Financial Protection Bureau.
Collection accounts – If your past-due account is sent to a collection agency, it may impact your credit scores from either company. But FICO generally ignores smaller collection amounts, when the original balance is below $100. VantageScore, meanwhile, doesn’t factor in paid collections, but includes all unpaid collections regardless of amount.
If you are applying for credit, you might consider asking which credit score the lender will use to evaluate your request. There is no one credit score used by all lenders and creditors, since there are so many credit scoring
A – We follow the same rules that apply Fannie Mae. Please note this applies to ALL mortgages with the Borrower, not just the subject property
A – Borrower to provide Award Letter evidencing the social security and pension income. For qualifying purposes, Social security and pension income cannot be grossed up by 25%; income will be taken at face value. Please note this will only apply to Lite Doc loans (CDL-OO and CDL-INV).
A – Yes; guidelines state the borrower must be self-employed OR in the business at least 2 years. If the current and prior jobs are in the same line of work, the employment history would be acceptable. However, borrower must be self-employed at last 1 year in order to provide a complete 12-month Profit and Loss statement.
A – Since employment information is no longer asked or verified, this question is moot.
A – Yes. Even though we may not require the income from the second job to qualify, all employments must be listed on the application. If the secondary employment is as a wage-earner (i.e. not self-employed), no verification of employment or income will be required (since working this type of job would not be something that could be considered a potential income-loss). If the secondary job is self-employment, then we will require a CPA/ accountant’s letter verifying borrower’s self-employment, ownership percentage, and date of inception of the business/Corp/LLC(s)*. In addition, with self-employed borrowers, there IS a potential for income-loss. Therefore, if borrower owns any other businesses, but we do not require income from these companies to qualify (i.e., no P&L to be obtained), we will require signed letter verifying the businesses have not been operating at a loss for the past 12 months*.
* NOTE: there are cases where the accountant’s letter and letter confirming no losses for the last 12 months can be waived. Example: borrower’s second job is as an Uber Driver. Borrower would be considered an independent contractor and works as often as he/she wish. We can verify their employment as a driver with their TLC license, so there is really no need to request an accountant’s letter, especially since we’re not using income to qualify. And since the borrower would only continue to drive for Uber to make money and not lose money, the potential for income-loss is minimal. Therefore, the letter confirming no losses for the past 12 months would not be required.
1) If borrower owns real estate under an entity, AND the mortgage on said property is evidenced on borrower’s credit report, the property must still be listed on the Schedule of Real Estate Owned. All sections of the Schedule of Real Estate Owned on the 1003 are completed, namely:
No supporting documentation will be required (i.e., mortgage statements, real estate taxes, hazard/flood insurance, HOA bills); the information stated on the signed 1003 will serve as verification of the income and expenses of the property(ies). Verification of properties owned free-and-clear is required, and can be accomplished via either:
2) If borrower owns real estate that is in the name of an entity (Corp/Inc/LLC) where either: A) there is no mortgage on the property, or B) the mortgage is under the entity (i.e., does NOT appear on borrower’s personal credit report), and requires the rental income form this property to qualify, then following the guidelines under #1 above.
3) If borrower owns real estate that is in the name of an entity (Corp/Inc/LLC) where either: A) there is no mortgage on the property, or B) the mortgage is under the entity (i.e., does NOT appear on borrower’s personal credit report), and DOES NOT require the rental income form this property to qualify, then property does NOT need to be disclosed.
A – Yes, 1031-exchanges are acceptable for Investment loans ONLY; the purpose of the 1031-exchange is to use the proceeds of the sale of one investment property to purchase another investment property in order to save the borrower on capital gains taxes. 1031-exchanges cannot be applied for the purpose of purchasing a primary residence, unless the dwelling is mostly non-owner occupant (ex: purchasing a 3-family primary where 1 unit is owner-occupied and the other 2 are tenant-occupied). The documentation required for 1031-Exchanges is as follows:
A – Yes. However, only Investment properties can be held under an entity name (Corp/Inc/LLC). The loan will be opened with the entity as the Borrower and the individual owning the entity as the Guarantor. All individuals with 25% or more ownership in the entity must guarantee the loan and provide an application. The Certification of Beneficial Owners of Legal Entities form must be signed and completed prior to closing. Owner-occupied and second home properties cannot be done in an LLC.
A – The following documentation is required for Corp/LLC loans:
A – If the borrower has owned the property at least 12 months from the subject disbursement date, and borrower will not be paying off anything other than the current outstanding mortgage and other individual’s equity portion of the property, then the transaction may be deemed as a rate/term. Borrower may not receive any proceeds from the refinance. Exception to the 12-month ownership requirement exist if the property was legally awarded to or inherited by the borrower. In all other scenarios, the loan will be treated as a cash-out.
We require a signed document / buy-out agreement from all parties confirming the removed individuals’ compensation for their equity portion of the subject. Any compensation paid-out to a party must be listed on the application as a liability and marked as ‘paid-off’ at time of closing. The settlement agent will issue the funds to the appropriate parties directly from loan proceeds at closing. Copy of the new proposed deed must be provided prior to closing for underwriting review. The new deed will be executed and recorded at closing.
A – Yes. However, the loan must be done under the borrower’s personal name, and a deed change will be required at closing transferring ownership in the property from the Corp/LLC to the borrower’s personal name. Borrower must provide the appropriate LLC/Corp documents (see above) to verify their ownership in the entity. In order to do a cash-out refinance using the appraised value, the entity must have owned the property at least 6 months, AND borrower must have been an owner of the entity at least 6 months. Copy of the new proposed deed must be provided prior to closing. If there are currently other members/owners of the LLC that are NOT evidenced on the new proposed deed, we require a signed document / buy-out agreement from all parties confirming the removed individuals’ compensation for their equity portion of the subject (since the asset held under the LLC/Corp will now be removed). Any compensation paid-out to a party must be listed on the application as a liability and marked as ‘paid-off’ at time of closing. The settlement agent will issue the funds to the appropriate parties directly from loan proceeds at closing.
A – Rate/Term refinance. Per guidelines, if the purpose of the subject loan is to solely pay off and satisfy the existing loan(s) on the subject property, then we treat it as a rate/term refinance. Borrower cannot receive cash-back more than $2,000 or 2% of the loan amount at closing, and cannot pay off any other debts through the loan proceeds for it to be deemed a rate/term refinance. Cash to borrower at closing that exceeds $2,000 or 2% of the loan amount will be considered a Cash-Out refinance. If borrower wishes or is required to pay off other debts through the loan (including but not limited to: other loans, liens, backed real estate taxes, credit cards, judgements, collections, etc.), the transaction will be considered a Cash-Out Refinance.
A – It depends on the type of refinance;
A – Yes. However, the property must be held in an Inter Vivos (Living) Revocable Trust. Irrevocable trusts are not permitted. We follow FNMA’s guidance in regard to this topic. At least one of the Settlors/Trustors who established the trust must be on the Loan/Note and used to qualify. Trustee(s) may also credit qualify for the loan, so long as they have the power to mortgage the security property for the purpose of securing a loan. All individual borrower(s) must sign the Note itself. The Title/Mortgage will be in the name of the Trust.
A – Interest-Only ARM loans are qualified using the greater of the Note Rate or the Fully-Indexed Rate (Index + Margin). Interest-Only Fixed loans are qualified using the Note Rate.
A – Subordinate financing is allowed, as long as CLTV and HCLTV are within guideline limits (LTV and HCLTV limits are identical). Loans will be priced at the loan’s HCLTV. Please note, however, the subordinate lender may require a full doc submission and may not accept the documents required for CDL loans.
Investor Cash Flow mortgage program allows your clients to qualify based on rental analysis to determine property cash flow. No Employment or No personal income required to qualify. This saves you from submitting complicated income statements and tax returns.
Debt Service Coverage Ratio is a calculation that compares your rental income on an investment property to the expenses of the investment. Obviously, the real estate loan (both principal and interest) you pay on the property is a big part of this calculation. But you also need to consider other standard, recurring expenses, notably:
Please create Calculate DSCR formula TWO Entry Boxes Divided by each other
Rental income $1,000 / PITIA $1,200 = DSCR of 0.83.
Many investors use the acronym PITIA (property, interest, taxes, insurance, association) to represent these recurring expenses. Your monthly PITIA becomes the denominator in a fraction where the rental income is the numerator. So rental income divided by PITIA equals DSCR.
Here are some sample numbers: You own a property that brings in $1,000 in rental income a month. Your loan (property + interest) is $550/month. Insurance is $100/month, taxes are $100/month, and association fees are $50/month. Add those numbers up to determine that your PITIA Is $800 per month.
This means your DSCR is $1,000/$800, or 1.25.
If your rental income is less than the cost of PITIA, then you’re losing money on a monthly basis on your investment property. Your DSCR in this case will be less than 1.
Example: Rental income $1,000 / PITIA $1,200 = DSCR of 0.83.
This kind of ratio signals it’s time to raise rental rates, refinance the rental property, or a combination of both, because your real estate investment is underwater on a monthly basis.
If your DSCR equals 1, then your rental income exactly covers your recurring expenses.
Example: Rental income $1,000 / PITIA $1,000 = DSCR of 1.00.
This ratio does not mean you break even, because PITIA does not include all expenses on a property—just the recurring ones. So a DSCR of 1.00 means you will get no profit on your investment and have no way to handle unexpected expenses without losing money. Again, this kind of ratio indicates that you need to take action to have a viable real estate investment strategy.
However, merely increasing your DSCR above 1 isn’t enough to ensure a profit. That’s because non-recurring expenses for a rental property aren’t included in PITIA. These include things like:
These expenses aren’t recurring, but real estate investors should plan for them to happen. The way you do this is by increasing your DSCR to 1.3 or more. This difference will give you capital so you can deal with expenses if they come. If they don’t, then you have more profit, which is a plus.
Example: Rental income $1,000 / PITIA $750 = DSCR of 1.33.
One note here: The more properties you have, the lower DSCR you need. If you run a SFR (single-family rental) portfolio, then you may choose a minimum DSCR closer to 1.2. The reason is simple—the volume of properties means you have more actual cash on hand for repairs, lowering your risk.
Example: Rental income $5,000 / PITIA of $4,000 = DSCR of 1.25.
In this case, you would amass a total of $12,000 annually to cover rental vacancies, repairs, etc. Because you have piled up more total cash from having more properties, you can still turn a profit despite the lower DSCR.
We’ve talked about the minimum DSCR numbers you should look at. How high should your DSCR go?
The answer to that question goes back to your investment strategy. Here are two examples of solid investment strategies with dramatically different DSCR targets.
You’re a retiree who uses rental property income to supplement your lifestyle. You own a property free and clear. Your PITIA will be quite low because you pay nothing for loan principle or interest. In this example, Rental income of $1,000 / PITIA $250 = DSCR of 4.00. You’ll have a low-risk investment generating a nice return, which fits your needs because you’re depending on the income.
You’re an aggressive real estate investor who wants to leverage equity in properties to purchase more rentals. You do a cash-out refinance for rental property to make your equity liquid. In this example, you’d likely aim for a new loan that resulted in something like this formula: Rental income $1,000 / PITIA of $725 = DSCR of 1.38. You don’t generate as much margin monthly, but higher DSCR would mean that you’re leaving equity on the table in your cash-out refinance, which limits other investment opportunities.
Calculating your DSCR is a vital step for any real estate investor, but it’s just as important to know what your target DSCR is. When you match the guidelines here to your personal real estate strategy, you will be able to choose a DSCR range that fits you best. Then you’re ready to find and finance deals to build your rental portfolio.