Ocean Mortgage 2020 Newsletter 005 |
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LOANS DURING COVID-19 |
Bob: “I can’t believe my lender just declined my mortgage.” Ocean Mortgage: “What happened?” Bob: “They called my employer and some guy in HR told them that my pay was cut.” Ocean Mortgage: “This is something you didn’t tell the lender?” Bob: “It just happened, and I’m pretty sure it will be temporary.” Ocean Mortgage: “You need to be honest – but you should be fine with a new lender if we show them that you can still qualify at the lower income, your employment is likely to continue, and you have sufficient reserves.” Bob: “Lenders are being ridiculous and should be more empathetic to consumers’ needs.” |
If you are currently seeking a mortgage, the big name-brand retail banks are requiring down payments as high as 30% – and most have eliminated their HELOCs. However, wholesale lenders (specializing exclusively in mortgages) haven’t changed their down payment requirements at all – you can still comfortably qualify for a loan up to 95% of the purchase price (97% for First-Time Homebuyers). BUT:You are NOT going to get a traditional mortgage today if …
- You didn’t make your last mortgage payment or are actively seeking forbearance (or you missed one of the last three payments under your forbearance repayment plan)
- You lost your job or your business is closed
- Within two business days of your mortgage closing, your HR Department hedges on whether you are or will continue to be employed (or you cannot produce a current pay stub with year-to-date earnings)
- Your wages or self-employed income have declined, causing your debt-to-income (DTI) ratio to exceed 40% (or if you are working from home and do not have 3 months of mortgage payments in reserve)
- After returning from a leave of absence, you do not have 30 days of pay stubs (even if income is reliable)
- You rely on OT/bonus/commission income to qualify, but the lowest of your two-year average, year-to-date, or most recent pay stub causes you to exceed the maximum DTI threshold
- 75% of your self-employed earnings is insufficient to qualify you for a mortgage, unless you have 12 months of reserves
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Finally, competitively priced jumbo or FHA loans (especially below a 640 FICO) are scarce – at a time when bargain-priced real estate is surfacing. |
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Here’s the Point: "If your income has been adversely affected by COVID-19, your loan will be postponed or declined – unless you have acceptable, convincing documentation." Mike Kanuka, Founder & President |
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NMLS #901949 (Company) NMLS #880882 (Individual) |
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