Mortgages for Self-Employed Borrowers

The Challenges of Self-Employed Borrowers
George has a stellar credit rating, ample assets and a 30-year career. So why did banks turn him down when he applied for refinancing? Two dreaded words: self-employment.

The lending industry relies upon the predictable – predictable, steady income to pay predictable debts and supporting documentation that meets predictable criteria. Unfortunately, self-employment is anything but predictable. Incomes go up and down, expenses rise and fall, and savvy accounting often blurs the full income picture on tax returns.

In George’s case, he transitioned his B2B enterprise to keep pace with technological changes. During the transition, his income dipped as equipment expenses skyrocketed. All of a sudden, his tax returns no longer reflected an income stream that met criteria to refinance his mortgage.

After a few lenders turned George down, his financial consultant recommended Debbie. “Debbie really helped me by strategizing. She analyzed all my records, spoke to lenders and counseled me to wait until my 2012 tax return was in,” George explains.

Sure enough, a bump in income on George’s 2012 return did the trick. Three years after first applying for refinancing, George finally got his mortgage – but not without undergoing what Debbie calls a “financial colonoscopy”.

“Self-employed borrowers need to be prepared for unbelievable scrutiny,” warns Debbie. “I actually like the challenge of helping business owners like George work everything out.”

George responds that he appreciates Debbie’s “can do” approach to obtaining mortgages. “Debbie doesn’t dump everything in your lap. She does whatever it takes to get things done,” he says.

Before working with Debbie, George didn’t know that mortgage brokers existed. Now he has a deep appreciation for brokers like Debbie who go the extra mile for challenging clients without charging the borrower for services. “It costs you no more to use me than it does to go through a conventional lender, yet you get a partner to work with you throughout the whole lending process,” Debbie explains.

Want to know more? Please give Debbie a call at 617-965-1236 or email Debbie for information or help.

May’s Home Value Improver

Banish Indoor Bugs

Ants, fruit flies, hornets, mosquitoes – warm weather brings out the insects, both outside and in. What should you do if you discover an ant colony parading across the basement floor or a bug festival in your kitchen?

The Natural Resources Defense Council (NRDC) cautions against reaching for pesticides. Instead, seal any entryways such as holes in screens or gaps around floors or windows. Then, remove food sources by making sure that your house is clean and dry.

  • Wipe up spills immediately with soap and water.
  • Take out garbage daily and keep garbage cans clean of food residue.
  • Keep ripe fruit in the fridge.
  • Wash dishes daily, or at least submerge them in soapy water until you can get to them.
  • Make sure all food and beverage containers outside the fridge or freezer are tightly sealed.
  • Sweep and vacuum your floors regularly.
  • Keep bathroom and kitchen areas as dry as possible. Fix leaky faucets and don’t let standing water accumulate.
  • If you have a pet, comb it regularly with a flea comb and wash its bedding frequently. Be sure to vacuum floors, rugs and upholstery your pet comes in contact with regularly.

If you still have insects in the house, the NRDC recommends vacuuming for individual bugs or nests since bugs will usually suffocate in the bag. You may also lay flytraps, pheromone traps, light traps and other chemical-free traps.

If all else fails, try these low-risk pesticide techniques from the NRDC:

  • Dust boric acid on cracks and crevices, which slowly poisons crawling insects like ants, cockroaches and silverfish, but is far less toxic to humans and other mammals.
  • Use tamper-resistant bait boxes, an effective and safer choice than sprays, powders or pellets, which all spread pesticide residues. Look for one that uses a nonvolatile chemical, like boric acid, and make sure to keep bait stations out of the reach of children.
  • Try insecticidal or fatty-acid soaps, which kill soft-bodied insects like caterpillars, fleas and mites on contact, and are virtually harmless to humans and mammals unless they’re ingested.
  • Hire a professional trained in Integrated Pest Management (IPM), which uses physical controls and low-toxicity products to manage pest problems.


Is That House Worth It?

Buyer Beware
A recent article in The Boston Globe chronicled the bidding battles in the greater Boston area as too many buyers seek to buy too few homes. The Globe story tells of buyers offering tens of thousands of dollars over asking price, waiving home inspections, agreeing to flexible closing dates and making other major concessions to buy a home.In the pursuit of the American dream, prospective buyers are taking on risks that could turn into a nightmare. Consider these scenarios:

  • You bid more than the asking price – If the appraisal comes in lower than what you are prepared to pay, you will be responsible for paying cash to come up with the difference.
  • You waive the home inspection – If you discover that the roof leaks, there is termite damage or other major repairs are needed, it’s your problem. You paid full price (or more) for the home, without any ability to discount the price to cover needed repairs.
  • You waive the mortgage contingency – A mortgage contingency clause means that the purchase of the home depends upon your ability to get a mortgage within a specified time period. If you don’t obtain a mortgage within that period, you can exercise your option to cancel the purchase and get your deposit back. By waiving this contingency, you relinquish your right to get your money back if financing falls through.

In a competitive bidding situation, it can be easy to get carried away. Sometimes the best thing to do is to walk away instead. When evaluating your options, take a level-headed approach and consider:

  • Your budget – Can you afford making a higher bid and/or potentially paying out-of-pocket for needed repairs or the difference between the sales and appraisal price?
  • Market value – Is the home really worth the extra you may pay in a bidding war? Don’t let your emotions overrule long-term investment considerations. Will you be able to recoup the money if or when you sell the home?
  • How difficult will it be to find another home that meets your criteria? – Would you be happy living in several different areas or do you have your heart set on a particular community or even a particular street? Evaluate how important this specific home is to you. If another house would do, then walk away.

Want to know more? Please give me a call at 617-965-1236 or email me for information or help.

April’s Home Value Improver

Quick Mood Boost

After last week’s events, we all could use a pick-me-up. If you can’t get outside to enjoy some sunshine or a brisk walk, bring the outside in! Studies have shown that indoor plants both improve your mood and purify the air.

According to an article in the Journal of Environmental Psychology, plants can boost mood levels, reduce fatigue, improve reaction time, lower stress, and even boost pain tolerance. A study published in 2008 even found that hospital patients recover faster and use fewer painkillers when a live plant is in the room.

Furthermore, NASA found that plants reduce airborne bacteria by 50 to 60 percent and researchers at Virginia Tech discovered that houseplants reduce indoor dust by 20 percent!

While cut flowers may not have the air purifying properties of live ones, separate studies have found that people are happier and more energetic after looking at a flower bouquet first thing in the morning. The fragrance of both live and cut flowers can help reduce stress and feelings of anxiety.

Now is the perfect time of year to place some herbs on your kitchen windowsill or pick up a big bunch of daffodils for the dining room table! Just keep in mind the power of color – reds, orange and yellow create a vibrant, energetic mood while blues and greens are more calming.


New Challenge for Jumbo Loans

Will It Be Harder to Get a Jumbo Loan?
The high price of Massachusetts real estate means that it is not unusual for buyers to turn to jumbo mortgages for financing. Jumbo mortgages are loans that are larger than the “conforming limit” – the maximum loan amount that qualifies for government backing through Freddie Mac and Fannie Mae.The conforming limit varies by county. In many areas of the country, jumbo mortgages are any loans in excess of $417,000. In higher priced markets, the conforming limit goes up. For example, in Middlesex County the limit is about $465,000.

Jumbo mortgages are more expensive than conforming ones. Rates are typically 1/2-3/4 a percentage point more than on conventional fixed rate loans. The higher rate compensates lenders for taking on greater risk. Since jumbo loans typically can’t be sold on the secondary market, lenders usually keep them in their own portfolios.

The jumbo market dried up in the recession but had started to regain energy. Now there is a concern that the new qualified mortgage rules issued by the Consumer Financial Protection Bureau could deal the jumbo market another blow.

The new rules prevent lenders from issuing loans to borrowers who can’t afford them through some stringent requirements for “qualified mortgages”. Lenders of qualified mortgages are protected from lawsuits filed by borrowers. The Wall Street Journal reports that two key criteria mean that some jumbo mortgages won’t be considered qualified:

  • Interest-only loans aren’t considered qualified, yet about 14% of jumbo loans start out as interest-only
  • A borrower’s total monthly debt payments may not exceed 43% of his or her income on a qualified mortgage. This restriction would exclude about 15% of jumbo loans. Often jumbo borrowers have considerable assets, but steady income that is hard to document because they own businesses or are self-employed.

If a jumbo mortgage does not qualify under the Consumer Financial Protection rules, a lender will not receive immunity from lawsuits. The big question is whether they will decide the risk is too great and tighten the reins on the jumbo market. The impact may not be felt in today’s cautious lending environment, but the new rules could affect the market in the future.

Want to know more? Please give me a call at 617-965-1236 oremail me for information or help.

March’s Home Value Improver

Quick Home Makeovers

After a tough winter, it’s time to celebrate spring’s arrival!House Beautiful offers these fast and easy spring makeover ideas for your home:

Paint Your Front Door – Welcome the season by refreshing your front door with a new color and a seasonal wreath.

Create a Colorful Entry – Clear the clutter and greet guests with eye-catching storage that lifts the spirits.

Reorganize Bookshelves – Create visual interest by sorting books by color or arranging them artfully in both vertical and horizontal stacks.

Style your Closet – Take advantage of the change of season to give your closet a facelift. Wallpaper the inside for a fun change of pace and arrange your spring clothes by color for an artistic touch.

Paint the Ceiling – Who says a ceiling has to be white? Try painting it a very pale blue or gray to make you feel as if you are looking up into the sky.


Refinancing in Cautious Times

Customer Story: Refinancing in a Cautious Climate
John had a good salary, perfect payment record, he wasn’t underwater on his mortgage – but he couldn’t get a lender to refinance his home. John needed to refinance to remove his ex-wife from the mortgage as a term of his recent divorce. Yet his new alimony obligation was part of the reason why three lenders had turned him down.

“I work for salary plus bonuses. Lenders couldn’t fit my bonuses into their formula so they didn’t count them as income,” John explains.

John turned to Westchester Mortgage for help. We located a lender who could count the bonuses – and then the real work began.

First, John needed to provide three years worth of complete financial records. Then his 1830s home tripped up appraisers and resulted in falsely low appraisals. Next, the lender found John’s name in a deed for undevelopable land in Connecticut that he had received from his father. That discovery led to a round of title searches and reviews of tax records. Finally, so much time had passed since the beginning of the process that the lender pulled John’s credit report again. The report reflected an unpaid gas bill for a statement that John had never received. John paid the bill and was then was required to jump through hoops to provide proof of payment.”

From start to finish, the process took 4 ½ months. “Debbiereally earned her money on this one,” John says. He adds: “My advice is to batten down the hatches unless you have a very simple financial situation. It’s going to be a long, drawn-out process.”

February’s Home Value Improver

Prepare Your Home for Snow

Let’s keep our fingers crossed that we don’t experience another snowstorm like the blizzard earlier this month. If we do, are you prepared? The Institute for Business and Home Safety (IBHS) says that heavy snow accumulation is the biggest threat, both as it builds up and as it melts.

IBHS recommends that every homeowner take the following steps:

  • Watch for snow accumulation on the leeward (downwind) side of a higher-level roof, where blowing snow will collect. For safe removal that won’t endanger you or damage your roof, consult a roofing contractor for a referral.
  • Remove snow from basement stairwells, window wells and all walls. Melting snow can lead to water damage and moisture intrusion.
  • Keep your attic well ventilated to maintain a temperature close to that of the outdoors to minimize the risk of ice dams forming. A warm attic melts snow on the roof, causing water to run down and refreeze at the roof’s edge, where it’s much cooler. If ice builds up and blocks water from draining, water is forced under the roof covering and into your attic or down the inside walls of your house.


Tips for Getting the Best Mortgage Rates

January Fiscal Fitness Tips
Are you thinking of refinancing or buying a new home in 2013? January is the perfect time to plan ahead to maximize your chances of getting the best possible mortgage terms. Set aside time at the start of the year to: Review
Take a good look at your finances. Is your debt under control? Is your job secure? Do you have a strong credit rating? How much equity do you have in your home? To qualify for the best rate, you’ll need to have a rock-solid financial foundation.Revise
If you recently bought a car, got a new credit card, or had your credit report pulled for another reason, your credit score may dip. To qualify for the best rates, change your plans so you are applying for a new mortgage when there is less activity on your credit report. Similarly, the value of homes typically dips during the winter when the market is quieter. Try to avoid refinancing early in the spring when appraisals will be based on sales of comparable homes during the winter months. Be prepared to revise your timeline to qualify for the best rates!

If you refinanced recently or explored refinancing within the past six months, you may feel that you don’t need to take action now. You may be all set, but it is a good idea to revisit rates and your qualifications annually to make sure that a better option is not available.

If you take a little time in the beginning of the year to review, revise and revisit your mortgage financing, you can increase your ability to qualify for great terms and save thousands of dollars over the life of the loan.

Want to know more? Please give me a call at 617-965-1236 or email me for information or help.

January’s Home Value Improver

Quick Tips for Decluttering

Are you struggling with the winter blahs? Scientists say that getting rid of clutter will help you feel more focused and energized. A Princeton University study found that a cluttered environment even limits your brain’s ability to process information.

Here are five quick tips to help you get rid of clutter:

1. Take photos: We are so accustomed to our environments that sometimes it is hard to see the clutter. Take photos of rooms and imagine you are viewing them in a magazine. You will see your rooms in new ways!

2. Everything in its place: Everything that you want to keep should have an assigned spot. Start by picking up five things and finding good places for them. Train yourself to always put those items back in their assigned places. Once you have mastered the first five, try it with five more items, and so on.

3. The hangar trick: This idea originated for clothes but, with adaptation, could be used for everything. Hang all your clothes with hangars pointing the same way. When you wear an item, return it to the closet with the hangar pointing the opposite direction. At the end of a season, discard any clothes that have not been worn.

4. Set a time limit: Tackle one room or closet at a time. Grab a trash bag or box, set a timer for 30 minutes and try to fill the bag or box within that time. Anything you haven’t worn, used or enjoyed within the past year is fair game to be given away.

5. Play mind games: Sometimes we have a hard time giving things away because we think we will use the item or that we like it more than we really do. A columnist for Psychology Today says to use your imagination to overcome roadblocks. Find out how much a similar item costs on ebay or Craigslist. Would you pay that much to own it? If not, get rid of it.