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David and Erika Bailey Mortgage Professionals

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Getting A Mortgage When Self-Employed: What You Need To Know

January 26, 2023 by David Bailey

getting-a-mortgage-when-self-employed-what-you-need-to-knowThere is a common misconception that someone who is self-employed will not have the tax records or income necessary to qualify for a mortgage; however, that is not necessarily the case. In reality, if you are self-employed, there are a lot of home loan options available to you. It is true that it might require some additional paperwork and planning, but as long as you have the necessary information, you should be able to qualify for a mortgage. 

What Is Necessary To Qualify For A Self-Employed Mortgage Loan?

If you are interested in taking out a mortgage when you are self-employed, you will be held to the same standards as everyone else. This means that the lender is going to require a solid credit score, a long credit history, a favorable debt-to-income ratio, and enough money to cover the down payment. In addition, you will also have to demonstrate a solid income history, just like everybody else. 

That is where the difference comes into play. A W-2 employee may be able to provide a few pay stubs, but someone who is self-employed may be required to provide up to two years of self-employment income. 

How Do I Maximize My Chances Of Getting Approved?

If you are self-employed and want to maximize your chances of getting approved for a self-employed mortgage, there are a few steps you should take. First, you need to make sure your debt-to-income ratio is as low as possible. That way, you can reduce the risk to the lender. You can also improve your chances by preparing financial documents ahead of time. That might mean including profit and loss statements, two years of tax returns, and 2 years of business taxes if you have them. Do not forget that improving your credit score and putting more money down can improve your chances of getting approved. 

Lengthen Your Income History

Finally, if you are serious about getting approved, lengthen your income history. Show that you are willing to provide a longer track record of income, and the bank will feel better about providing you with a self-employed mortgage loan. That way, you have the financing to purchase the house of your dreams. 

 

Mortgage Tagged: Mortgage, Non-QM Mortgage, Self Employed

On Time, Every Time: How Being Late on Monthly Payments Can Affect Your Mortgage

January 25, 2023 by David Bailey

On Time, Every Time: How Being Late on Monthly Payments Can Affect Your MortgageAre you the type of person that struggles with remembering to pay their bills on time? You’re not alone. People across the country regularly submit late monthly payments, inflicting terrible damage to their credit. Let’s take a quick look at how paying your loan or other monthly payments late can have a negative impact on your mortgage.

Your Credit Score Is At Risk

As you already know, almost all banks, credit cards, mortgage companies and other lenders rely on your credit score to help assess the risk of lending money to you. Paying any of your payments late – even something as small as your mobile phone bill or a department store credit card – can result in negative marks showing up on your credit report. If you are late enough times or fail to repay the late payment in full, then your score will start to drop.

Refinancing Can Be Affected

If you already have a mortgage, then a lower credit score can be a problem when you try to refinance. The process of refinancing involves taking out a new mortgage, in which your lender will reassess your risk using your credit score as one of the indicators. If you have been making late payments, you might end up having to settle for a higher interest rate or you may even be declined for the new mortgage.

Making A Late Payment? Contact Your Lender

If you are caught in a bind and have to make a late payment, it is best to get a call in to your lender as soon as possible. First, there may be a grace period in which you can be a few days late without any penalty. If that little bit of breathing room is all you need to get caught up, you’re set. If not, you can let them know your circumstances and discuss what options you have.

It is essential to pay your monthly payments on time, even if it means making some small sacrifices in other areas. The better your credit score looks, the more opportunities you will have to make positive financial moves in the future. To learn more about monthly mortgage payments or to take out a mortgage on a new home, contact us today. Our team of mortgage professionals is here to help you find a mortgage to buy the home of your dreams.

Home Mortgage Tips Tagged: Home Mortgage Tips, Mortgage, Real Estate Tips

What Is A Loan Contingency: An Overview

January 24, 2023 by David Bailey

What Is A Loan Contingency: An OverviewIf you are in the process of looking for a new home, you need to find the right one to meet your needs. Sometimes, you want to learn more about specific properties before you decide if it is right for you. As a result, a lot of prospective buyers will include contingencies in their home offers that may allow them to back out without losing their earnest money. What are a few examples of loan contingencies, and how can you use them to protect yourself during the process? 

Examples Of Common Loan Contingencies

Even if you have agreed on a purchase price for the house, the closing date is probably not going to be for one or two months. This will provide you with time to complete your due diligence and make sure no issues come up. For example, there may be a contingency that allows the closing date to be extended if there are any issues with the financing process through the lender. 

You might also decide to include a contingency clause in case something develops with the home inspection. If something is wrong with the home inspection, you may provide yourself with an opportunity to pull out of the deal without losing your earnest money. 

How A Loan Contingency Clause Protects The Buyer

It is important for buyers to work with real estate agents who understand how loan contingencies work because this is an important protective measure. A contingency clause can protect the buyer because it provides the buyer with a way to back out of the contract without losing his or her earnest money. 

Typically, if the buyer backs out of the contract, he or she will lose his or her earnest money; however, if the buyer backs out for a reason that is protected by the contingency clause, then his or her earnest money might be protected. 

Some Buyers Waive Their Loan Contingency

If the housing market is particularly competitive, and you know you are going to purchase the house no matter what, then you might want to waive your loan contingency as a way to strengthen your offer. On the other hand, keep in mind that waving your loan contingency means sacrificing this important layer of protection. 

 

Mortgage Tagged: Loan Contingency, Mortgage

An Often-Overlooked Trick Can Help You Afford A Second House

January 20, 2023 by David Bailey

An Often-Overlooked Trick Can Help You Afford A Second HouseThe whole idea of investing is to use a portion of your money now to get more down the road. It is important for everyone to diversify their investments, and you might be thinking about buying a second house to do so. Investing in real estate is a goal that a lot of people have, but how can you get started? It was challenging enough to buy your first house, so how can you afford a second one? 

Use A Cash-Out Refinance To Buy Your Second House

One trick that many people overlook is that they can actually conduct a cash-out refinance to purchase a second house. In general, your lender will allow you to cash out up to 80 percent of the value of your home during a cash-out refinance. This can give you a tremendous amount of flexibility that you can use to purchase a second house. For example, if your house is worth $300,000, you may be able to withdraw tens of thousands of dollars in equity.

What To Consider When Using A Cash-Out Refinance

When you apply for a cash-out refinance, there is a chance that the interest rate on your new loan might change. This might mean that you end up with a higher interest rate than before. You must make sure you can afford this new interest rate. Furthermore, you will be required to pay closing expenses. You need to have enough money set aside to cover those closing expenses. Keep in mind that the term of the loan might change as well. If you were close to paying off your house, this type of refinance might reset that clock. It might take you longer to pay off your mortgage than it did before. Consider these factors carefully before conducting a cash-out refinance.

A Cash-Out Refinance Might Be Right For You

In the end, a cash-out refinance could be a great way for you to withdraw equity from your home, using it to purchase an investment property. On the other hand, you need to ensure you can still afford the new loan after you take that equity out of your home. Work with an expert who can help you find the right option to meet your needs.

 

Mortgage Tagged: Cash Out Refi, Mortgage

VA Loans: Are They Assumable?

January 19, 2023 by David Bailey

VA Loans: Are They Assumable?Members of the military, their family members, and veterans have access to a unique mortgage option called a VA loan. This can be a strong option because it provides borrowers with an opportunity to purchase a house for less than 20 percent down. While not everyone is eligible for a VA loan, there are a lot of people who are wondering, are VA loans assumable? There are a few key points to keep in mind.

What Is An Assumable Loan?

An assumable loan means that the buyer is essentially going to take over the mortgage held by the seller. Essentially, this means that the buyer is going to take over the remaining balance of the loan as well as the interest rate attached to that loan. The buyer will have to compensate the seller for any equity the seller has already accumulated. This means either providing the seller with cash for his or her equity or taking out a second mortgage to cover the difference. The biggest advantage of assuming a loan is that you may be able to secure a lower interest rate than you would in the current market. 

Who Can Assume A VA Loan?

The great news is that a VA mortgage loan is assumable. Even though a VA loan is only available to retired service members, active service members, and members of their immediate families, anyone the lender qualifies to take over the loan can assume it. In general, this means that the buyer needs to have a credit score of at least 580 and a debt-to-income ratio of 45 percent. The buyer and seller must also have at least 12 months without any missed payments. Finally, the person assuming the loan must also occupy the property and the buyer must be willing to take over the terms of the original loan.

Should I Assume A VA Loan?

Assuming a VA loan could be right for you because you can access a lower interest rate and potentially save thousands of dollars on closing costs and expenses if you do not have to take out a second mortgage. On the other hand, this also means that you might need to put more money down to compensate the seller for his or her equity. 

 

Mortgage Tagged: Assumable, Mortgage, VA Loans

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Erika 631.767.8944
David NMLS #3458 • Erika NMLS #217190

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