Michael Kanuka
Author Archives: Michael Kanuka

First-Time Homebuyer Programs?


First-time homebuyer programs (FTHP’s), when available, can make purchasing a home more affordable for low-to-moderate income individuals and families – but there is generally always a catch. For example, the Florida Housing Finance Corporation advertises that they offer fixed, low-interest rate FTHP loans. This is true, however the rate is actually higher than what is offered by the most active mortgage lenders in the industry.

Before you get excited about being approved under a government-sponsored first-time homebuyer program, you should know:

  • Some grants can only be used towards your down payment, not closing costs – and in most cases are required to be repaid (getting a gift from a relative may be better)
  • A home inspection report (not required under a conventional loan) may crater the deal because all costly repairs will likely need to be completed prior to closing
  • Some programs have long waiting lists, so be prepared that it may take well over a year before you find out if you qualify
  • Including all other income sources with your application (such as alimony and child support) will often disqualify the applicant because the maximum income threshold may be exceeded

First-time homebuyer programs generally always require another separate government approval stamp. It is therefore not uncommon for loans to be declined at the last minute when it would appear the borrower could qualify for a regular conventional loan.

Sometimes all it takes is a little more preparation and guidance – and a first-time homebuyer can comfortably qualify for more cost-effective conventional financing.

Here’s the Point: First-time homebuyer programs, if available, are not always the best or most cost-effective solution.

You Really Think You Are Pre-Qualified!

mortgage pre-qualify

“My real estate agent said I need a pre-qualification letter, and I was wondering if you could provide one to me within the next hour so that I can make an offer on a property.”

It is very rare when a borrower has pre-prepared all of the paperwork required to demonstrate their ability to repay the mortgage they are seeking.

A pre-qualification letter is absolutely useless, unless it confirms that the preparer has verified the prospective borrower’s income, liquidity and credit. This would include at least the receipt and review of the following, as applicable:

  • last 2 years of tax returns, W-2’s or 1099’s
  • last 30 days of paystubs
  • last 2 monthly bank and retirement account statements
  • tri-merge credit report from the 3 national credit reporting agencies 

Without the above, there is no way a lender can properly confirm that a borrower is truly pre-qualified.

Real estate agents showing “pre-qual” letters to sellers that do not confirm the above are likely wasting their and their seller’s time.

Ideally, an “Approve/Eligible Finding” should also be obtained from government-approved software, evidencing that a greenlight was received from FannieMae or FreddieMac to proceed with a bona fide mortgage loan submission.

Many people are in such a rush to make their offer, they avoid mortgage professionals who take the time to diligently ensure the buyer is a capable borrower. Instead, some buyers actually call around until they find a lender who accepts verbal confirmations alone – and then a letter is issued that usually does more harm than good.

Here’s the Point: ​You can get a mortgage pre-qualification letter in less than 10 minutes – but they are not worth the paper they are written on.

Are You Sure About Value?


When valuing your home, don’t simply rely on a few houses that recently sold in the neighborhood. Just because Fred sold his place across the street for $450,000 (or because Trulia/Zillow estimated your value to be $435,000) doesn’t mean your home is worth the same.

Fred’s house is not a good sales comparable if he has:

  • a pool (and you don’t)
  • 4 bedrooms/3 baths (versus your 3 bedrooms/2.5 baths)
  • a 2-car garage (to your carport)
  • a newly renovated kitchen (versus your limited renovations)

Without doing your homework, you may be unable to sell your home for the price you want – or your loan entitlement could be much less on a cash-out refinance or reverse mortgage.

The lender will require an appraisal prior to closing – unless an appraisal inspection waiver is granted (such as when you may have substantial equity in your house).

In a conventional or government purchase mortgage, you can get pre-approved by a lender before getting an appraisal (so you shouldn’t spend $485 on an appraisal until you see the loan closing conditions). Whereas in a reverse mortgage, you generally cannot get pre-approved without the appraisal (so make sure your home value estimate is accurate before paying for the appraisal – otherwise you may be disappointed when your approved loan amount is far less than you had expected).

Analogous to lawyers being trained not to ask a question without knowing the answer, you, as a borrower, should be confident in your home valuation before paying for an appraisal.

Here’s the Point: Before you refinance, don’t waste your money on an appraisal until you have done your own homework on value.

Just Retired and Can’t Get A Mortgage

retired mortgage

The plane tickets are booked for golfing and walking on a Florida beach for three months. Upon settling into retirement, you realize how nice it would be to own a home in your favorite vacation spot. With family back home, the perfect scenario would be to keep your primary residence – and buy a vacation property.

But do you really want to spend a good chunk of your retirement savings by paying cash for your Florida home? Most people would rather finance their vacation home – to save their funds and capitalize on low interest rates.

However, getting pre-qualified for a mortgage may be problematic if you do not have a monthly pension. You need to show the lender sufficient ongoing annual income to prove you can continue to make monthly mortgage payments.

There are two programs available that allow you to create an earnings stream without having to spend all your retirement funds:

  1. Structured Annuity: Establish a monthly draw from your 401k or IRA funds, and show you are able to continue this income stream for 36 months;
  2. Assets-For-Income: Create a hypothetical income stream without liquidating your brokerage account (equal to 70% of your assets divided by the number of months in your loan);

If you aren’t worried because you expect to continue earning commissions from your prior business while retired, be careful because you may be deemed a Self-Employed borrower after retiring from your W-2 job (conventional lenders require two years of tax returns from Self-Employed borrowers).

Here’s the Point: You can retire without a stable income stream and still qualify for a mortgage.

The Mortgage Colonoscopy

mortgage colonoscopy

Okay, maybe the analogy is extreme… But, thanks to the cumbersome mortgage regulations, it will be a long time before borrowers exclaim: “Boy was it ever easy to get that mortgage!”

It is always advisable to expect the process to be highly invasive in respect to your personal financial records. And, it is a time-consuming exercise, fraught with an abundance of disclosure and closing documents. But believe it or not, the process has actually improved over the years.

For the time being, the negatives are essentially fixed. But at least the most active, progressive lenders have been able to offset some of the frustrations by simplifying the process and offering more cost saving solutions. For example:

  • Instant Funding: The wire can now be released to the borrower as soon as the last document is signed (it used to be that the lender needed to review all of the signed documents, and then provide an authorization number for funding – which could take hours);
  • Appraisal Waivers/Refunds: At or below an 80% loan-to-value ratio, the appraisal could possibly be waived – depending on overall borrower financial profile. Or, depending on the mortgage product, some lenders will refund the appraisal cost up to $500;
  • PMI Discounts: Economies of scale from larger lenders has lead to attractive discounts to monthly private mortgage insurance (PMI) premiums;
  • No Overlays: Many lenders have traditionally added their own conservative requirements to the minimum lending conditions imposed by Fannie Mae/Freddie Mac. Today, industry competition has rendered these “add-ons” as unnecessary.

Here’s the Point: Getting a mortgage will never be a “walk in the park”, but at least some lenders are making the process a little more tolerable and efficient.

Combine Your Financial and Physical Health

financial physical healt

"Sorry for the mix-up. Your financial health is fine. It was your physical health I was looking at."

One of the benefits of obtaining or refinancing a mortgage is that you get the opportunity to fully understand your financial health. The most common complaint, though, is how detailed of a process it is and how time consuming it can be to complete. In the end, people tend to remember these negatives – that’s just the way it is.

The ideal outcome would be to comfortably orchestrate the advancement of your financial health, but yet also improve your physical and mental health at the same time. It certainly would make things easier to contend with the anxiety associated with extensive mortgage documentation – by ensuring that you become or remain physically fit in health, mind and body.

To discover the simplicity behind walking longer distances, learning how to jog or run, or advancing your current running to a whole new level of fitness, I highly recommend that you enroll in the following WalkRun program created and coached by my Olympic Medalist track and field sister (www.LynnKanuka.com):



I can unequivocally state that this program works. I know, because I did it – and I advanced my fitness to a level that I never thought I could achieve in such a short period. Specifically, I improved my best time in a 10 kilometer road race by over 5 minutes. It was one of the best decisions I have ever made that continues to provide me with a more rewarding and less stressful lifestyle today – while navigating the ever changing, challenging mortgage industry.

Here’s the Point: In 2018 and beyond, keep in mind that taking care of your physical health can also give you the energy, patience and mental health to help you achieve your financial goals.

Walk Away From The Deal

walk away

I admire my clients. They find the perfect home – or so they think, and then are driven to close the deal regardless of financing roadblocks that surface. Sometimes, though, they don’t see the forest for the trees.

Typically, there are relatively simple solutions to resolve issues. For example, if a lender requires a borrower to evidence timely rental payments via cancelled checks (but in some months cash was paid), the landlord can confirm this with a signed Verification of Rent (VOR) form.

But when several solutions are required, stretching is likely not the best answer. I’m all for rolling up the sleeves and making it work, but there is a point when you need to walk away so that either your economics are more comfortable or you truly know your Seller’s bottom line.

Having some of these example issues should give you pause:



Debt-To-Income Ratio Too High

>Restructure Vehicle Loan to Reduce Overall Monthly Payments

Low Appraised Value & Seller Is Price Inflexible

>Obtain Gift Funds to Cover New Equity Required

Higher Gift Funds Introduces Risk to Lender

>Evidence More Cash Reserves in Bank Account

Uneconomical Homeowners Insurance Costs

>Change from Replacement Cost Coverage to Actual Cash Value

There is Asbestos in the Siding & Ceiling Tiles

>Accept the Fact that Fibers Are Not Airborne Unless Disturbed

Dry Rot and a Ceiling Leak

>Seller to Set Aside Sufficient Repair Reserves

Remember: Your best solution may very well be to find another property!

Here’s the Point: Don’t fall in love with your real estate purchase until you are Cleared-To-Close, because your judgment might be clouded.

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