Using Alimony/Child Support as Income

May 23, 2018

When you are looking at leveraging Alimony or Child Support as a source of income there are several thresholds clients will need to meet. First, they will need to provide a copy of the Divorce Decree (or any other legal document) outlining the payment structure. Next, they will be asked to provide proof that they have received at least six months of the full Alimony/Child Support payments. There can be no partial payments as this makes the income source “unstable.”  The above is the standard for a Conventional and Jumbo style mortgage loan, it is only 3 months received doing the loan as an FHA.

Finally, any support that is calculated as part of Income will need to continue for at least three years from the time of the mortgage application. This means that if a client has two children, one who is 12 yrs. old and another who is 17 yrs. old, then only the Child Support for the 12-yr. old can be counted as income if the Divorce Decree states support will end when children reach 18 years of age.

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034


Equity or Cash?

April 4, 2018

Use Cash-Out, HELOC Loans vs Bridge Loans?

 

 

Let’s face it. One of the worst parts of buying a new home is that clients often need to sell their existing home first. It’s a beating for them to keep it perpetually staged and makes their offer less desirable because they’ll have a contingency. Realtors and clients often ask me about Bridge Loans. I have a love/hate relationship with them because they’re risky which is exactly why so few lenders offer the product. They also come at a high rate and cost that then needs to be refinanced out of when that home sells, move costs. For the right client, with sound financial judgment in a stable economy, they can be a useful tool. If there’s a speed bump along the road, however, they can turn into a nightmare.

If you have clients who have been looking to buy a new home before their present one sells, they may want to consider pulling out equity. With the recent growth here in North DFW, homeowners often have a chunk of equity sitting there that could act as their next down payment. Leveraging a Home Equity Line of Credit (HELOC) and Cash-Out Loans, buyers can pull out any equity in their home as long as 20% remains unused. Here’s how they work:

Cash-Out Refinance

This is just like a regular refinance in that your client is starting a new loan with new terms. The difference is that you’re pulling out available equity up to the 80% mark. Loans today do not have Pre-payment penalties, but Fannie Mae does have what is called a buy back if the loan “pays off” too early. That has no impact on the consumer, but it is a good conversation for the lender and customer to have.

Home Equity Loan

Commonly referred to as a HELOC, this loan product allows buyers to borrow from themselves at a slightly higher rate than what you’d see on conventional financing. The big difference is that this is just a short-term loan much like a car loan AND you’re not starting a brand-new loan. Your client’s original mortgage stays in place.

In either scenario, your client could pay off their Home Equity loan or cash-out mortgage once their original home sells. Pulling out equity is a great way for clients to buy that next home without having to go through the hassle of selling their original home first. It’s their equity–they might as well use it!

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034


Interest Only Loans: Dangerous for Avg. Consumers

March 27, 2018

For those of you who were in Real Estate during the 2006-2008 timeframe, you remember the fall-out of all the ARMs, interest only, high loan-to-value and low document style loans. When home prices go up, and applicants can’t be approved for more traditional products, we see folks turn to riskier alternatives. These products are great for savvy investors who want to use their cash for investments with a better return than real estate–but they present the average buyer with a risky proposition. Let me tell you a story about Dan and Jan…

-Dan and Jan wanted to own their first home after the got married. Yet, they really couldn’t afford a payment including principle and interest.

-They decided they could afford a 5/1 Interest Only ARM product where the first 5 years have them just pay the Interest portion of that payment

-Dan and Jan were busy with their careers, and since traditional rates really hadn’t changed much, they didn’t bother to refinance out of their original loan.

-Year 5, BAM!!!! The full payment comes into play and they can no longer afford their mortgage payment

-They struggle to sell their home because there are many other homeowners in the same situation on the market

-To get out of the home they will either have to bring cash to the table (which they don’t have) or foreclose

-The End.

It’s the same story we saw ten years ago, and it’s come full circle. Clients getting into risky loan products can hurt their ability to buy up when they really need to (e.g., growing family), damage their credit or ruin them financially. I view my relationships with my clients as life-long. I don’t want them to get themselves into a situation that will bring unneeded financial turmoil to their lives and not let them live a financially robust life.

If you have clients who are considering these products, I would be happy to discuss with them what they need to do to qualify for more financially stable loans. Sometimes a few changes can make a big difference and can put our clients in a better position for long-term success.

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

Click here to Apply


The Rate Hike Struggle

March 13, 2018

Chairman Powell in between a Rock and a Hard Place

So, you’re the new kid on the block and your job is to drive a strong U.S. economy. It’s not an easy gig and Powell is faced with three major problems.

Problem #1: Doing what you say you will do…

The markets hate it when things aren’t predictable, and they rely on financial leaders to be able to adequately forecast what they plan to do next. This is especially important when Trump and the Republican party are at odds because this presents a wild card scenario. Throw on some tariffs that create opportunities for trade wars and the markets cringe at the potential impacts. Powell needs to position himself as a leader who knows what’s happening, how to manage key issues and demonstrate he can deliver.

Problem #2: The data doesn’t squarely support raising rates

We are still seeing the effects of unraveling quantitative easing (where Fed invested in Bond market to pull rates down) which has moved rates steadily upward. Meanwhile, the economy is doing well but we’re starting to see some financing program changes that feel similar to what happened prior to the mortgage collapse ten years ago. This includes the loosening of Underwriting guidelines (e.g., you can have more debt than you used to) and an increased use of ARM products. It makes me wonder if people are making desperate moves to get into a home and that can put clients (and Banks) in a risky situation in a downturn.

Problem #3: Lack of consensus among Fed Reserve

There are several cooks in the kitchen, among them the Regional Presidents who make up the voting body of the Fed Reserve. Powell has to herd the cats and gain alignment on both the long, and short-term, agendas. This is not an easy task, especially when financial data is mixed, and economic stability varies by geographic area.  In public statements, everyone is saying rates need to go up, but the how and when vary by voting member. I do think rates are posed to go up, but I would forecast no more than .125 to .25 at each opportunity the Fed has to do that.

Photo credit: https://en.wikipedia.org/wiki/Jerome_Powell

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034


How to handle minors and credit?

March 2, 2018

This is a question I was asked the other day so I did some research.  As a member of LifeLock so that was my first stop.  We have been members for years and so far so good and have never needed them but they are a great resource of information when it comes to this topic.  They have a Junior product for kids, costs $5.99 a month and has many benefits included, 2 being Identity alert and Dark Web monitoring.  https://www.lifelock.com/products/lifelock-junior/

I don’t know about your kids, but mine are “on-line” either on phones, tablets or computers a good amount of time each week.  And as I view the home computer, seeing a few programs they have mistakenly downloaded, they don’t always make the best choice on-line.  So that $5.99 a month might be money well spent.

But what are the other options and maybe you are just realizing their identity might have been compromised?  A Police Report is that 1st step, get them involved early!  Then check out this Identity Theft website the Government has: https://www.identitytheft.gov/ It gives you a step by step plan towards a resolution!

Looking to learn a bit more about kids, credit and identity theft?  Experian has a wonderful page dedicated to it: https://www.experian.com/blogs/ask-experian/category/credit-advice/life-stages/kids/

As always, please let me know what of this report was useful and other tips you might add to my list.  Thanks for reading and your feedback.

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034


Is the Fed turning a Blind Eye?

February 27, 2018

This week the Federal Reserve released the notes from their January meeting where the majority of members said we’re going to see increased inflation due to stronger economic growth. This assertion will continue to support their very gradual increase of rates over time and I would still expect to see two upticks within this calendar year unless we hit a very obvious economic bump. It’s a bit frustrating because while the Fed is touting our economy’s strength, I don’t believe the data is stacking up on the Real Estate side.

Year-over-year home sales and application volumes are dropping and I’m seeing softening in the market rather than ongoing strength. Buyers seem less confident whether they’re worrying over unpredictable “Trump Economics” or current housing prices–It’s hard to say. Regardless, I don’t agree with the Fed when they say we’re on an upward trajectory. I think we’re flat and raising rates is going to make things worse over time, not better. I can’t decide if the Fed really believes what they’re saying, are just trying to convince the public things are OK or if they’re operating in an alternate reality. I guess only time will tell…

Now check out the Case-Shiller Home Price Index below, wow!! This index tracks Real Estate across the country and shows appreciation has remained solid!!  That is great news for possible on the fence sellers.

Geoffrey Davis

Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

Click here to Apply


Do you Echo?

February 20, 2018

I don’t know about you but I’ve had my share of experiences with Amazon’s Alexa–who’s been renamed Echo at our house–as to not be confused with my daughter’s friends Alexis and Alexa. Overall, we find Echo an enjoyable product especially for our younger children (who don’t have their own devices) and when we’re doing something else (e.g., dishes) that makes it hard to stop and look at your phone/tablet.

Recently, I came across a Realtor who is using Amazon’s technology to provide room-specific information in a seller’s home. For instance, there’s an Echo unit when you arrive welcoming you to the home and providing a brief overview. The Echo Dot in the kitchen provides details around the recent kitchen renovation. The Master Suite Eco Dot highlights the new nylon Karastan carpet, closet square footage and large walk-in shower. And so on…

The challenge? You have to tell Echo to play the overviews rather than her detecting motion–which many buyers might find odd. There’s also the fact that Alexa talks at a pace that is annoying slow at times. I really like the idea of providing relevant buyer information while they’re in each room but think we’re a few years away from this technology being spot-on for showings. Meanwhile, it’s a fun idea! I’d love to hear about your experiences with Alexa and what you love/hate.

Meanwhile, here’s one of my favorite links with things that Echo/Alexa can do.

50 most useful Alexa skills