April 6, 2023

Calculating income can always be challenging, and some lenders don’t pay attention at the beginning, which causes issues down the road. Below are a few essential things that a Loan Officer needs to be careful with when they are qualifying a buyer:

• Buyer has two jobs – They MUST be on BOTH jobs for a MINIMUM of 2 years!!!!
• The buyer gets a big raise early in the year and doubles or even triples their salary. We see this all the time - and Red flags fly up everywhere! How, why, and why now? Oh, to qualify for a loan?
• Family employment - Buyer must work there for at least two years, except one year with confirmed transcripts from the IRS!
• Business income is usually a two-year thing unless you are self-employed for at least five years and get one-year tax findings. I had one just the other day where the buyer was pre-approved with another lender based on the 2022 taxes, but 2021 was the first year in business, and they showed a loss! Their income was WRONG, and there was no way this loan would have gotten past an underwriter. It said in the findings that they only needed one year of tax returns if the buyer could prove five years of self-employment!
• Child Support / Spousal Support / Foster care income must have three years continuance.
• We can increase the amount of your IRA/401K distributions assuming you are 59.5, but we need three years remaining at the close of escrow! The buyer has $360,000.00 in IRA, and distributions are $10,000.00 per month. Then, we are OK to use $10,000.00 in income. If the borrower has $350,000.00 in the bank, we would decrease the distributions to a number where there are still 36 months remaining to use that income.
• Social Security income is sometimes taxable! You can gross social security income up by 25% when it is not taxable! The buyer gets $2000 in SSI; if the SSI is not taxable, we can use $2500 for the income.
• Large deposits in Bank accounts are also a big thing, as money needs to be seasoned!

I hear that a few files are falling out due to Loan Officer error, and the above are just a few of the many things we look for when we start a file. We pre-underwrite every file before giving a client the OK to put in an offer. I know your buyers are in a hurry when they find the dream home they always wanted. Yes, we sent them what we needed 30 days ago and followed up with them 32 times in the past month, and now that the papers hit our desk, we need to expedite the pre-approval, and we do!

Two quotes come to mind by the late great John Wooden in these situations. “Be Quick, but don’t hurry!” “If you don’t have time to do it right, when will you have time to do it over?”

We can review and complete many files in 20-30 minutes after we have everything, but some are more complicated and must be looked at carefully. Too many of these fallouts are just Loan Officer error, laziness, or inexperience!

Rates were better the past few days, and I like where we are going. Let’s hope we continue the momentum and rates get lower so sellers feel like they can sell! We have the buyers, and we need sellers!!!!

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• 0 down California Dream for all Equity Share program 6.125% today (6.31APR)
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!
• Government Loans (FHA / VA) are in the low to mid to high 5’s.
• Conventional Loans up to $726,200.00 are in the high 5’s and low 6’s.
• High Balance Loans $726,201.00-$ 1,089,300.00 are in the low to mid 6’s
• Jumbo loans above $1,089,300 are in the low to mid 6’s
• 5/1, 7/1, 10/1 Arms are in the 5’s and 6’s.
• Bank statement loans - They are available with 10% down again! 7’s + depending on down and credit score.
• Stated income loans – 20% down with reserves! In the 8’s and 9’s!
• 0 down loans are in the high 5’s to low 6’s- 620 credit score min right now! Low 6’s, for the most part, up to $725,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - are typically 7.49% with limited fees – But they get you where you need to go!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I am around all weekend if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!