My favorite thing about working for First Home Mortgage in Richmond, VA, is the team with whom I work. We have a dedicated staff of underwriters and product support specialists available to research ways to assist clients with their outside-of-the-box lending needs. When tough scenarios come up, this experienced team sifts through page upon page of Fannie/Freddie/HUD/investor text to find solutions–and, we are often able to find a solution when other lenders aren’t.
It may surprise you, but sometimes the borrowers with the most income/assets have a trickier time qualifying for a mortgage loan. It may be because they are self-employed, their assets are tied up in business accounts, or, their income, even while significant, may be declining.
Important information to know if you are short on monthly qualifying income but have assets on-hand is the ability to use those assets to supplement qualifying income. Fannie Mae will not allow it, but, Freddie Mac will, so you would have to meet Freddie’s other guidelines. Here are the rules for using this income to qualify per Freddie Mac’s rules: (source)
Assets may only be used for qualification if the mortgage meets all of the following requirements:
- Is secured by a one-unit primary residence or second home,
- Is either a purchase transaction mortgage, “no cash-out” refinance mortgage, or relief refinance mortgage , and has a maximum loan-to-value (LTV)/total LTV (TLTV)/Home Equity TLTV (HTLTV) ratio of 70
- The borrower must not currently be using the eligible assets as a source of income.
- The asset source must meet all the associated requirements listed under “Asset eligibility requirements” as indicated in Guide Section 37.13(e)(1)
To qualify the borrower for the mortgage:
- Determine that both the source of the asset and the amount of the asset source are reasonable and stable for each asset qualification source
- Include a written analysis of the asset qualification source and amount in the Mortgage file
- Meet the requirements of Guide Section 37.13(e), regardless of the underwriting path of the mortgage
- To calculate asset sources, use 70% of the balance of the eligible asset less any funds required to complete the transaction (e.g., down payment, Closing Costs, Financing Costs, Prepaids/Escrows), divided by 360 months, regardless of loan term or account balance.
The above information may be a little over your head if you’re not a loan officer, but please feel free to contact me if you think this information could help you purchase your next home. As I write about here, don’t take no for an answer when you’re trying to finance a home purchase. You may have just not spoken with the right lender yet who is willing/able to find the lending solutions you need for your home pre-approval. At First Home Mortgage, we are dedicated to finding residential financing solutions for our clients.
This post is dedicated to Marci, Underwriter Extraordinaire.