We haven’t been hearing much lately about how tight credit is choking off the housing recovery. Once it was announced that the GSEs were going to purchase 97% loans for the first time is five years (which starts today), the tight-credit talk started to subside.
But you still have to qualify for a mortgage, which has always been difficult for self-employed folks who write off their expenses to lower their taxable income. The obvious solution is to lower the write-offs and pay more taxes – but that goes over like a lead balloon with those who are used to creative accounting.
The common belief is that you need two years’ worth of tax returns to qualify.
But did you know that Freddie Mac will accept only one years’ tax return?
That’s right, and I just saw it happen. I just had a self-employed buyer with excellent credit and a 20% down payment close escrow after qualifying by using their 2014 tax return only. The Freddie Mac Loan Prospector (their automated-underwriting service) determines whether you need 1 or 2 tax returns – so as long as the computer approves, you’re in!
For the self-employed who had a strong 2014, you may want to bite the bullet and pay more tax now so you can qualify for a bigger loan. The Freddie Mac maximum loan amount in San Diego is $563,350, which puts your payment around $2,700 per month, plus taxes and insurance.
Get Good Help!
http://www.mortgagenewsdaily.com/consumer_rates/445412.aspx
Mortgage rates continued lower today, reaching levels not seen since February 9th. This further solidifies the positive move that followed last week’s FOMC Announcement and Press Conference and offers ongoing confirmation that the disconcerting trend toward higher rates that began in February is defeated. While that doesn’t necessarily have any implications as to the direction of the next trend, it does mean that we’re no longer following the same steep and steady path toward higher rates.
Most lenders are now offering 3.75% as a conventional 30yr fixed rate for top tier scenarios. Even if you’re seeing 3.875%, it might make sense to consider paying more upfront (or taking less of a lender credit) in order to move down to 3.75% as the cost to do so is currently about as low as it gets. At most lenders, that eighth of a point in rate would save enough each month to recoup the additional upfront cost in 4-5 years. There is nothing inherently bad or good for paying more upfront to lower the rate. It’s a simple matter of personal preference.
JtR, I just checked my credit union: 15-year fixed: 2.875% and 30-year fixed: 3.625%. I got a 30-year fixed back in November, 2010 for 4% fixed (20% DP). And I really thought we’d never see lower than that…
its a step forward, i wish they would lower the years people need to wait post foreclosure for a 30 year fixed rate mortgage.
Had a relative just go through the process of securing a loan. Perfect credit, and could well afford it, but… self-employed.
The unmitigated scrutiny by the bank to secure his loan would make a even seasoned proctologist denounce these people.