Stated-income loans with easier standards help self-employed and wage earners.
What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.
Rate news summary
From Freddie Mac’s weekly survey: Jumping 11 basis points, the 30-year fixed rate is at its highest level since February 2011, averaging 4.94 percent. The 15-year fixed jumped 10 basis points, averaging 4.33 percent.
The Mortgage Bankers Association reported a 4 percent decrease in loan application volume from the previous week.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $453,100 loan, last year’s payment was an astonishing $279 lower than this week’s payment of $2,416.
What I see: Locally, well-qualified borrowers can get the following fixed rate mortgages for a 1-point cost: 15-year at 3.75 percent, 30-year at 4.50 percent, high-balance ($453,101 to $679,650) 15-year high balance at 4.0 percent, 30-year high balance at 4.625 percent and jumbo (over $679,650) 15-year jumbo at 4.125 percent and 30-year jumbo at 4.75 percent.
What I think: Where is the energy and action these days when it comes to mortgage products?
After all, most well-qualified borrowers are hunkered down enjoying their lower mortgage rates. Mortgage Bankers Association chief economist Mike Fratantoni said, “75 to 80 percent of mortgage holders are below 4 percent.”
Lenders are in more of a survival mode given the general market slowdown. So, they are, once again, getting more creative.
“The non-QM or expanded credit market is the only segment of the mortgage market that is growing this year,” said Guy Cecala, CEO and editor of Inside Mortgage Finance. “This segment grew by 24 percent in the first nine months (of this year) while the overall market declined by 6 percent.”
Within this expanded credit market (which is outside of the conventional Fannie and Freddie box) is the re-emerging stated-income world. Easier standards and easier qualifying await self-employed borrowers since I first wrote about this loan back in August 2017. This is a bold new bonanza for salaried employees and wage earners.
Go as low as a 680 middle FICO credit score and put 30 percent down on a primary residence up to a $1 million loan amount on a purchase or rate and term refinance. You can enjoy a seven-year rate lock on a 30-year adjustable rate mortgage that starts at roughly 5.5 percent and you are good-to-go!
Two to four units are allowed with a larger required down payment. Up to 50 percent gift funds are allowed for owner-occupied transactions.
Investors are allowed at one-quarter percent higher pricing.
Even seasoned bankruptcies, foreclosures and short-sales are OK.
So, what’s the catch? There are several catches. I will highlight the more important ones.
First and foremost, you will need the most recent two months of bank statements to show available down payment funds. For purchase and refinance, you will need 12 months of total house payment reserves to qualify. Yes, you can also count retirement funds at a discounted value.
2) Wage earners must state an income on the application that is reasonable for that job. Busboys claiming $80,000 of income will not fly (like the olden days). Your employer will be contacted for a verbal verification of employment. The big idea is to avoid having to show various tax return losses, for example, that traditional underwriters will flag and may hold against you.
Self-employed borrowers need a CPA letter acknowledging a minimum of two years of self-employment. No need for a profit and loss statement on this stated-income program. Nothing is needed from the CPA to support the stated income on the application. Yes, self-employed tax cheaters can have at it. Where applicable, business or professional licenses are required.
Be mindful and be careful. If you can go full-doc, then do so because you’ll receive better pricing than lesser documentation requirements of stated-income loans.
This expanded credit market is trending toward the Wild West of fictional rate quotes. Shop around. Ask questions. It’s never a done deal until you have a written loan approval along with a rate lock letter.
Mortgage broker Jeff Lazerson can be reached at 949-334-2424 or jlazerson@mortgagegrader.com .
