Mortgages for the Self-Empoyed

Getting a Mortgage when Self Employed.

 

The process of getting a home loan when self-employed does not have to be difficult if you are prepared. While the self-employed enjoy the freedom to work when and how they want, full-time employees benefit from getting the same paycheck month-to-month from long-established companies. In the eyes of lenders, that gives them a sense of security the self-employed may not have. This makes working with an experienced mortgage professional essential when getting a mortgage while you are self employed. Here are five key items to getting a loan as a self-employed business owner:

Document Your Income

When banks consider the self-employed for a mortgage, they usually look at the last two years of tax returns. They’ll take the income you earned, combine it, then divide by 24 months to estimate your monthly income.

Generally, you’ll have better odds of being approved on a loan if the monthly debts are less than 45 percent of your monthly income. Of course, you must consider other factors as well. Your loan officer may be able to find items to add back in to your income such as depreciation expenses.

Track your Credit Score and Keep Records

In addition to your income taxes, there are two ways you can prove you aren’t a risk to lenders: a high credit score and adequate record keeping.

A high credit score is crucial for those who work for themselves. Again, it goes back to a reliability factor. Generally a 600-640 FICO score is considered satisfactory for many mortgage lenders if you are self-employed. Government loans such as FHA mortgages may allow self employed borrowers to qualify with as low as a 580 credit score.

Depending on the kind of work you do, you may already have solid record-keeping skills that will make analyzing your income a lot easier. Invoices and accounting software records can help you stay more organized. Lenders need to know you have enough revenue, after expenses, to pay back the loan.

Review Write-Offs with Your Accountant

Tax write-offs are a Godsend for people who work for themselves — until they need a loan. Writing off expenses on your taxes does ease your tax burden, but it also reduces the amount of revenue on your taxes when lenders consider you for a mortgage. Your accountant may offer solutions for write-offs that do not affect your qualifying income such as depreciating assets.

If you are thinking of buying a new vehicle, taking a trip to a seminar, or paying some other huge expense for your business, you may want to wait until after you get approved on the mortgage.

Separate Business and Personal Expenses

Every lender is going to ask for two different but important plans: First, your business plan: What do you sell? How is your business growing? What kind of clients (if it doesn’t breach any confidentiality) do you have? It all comes back to knowing where the money comes from and whether the lender considers the source of your income reliable.

Secondly, every business experiences setbacks, and the self-employed are no exception. Do you have a savings plan, a line of credit for emergencies that will allow you to continue making payments until your financial situation gets better? Additional assets that you can document area always a positive thing when qualify for a mortgage.

Keep up Appearances

Full-time employees give the appearance of being a safer investment. The self-employed can also make themselves more appealing through changes in their appearance. Registering your business and having separate business accounts from your personal accounts can make record keeping easier and give the appearance of legitimacy in your work.

Separating the business from the personal also can help keep more money in your wallet. If you use a business credit card for a work expense, your company can write it off, and your personal income will still not be hurt by the deduction.

So, if you work for yourself, have enough clients, and work to keep your bank account in the black, I do have one good piece of news for you: You’ve already mastered overcoming obstacles and objections as a business owner, so the challenges of getting a mortgage should be nothing new to you.

Apply for a Self Employed Home Loan

To apply for a self employed home loan, call Riverbank Finance today at 1-800-555-2098.

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Buying a Vacation Home

What you need to know about buying a vacation home

You’ve been comfortably settled into your home for quite some time now, and you are financially stable. You may be nearing retirement or are craving a place of relaxation and leisure where you and your loved ones can get together without the hassle of booking hotels. A vacation home in Michigan may be just what you need. Before you jump in, you should understand how buying a vacation home is different from buying a primary home. Here’s what you need to know:

Location.

Your idea of the perfect vacation home may be on the beach, in the mountains, or in a small lakeside town along the white sands of Lake Michigan. Before you decide on the exact location, find out about the growth opportunities in the area you’re considering. Having a vacation home in a popular tourist spot can appreciate the value of your home over time, making it a great long-term investment.

Associated costs.

Interest rates for second homes are typically higher than they are for primary homes. Our mortgage calculator can show you what those rates would look like. When you apply for a mortgage on a second home, mortgage underwriters typically look at the costs associated with the principal amount, interest, property taxes, insurance, and any Homeowners Association dues that come with the property.

Likewise, owning a second home means you’ll have to be prepared for added expenses, such as travel, maintenance, repairs, utility costs, and household necessities. One way you can recoup those costs is by renting out the home when you don’t plan on using it yourself.

Down payment requirements.

When buying a primary home, you can put down as little as three percent, and in some cases, no down payment at all. However, FHA and VA loans don’t apply to second homes. In most cases, your lender may want you to put 10 percent down on your vacation home. If you plan on renting out the property on a part-time basis it could be considered a rental property which requires a 20 percent down payment.

Vacation Home Mortgage qualifications.

When you buy a vacation home, the lender will expect you to have saved at least two months of mortgage payments on your primary home and vacation home if you have reliable income, and six months of mortgage payments if you are self-employed. This is to protect you and the lender in case your income is interrupted for any reason. You may also be required to have a higher FICO score and a lower debt-to-income ratio than you would with a primary home loan.

Owning a vacation home can be a great long-term investment and a wonderful getaway for you and your loved ones. However, the process is often difficult, as the lending requirements are more strict. Contact a mortgage loan officer at Riverbank Finance to discuss your best options for purchasing your dream vacation home.

Apply for a Vacation Home Mortgage

To apply for a Vacation home loan, call Riverbank Finance today at 1-800-555-2098.

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Waiting to Buy a Home in West Michigan?

5 reasons why not to wait to buy a home

5 Reasons Why You Shouldn’t Wait to Buy

Timing can mean the difference between getting a home at a good value or missing out completely. Right now, the West Michigan housing market is red hot. If you are thinking about buying a house in West Michigan, here are five reasons you shouldn’t wait much longer:

1) The growing economy.

Grand Rapids has entered a new life outside of its history as a rust-belt city. Currently it is listed at 31st in Forbes Best Places for Businesses and Careers. Unemployment is at 3% with jobs growing at a rate of 2%. That growth, in turn, means homes purchased in the region will increase their worth as investments.

2) Increased demand for homes.

In 2016, Grand Rapids ranked third for housing shortages, according to the National Association of Realtors. Forbes Magazine forecasts that 2017 will be similar to last year in terms of housing demand. Last year, homes averaged 52 days on the market. Experts believe the window of opportunity will be even shorter in 2017. Securing your mortgage is key, so you can get the home you want before it’s too late.

3) Interest-rate increases.

The Fed increased interest rates in March 2017 for only the third time since the 2008 financial crisis — and there’s no sign the rates will decrease again anytime soon. In fact, the rates may increase again before the year is over. Currently, the National Association of Realtors averages nationals rates at 3.39 percent for 15-year mortgages and 4.14 percent for 30-year mortgages. To see what kind of rate you could get for a mortgage, try our mortgage rate calculator.

4) Deregulation.

The Trump Administration has moved toward rolling back the Dodd-Frank Act, the Obama-era federal reform legislation that put the government in charge of regulating the financial industry. Trump’s financial deregulation may benefit mortgage seekers by loosening restrictions on lenders. Home buyers would be able to secure loans easier, but it would mean the pool of available home buyers would likely increase.

5) Options for imperfect credit.

If your credit is imperfect, options are available that could help you buy a house anyway. FHA loans require a 580 credit score with a 3.5% down payment. However, you can still get an FHA loan with a credit score between 500 and 579 with a 10% down payment. Another option is asking a friend or relative with a better credit history to co-sign on your loan. Just be careful about co-signing, because you could strain your relationship with the person if you run into any financial trouble. Other than FHA and co-signing, you can always pay down your debt, decreasing your debt-to-income ratio, or find a way to increase your housing-to-income ratio.

Given the rise of interest rates, a high demand for homes, and a potential ease in mortgage regulations, 2017 is shaping up to be another year when demand will outpace the available supply of homes. So, the longer you wait, the less likely you are to get the kind of home you want within your budget.

To start the process now, check out our pre-approval page or contact one of our mortgage loan officers for more information at 1-800-555-2098.

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Michigan Dower Rights Repealed

Michigan Dower Laws

Michigan’s Marital Signatory Requirements

Effective today April 6th, 2017, both spouses will no longer be required to sign documents (mortgage, rescission, Loan Estimate (LE), Closing Disclosure) unless required by Michigan’s Homestead Law. Prior to this law change, Michigan’s Laws required that female spouses sign mortgage documents to acknowledge liens place on real estate.

History of Dower Rights in Michigan

The Dower Rights in Michigan can be traced back to early 1797 ordinances. Nearly all other states have eliminated these archaic laws that are gender specific and only granted dower rights to married women without providing similar requirements for men. In modern times it creates more hassle than benefits for spouses. Even if a husband applied for a mortgage solely, the wife would still need to be placed on the mortgage and sign at the closing. The dower laws also required females to sign at the closing when their husbands sold real estate even if they were not joint owners.

Repeal of Michigan’s Dower Rights

On January 6, 2017 Governor Snyder signed Senate Bills 558 and 560 into law abolishing dower rights in the State of Michigan. These bills took effect on April 6, 2017. Moving forward married spouses will no longer be required to sign transfer and lien documents for real estate in which they do not hold title. The exception to this is the martial home which always requires joint authorization to refinance a mortgage on the real estate.

For more information visit: https://www.legislature.mi.gov/documents/2015-2016/billanalysis/senate/pdf/2015-SFA-0558-F.pdf

To apply for a Mortgage, call Riverbank Finance today at 1-800-555-2098.

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LEGAL DISCLAIMER: Riverbank Finance LLC and its officers are not licensed to practice law or provide legal advice. Interpretations and commentary are solely the opinion of the Author and should not be taken as legal advice. It is recommended that you seek legal counsel for advice on the law changes that may affect your individual situation.

Buying a Home with Student Loan Debt

Buying a Home with Student Loan Debt

In a few short months, thousands of college students across the country will walk across a stage, shake a hand, and graduate from a university with a degree and more than likely… a whole lot of debt. Student loans are often necessary to reach your educational goals, but will they affect your ability to qualify for other financing in the future? Here’s what you’ll need to know.

Qualifying for a Mortgage with Student Loan Debt

How your student loans will affect your ability to qualify for a mortgage depends on two things: the total amount you owe, and what type of home loan program you are applying for. There are many loan programs available today and they each treat student debt differently, by the way they calculate your monthly payment.

FHA & USDA Mortgages and Student Loan Debt

Effective last summer, the FHA and USDA began calculating monthly student loan payments at 1% of the total amount owed. Regardless of deferment or income-based repayment plans, 1% of the total must be used to calculate a borrower’s debt-to-income ratio (DTI).  If a borrower is on a standard repayment plan, and their monthly payment is greater than 1% of the total amount owed, the actual payment amount will be used.

For example, lets say John has $65,000 in total student loan debt, but he is in deferment for 6 months. His monthly payment will be calculated as $65,000 * 1% (.01) = $650 regardless of what he actually pays each month.  If, however, he is on a standard repayment schedule and his monthly payment is $780 per month, his payment must be qualified at $780.

VA Mortgages and Student Loan Debt

Last month, the Department of Veterans Affairs (VA) introduced a new policy regarding how student loan debt is calculated. Prior to this change, it was calculated the same way as FHA and USDA. Now, however, the payment is calculated based on 5% of the total student loan debt, divided by 12 months.

Lets get back to John. In this scenario, John’s payment will be calculated as $65,000 * 5% (.05) / 12 = $271. Under the VA mortgage program, John more easily qualifies, because his DTI is lower.

What if John’s student loans are in deferment? If his repayment is scheduled to begin within 12 months from the estimated closing date, 5% / 12 months calculation must be used. If not, however, the payment can be omitted altogether if written evidence can be provided as such.

Conventional Mortgages and Student Loan Debt

Under Fannie Mae Conventional guidelines, student loan payments are calculated under the same rules as FHA and USDA. Under Freddie Mac Conventional guidelines, however, an IBR payment can be used in place of the calculated amount.

Lets say John is on an income-based repayment structure and only pays $250 per month. John will simply need to provide a statement from his loan servicer showing the actual repayment terms.

Perhaps the best news yet is that our 1% Down Conventional program allows for an actual IBR payment to be used when qualifying a borrower. So, not only can John more easily qualify with a lower DTI, but he can put just 1% down on his home purchase!

Apply for a Mortgage

To apply for a Mortgage, call Riverbank Finance today at 1-800-555-2098.

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Mortgage Bankers vs. Mortgage Lenders vs. Mortgage Brokers

Bankers and Lenders and Brokers, Oh My!

Mortgage Bankers

When many prospective homebuyers think about getting pre-approved for a mortgage, they picture their local bank. They stop by the nearest branch, are greeted by a friendly teller, and ask to speak to a loan officer. There’s nothing inherently wrong with this concept, but it certainly isn’t the only way to obtain a mortgage.

Mortgage Lenders

Mortgage Lenders exist with the sole purpose of originating home mortgages. They do not have checking accounts or ATMs. Generally, they originate the mortgage, but once it closes and funds, they sell it to a mortgage servicer, and use the money to originate new mortgages. Mortgage lenders are also referred to as Direct Lenders or Retail Lenders.

Mortgage Brokers

Mortgage Brokers are basically a financial matchmaker, matching homebuyers to mortgage lenders. They develop relationships with multiple Wholesale Lenders to originate mortgages through the loan programs those lenders offer. Mortgage Brokers take a loan application, then send it to the lender who offers the best rate and terms for that borrower’s financial situation.

Which option is best for you?

Riverbank Finance is a Mortgage Broker, so I’m more than a little biased, but let me explain! Mortgage Brokers are a great option for most borrowers because we have access to more programs and encourage competition amongst our lenders—both of which drive pricing down. We also charge zero origination fees on the majority of our loan programs.

Working with a Mortgage Broker saves borrowers more than just money— it also saves hours of time! We shop our lenders’ rates and fees everyday, and know the program guidelines inside and out. Unlike banks and lenders, we do not add any additional overlays to our lenders program guidelines—their minimums are our minimums, allowing us to serve borrowers that others can’t.

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To apply for a Mortgage, call Riverbank Finance today at 1-800-555-2098.

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Michigan Jumbo Mortgage Limits

House with michigan jumbo loan financing.2017 Jumbo mortgage limits are based on guidelines set by Fannie Mae and Freddie Mac.  Most consider a Jumbo Loan anything over the conforming limit which is currently set at $424,100 however this may differ depending on the type of financing you are seeking. Referencing he Conforming loan limits for 2017 is the best resource to verify mortgage limits in your area.

For more information visit Jumbo loan mortgage.

The chart below, from Fannie Mae’s website, displays general mortgage limits in United States for mortgages closed in 2017.

UnitsContiguous States, District of Columbia, and Puerto RicoAlaska, Guam, Hawaii, and the U.S. Virgin Islands
GeneralHigh-Cost*GeneralHigh-Cost*
1$424,100$636,150$636,150$954,225
2$543,000$814,500$814,500$1,221,750
3$656,350$984,525$984,525$1,476,775
4$815,650$1,223,475$1,223,475$1,835,200

Michigan FHA Mortgage Limits

FHA mortgage limits: FHA County Mortgage Limits are determined by the county in which the property is located. For example, if you are financing a mortgage for a home in Grand Rapids, MI which falls in Kent County, FHA financing would limit your Loan amount to $275,665 or less for a single family home. Conventional mortgages would still permit you to mortgage up to the national mortgage limit previously mentioned.

It is important to know the jumbo mortgage limits for your area so you can avoid the high interest rates and fees generally associated with Jumbo loans.  Doing the proper research and working with the best lenders for your needs, can help save you thousands of dollars in both closing costs and mortgage interest.

Michigan VA Loan Limits

VA loan limits in Michigan following conforming loan limits which are currently set at $424,100 for a single family home. For a military veteran applying for a VA home loan the loan would also be limited based on the available VA entitlement remaining. Previous VA loans there were not paid in full may reduce the available VA entitlements that an individual is able to borrower. Fore more information on VA benefits in Michigan contact the Regional VA Loan Center below:

Cleveland
Department of Veterans Affairs
VA Regional Loan Center
1240 East Ninth Street
Cleveland, OH 44199
http://benefits.va.gov/cleveland/regional-loan-center.asp

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Buy a Home with No Closing Costs

Buy a Home with No Closing Costs

An alarming number of first time homebuyers are unaware that mortgages involve closing costs, and which often creates a financial obstacle. Here, we’ll explain not only what closing costs are, but more importantly, how to avoid paying them!

What are Closing Costs?

Closing costs are additional fees a homebuyer is responsible for, outside of the down payment, at the time of closing. They include things like lender fees, title fees, government fees, and prepaid items such as property taxes and homeowner’s insurance. See below for a more conclusive list of closing costs you may encounter.

Lender Fees
• Credit Report Fee
• Application Fee (if applicable)
• Origination Fees (if applicable)
Appraisal Fee
Flood Certification Fee
Title Fees
• Chain of Title
• Owner’s Title Insurance (typically paid by the seller in Michigan)
• Lender’s Title Insurance
• Closing Fee
• Courier Fee
Government Fees
• Recording Fees
• Transfer Tax (typically paid by the seller in Michigan)
Real Estate Broker Fees (if applicable)
Prepaid Items
• Per Diem Interest
• Property Taxes
• Homeowner’s Insurance
• Tax Prorations (to reimburse the seller for taxes they already paid)

Related: Transfer Tax Calculator and Title Insurance Calculator

How Much are Closing Costs?

Closing costs vary based on factors such as loan amount, location (state and locality) of the property, and lender fees. Total closing costs typically range between 3-6 percent of the sale price. As stated above, not all fees apply in every loan situation. For instance, here in Michigan, title insurance and transfer taxes are typically paid by the seller.

Ask your buyer’s agent about what (if any) fees their brokerage charges for their services, as their administrative fees can range up to $500. Lender fees can also have a large impact on a homebuyer’s total closing costs. Here at Riverbank Finance, we don’t charge any additional lender fees for most loan programs! Be sure to ask your loan officer what fees you can expect to pay for their services.

Can I Avoid Paying Closing Costs?

There are several ways in which homebuyers can avoid paying closing costs. The most common way to do this is to request seller paid closing costs when writing an initial offer on a property. Each loan program is different, but allows for a percent of the purchase price to be given back– up to 3% on Conventional, 4% on VA, and 6% on FHA and USDA. For example, if you are purchasing a $200,000 home with a VA mortgage, you can request seller paid closing costs of up to $8,000.

Homebuyers should also speak with their loan officers about no-closing cost loan programs. By utilizing lender credits, buyers can reduce or even eliminate their closing costs altogether—ask your loan officer if you qualify for lender paid closing costs! Here at Riverbank we charge NO APPLICATION FEES and most of our loan programs have NO LENDER FEES.

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To apply for a Mortgage or Refinance with NO closing costs, call Riverbank Finance today at 1-800-555-2098.

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VA Loans Just Got Better

 

For eligible servicemembers, veterans, and surviving spouses, the existing VA home loan program just got better! The Department of Veterans Affairs (VA) has introduced a new policy regarding how student loan debt affects mortgage eligibility.

Related: VA Loans for Military Veterans

VA loosens Guidelines for Student Loans

The new policy makes it easier for VA eligible borrowers to obtain a purchase or refinance loan, by changing the way student loan monthly payments are calculated. Prior to this change, 1% of the total student loan debt had to be counted toward the borrower’s debt-to-income (DTI) ratio each month, regardless of actual monthly payment structure or deferment. Now, however, the payment will be calculated based on 5% of the total student loan debt, divided by 12 months. Clear as mud, right?

Lets do some math!

For example, lets say John has $65,000 in student loan debt. Formerly, his monthly student loan payment would have been $65,000 * 1% (.01) = $650. Now, his payment will be $65,000 * 5% (.05) / 12 = $271.

What if John is on an income-based repayment structure, and only pays $250 per month? The new policy also allows a statement from John’s student loan servicer to be provided, allowing the calculated payment to reflect the actual loan terms.

What if John’s student loans are in deferment? If his repayment is scheduled to begin within 12 months from the estimated closing date, we must use the 5% / 12 months rule. If not, however, the payment can be omitted altogether if written evidence can be provided that repayment will be deferred at least another 12 months from the closing date.

By changing the way student loan payments are calculated, more VA eligible borrowers will qualify, and for a larger amount. Check out our VA Mortgage Calculator to estimate your monthly payment on a desired home purchase.

What is a VA home loan?

VA home loans are originated by private lenders, banks, and mortgage companies, but the VA guarantees a portion of the loan, allowing us to offer you more favorable terms. VA purchase loans help you buy a home with a low interest rate, without requiring a down payment or private mortgage insurance (PMI). There are also special VA loan programs for Cashout and Streamline Refinances.

Who is eligible for a VA home loan?

Active servicemembers, veterans, and surviving spouses are eligible for VA home loan programs, with a valid certificate of eligibility (COE). Length of service or service commitment, duty status and character of service determine each veteran’s eligibility for specific benefits. All VA borrowers are still subject to the minimum credit score requirement of 580 and sufficient income levels to cover expected monthly obligations. For more specific information on eligibility and requirements, visit the VA benefits website.

For More Information Visit the VA Student Loan Announcement.

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To apply for a VA Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Should I Payoff my Mortgage Early?

 

Should I pay off my mortgage early? How much money will it save me? How much extra should I pay each month? If I pay an extra one hundred dollars each month, when will my mortgage be paid off? As you can imagine, we get these questions a lot. They are all excellent questions, but the answers vary depending on the homeowner. Here, we’ll address some things to consider before paying off your mortgage early.

Debt-free living sounds like a dream, but even if it is financially feasible, is it the best choice for you? Paying off your mortgage early will save you the interest expense you would have incurred over time; and the higher your interest rate, the more you stand to save. If your interest rate is low, however, sending any excess cash to your mortgage servicer may not be your best option.

Related: Refinance your mortgage with FHA Streamline

So, what else could you do with that extra cash? Speak to your financial advisor about your goals for retirement. When discussing investment options, you may be surprised to hear that the expected return on some portfolios may be greater than the savings you’d see by paying your mortgage off early.

How long do you plan to stay in your home? If you’re still in your first home, and you don’t anticipate ever paying off the mortgage, it doesn’t make much sense to overpay. Conversely, if you’re in your ‘forever home’ adding a little extra to your monthly payment could mean significant savings down the road.

When it comes to debt, mortgage debt is the best kind of debt to have, but let’s be honest—it’s still debt. If it’s going to help you sleep at night, and you can afford to payoff your mortgage, then by all means, do it! Have a mortgage burning party! Apparently that’s a thing.

So you’ve weighed your options and decided to pay down your mortgage—great! Use our amortization schedule calculator to determine how much sooner you will pay off your loan by paying extra monthly. Enter your total loan amount, interest rate, loan term, and open the advanced calculations to add your extra principal payments (monthly). After you click calculate, scroll down to see the number of months it will take to pay off your mortgage.

Let’s say, for example, you have a 30-year mortgage of $160,000 at a 4.25% interest rate. If you pay an extra $100 each month, you will pay off your loan in approximately 289 months, or 24 years.

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To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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