Non-Qualified Loan

Can Foreigners Buy US Real Estate?

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Yes, it is possible to own a property in the United States even if you’re a non-citizen. You can even get a mortgage to finance a property. Although it may be a bit complicated – and expensive, purchasing a property in the Land of the Free is actually more possible compared to doing so in other countries.

If buying a US property is within your future investment plans, here is a quick guide to the basics of purchasing US real estate as a non-citizen.

Almost equal

You might be surprised how little hassle it takes to procure a condo or a housing unit in the United States. Save for some limitations such as when a unit is under strict rules of certain community associations barring foreign ownership, foreign buyers are treated similarly as any domestic, citizen buyer.

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What requirements are necessary for a non-citizen, alien, or non-national to buy a US property?

You will be asked for more or less the same requirements as a citizen when you initiate property purchase. Many foreign buyers usually pay cash for their purchases but if you opt to get a loan to pay for the home, your lenders will require you to forward additional documentation, typically the following:

  1. your green card with your social security number; or
  2. your temporary residence status, work permit, and social security number

In order to secure their interests, lenders will want to make sure that you will be able to pay for the money you owe. Most would want to know the details of your employment arrangement and your credit history. Some also prefer that you have stayed in the country for a couple of years first before the application date.

When it comes to financing, foreign buyers are usually faced with higher interest rates, and are required to put down more for down payment (usually 40 percent) than a citizen (20 percent). More security makes sense, since should the foreign buyer default, it would be harder to serve them with a legal process and their legal assets will be more complicated to tap.

The case of closings

It would be extra hassle for a foreign buyer to fly in and out of the country just to settle his or her financing process. So the law allows for the foreign buyer to provide a “Power of Attorney” to an agent who can represent him or her in the US and make the necessary engagements to conclude the purchase.

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What about taxes?

Taxes are a given. And if you’re a foreigner buying a property in the US, you may be subject to differing tax laws both in your country and those in the US. You’re more likely to end up paying taxes in the two countries, depending on how the laws are structured regarding property transactions.

If, however, you are able to make the 40 to 50 percent loan down payment, you can avoid paying income taxes on any rental income gained from the property for the first 10 to 15 years.

When selling, a foreign seller will take 10 percent of the gross purchase price withheld by the IRS. This amount will be dependent on many factors such as the items in the foreigner’s tax return. Possible additional payments or a refund may be due if they file their tax returns in the US for that year.

The above-mentioned are only the basics but are fundamental in helping you get started with your plans. For further guidance, consult a legal professional who can help you make arrangements on the procurement of the property.

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The Auto Lending Industry is Tightening Credit, How About Mortgages?

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Slowing demand in cars is causing automakers to cut down production to balance the rise in available inventory. April is the fourth month in a row where automakers report poor sales. Apparently, fewer Americans are buying cars now. But what caused this?

The possibility for disaster

You might be familiar of the subprime auto loan crisis that has recently grabbed headlines. A quarter of the American auto loan debt of $1.2 trillion is lent to high-risk borrowers or those who have not-so-stellar credit scores. As the panic sinks in among lenders, many tried to mitigate disaster by setting stricter guidelines and qualifications on their loan services and products. Now, a third of new auto loan originations are given to borrowers with FICO scores 720 and up.

The tightening of credit, along with the rise in interest rates is making it harder for many potential borrowers to get financing for their vehicle-buying intent. Many are reconsidering their intention to buy new cars, with others just settling for used ones.

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But the question right now is: is the mortgage sector following the auto loan sector’s example?

A new report from the Federal Reserve’s Senior Loan Officer Survey has shown that commercial real estate lending standards tightened in the second half of 2016 following a warning by the Office of the Comptroller of the Currency regarding the easing of loan standards for mortgage originations. An analysis of a sample of fusion commercial mortgage-backed securities spanning the period of 2012 through the first quarter of 2017 also showed a significant drop in LTV (loan-to-value) ratio this year which indicates that commercial mortgage-backed securities lenders are tightening credit as well.

Not again

Remember that the boom of subprime mortgages caused the collapse of the housing market and paved the way for the Great Recession back in 2008. Of course, nobody would want to take that disastrous dive once more. Still, this does not prevent many other private players from taking advantage of the lack in competition. Those who choose to do so are racking up $20.4 billion last year alone, a significant rise compared to $12.2 billion the previous year.

Not plunging into crisis is a collective effort. But in this game of risk and rewards, the intent is always individually-motivated. Are we mature enough as a collective to never make the same mistake twice?

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Survey: Mortgage Purchases to Increase in 2017

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Survey- Mortgage Purchases to Increase in 2017

With rising home prices, interest rates inching higher, and housing inventory still in the low, it’s only logical to predict that mortgage purchase volume this year would dwindle. But a recent survey by Lenders One Cooperative says otherwise.

Out of the 200 lenders that participated in the survey, 94 percent expect an increase in mortgage purchases, a significant march up compared to last year’s 62 percent.

Furthermore, more than half of the lenders (59 percent) expect a rise in first-time homebuyers. This is in line with a report from the National Association of Realtors released recently showing a relative increase in first-time homebuyer’s share in mortgage purchase originations from 2015 to 2016.

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Non-QMs on a comeback

Consumer debt is seen as a potential risk factor that could challenge growth. Almost majority of the lenders (93 percent) said they already dispense Non-QM loans, though most of this bulk come from jumbo loans – a loan choice that increased parallel to the rise in home prices.

Will the prediction deliver? Bryan Binder, CEO of Lenders One believes so, if the lenders shift their focus into the purchase market and use tools and solutions that could improve efficiencies in business.

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Why Do I Need to Keep Good Credit?

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Why Do I Need to Keep Good Credit?

It’s become a practical necessity for many Americans to own a credit record and a corresponding credit score. Not only do you use credit for making your purchases, a credit record is also fundamental in helping you get access to various financing resources such as a mortgage or a car loan.

But how deeply could a three-digit number really affect your everyday, economic life? Why is keeping a healthy credit score so important? Let us count the ways.

Determines your housing budget

Majority of Americans don’t have the cash to pay for a house. That is why we go through the hassle of finding a lender, sorting out all the needed paperwork, and applying for a mortgage. Or, we look for a rental property that is affordable and within our budget.

But a big part of actually getting a home to settle into is your credit score. Both the lender and the landlord would want a reliable piece of assurance that you will not default on your housing payments. And the most fundamental, universally-accepted way to prove that is via your credit record.

If you have a good score, you are more likely to get approved. But if you don’t, you better find another option – that is, if you cannot find another alternative to prove your creditability. Your score sometimes also affects the loan amount you can borrow, and the interest that will be carried into your monthly mortgage payments.

So basically, a good score equals more affordable payments. The same goes with the rent.

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Dictates what you drive

What is true for housing is also true for your car loan. If you don’t have the cash to pay it upfront, you need to find a lender who will let you borrow the money to buy the car. The lender looks at your score and if it is satisfactory, they will then dispense the money with a relatively manageable interest rate. If not, such as in the case of individuals with credit scores 620 and below, you might get denied, or be forced into the subprime market with soaring interest rates. If you have good credit, you get access to larger car loans, with better loan terms and options.

A vital consideration when starting a business

Most of the time, it’s not easy to get your ideas out there. You need money to transform your brilliance into a revenue-producing effort. That is why many entrepreneurs seek business funding via small business loans to get their own projects started. But then again, getting approved for such requires having good credit. Business loans usually have stricter requirements so when it comes to having a score below what’s considered prime, you are most likely to pass through a needle point to get the money needed.

Bills, bills, bills!

Most utility services now entail showing your provider a good credit score. That includes all your basic daily necessities that won’t be provided unless you can prove to the providers that you are a responsible payor.

A career requirement

Although not universal, many employers hesitate to hire candidates or applicants without an established credit score. Your score could also be the basis for salary offers and promotions.

As you see, having a credit score – and a good one at that – is an integral part of the American way of life today. Establish good credit habits, pay your bills and dues on time, and regularly check your record for errors. Being proactive in your credit info will help you ensure you’re ready for when you need it the most.

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Alternative Housing Options

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Alternative Housing Options

It’s almost automatic for many people to think that decent living is all about buying your own home or at least living in an apartment or flat. Forget the 30-year mortgage. But what most of them miss are the possibilities of still fulfilling a career or any creative pursuit while cuddled in nontraditional living arrangements.

Here, we have compiled some of the cheapest alternative housing options you can explore so you can live your life to the fullest without being harnessed by the shackles of convention.

Purchase abandoned properties

It’s very nontraditional but there is a rapidly popularizing trend nowadays about buying old buildings and renovating them into custom-built work or living spaces. They’re usually relatively cheap compared to listed properties and may make for an interesting abode once successfully rehabilitated.

Become a college dorm’s resident director

Dorm overseers and directors get to have a place of their own within the dorms. Aside from getting work, you also get a space for yourself. A strange living setup for those who are used to the comforts of traditional housing, but definitely an interesting one for those who want to experience the unique living situation. Worth exploring for individuals who miss their old college days and those who have looked everywhere but can’t find a cheaper housing option.

Live in a boat

Just like a house, but cheaper, and floating. Also mobile. If you love the sea, want some challenge, or tired of the old living setup, you can invest in a boathouse and practically live on the sea. Of course, you may have to consider some fees for boat repair, fuel, and mooring, among others. Check your finances first if you will be able to afford the cost of maintenance.

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Work in a university

Some professionals are offered living spaces within the universities they work for. This is great if you don’t want to commute to work, or want to be near the university while doing your tenure.

Rent a hotel room

If you don’t want to hassle yourself with maintenance, find rent prices too high, or most definitely cannot afford a mortgage, rent a hotel room! No, not all hotels are created equal and some are definitely cheaper than others, decent utilities and all. There are hotel rooms with rates that sum up to less than the average rent (fluctuates by area) per month. If you can find one, you have found your place!

Live the #vanlife

You have seen those Instagram photos and swooned over those sunset shots. It’s a lifestyle as much as it is a trend. If you want to get on the road, follow your wanderlust, and live the hashtag, buy an RV, and get yourself rolling. The average cost of campervans nowadays is about a quarter of the average home price in the US. No mortgage, more freedom. But of course, before you leave, make sure the life is for you.

Get creative with shipping containers

You can buy a shipping container straight from Amazon. Yes, I’m not kidding. And then you can work out your creative powers and transform this gargantuan of a shipping load into your custom home. It’s a thing, you can look it up. The unusual living space is durable and can decently house you and your pets. Plus, it costs way less than traditional housing.

Take advantage of your career perks

Jobs that require frequent transfer may offer their employees free accommodations to compensate for the risk and hassle of the work. Although it can get tiring, for some, it is like hitting two birds with one stone: travel and a home!

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Is it Possible to Get a Mortgage Without a Job?

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Is it Possible to Get a Mortgage Without a Job?

Yes, you can get a home loan without a job. It may seem impossible, and to the wary, kind of scary. But there, indeed, are legit lenders who can give you financing at the time of need.

It’s true, many lenders have slackened on qualifications years after the trauma of the 2008 crisis. Some of them have recognized the fact that a good number of “limited” borrowers deserve access to financing as well.

For unemployed borrowers, there are ways to reach a compromise with your lender – usually in the form of non-conventional assurances.

Showcase good history

Typically, lenders look at your income when you apply for a mortgage. They look at how much you earn each month and calculate how much of your debt puts a strain to that source of income.

But what if you don’t have that proverbial source, to begin with?

In such a case, your lenders may look at patterns in your credit record. These include how you pay your credit, whether you are receiving alternative sources of income such as an alimony or disability allowance, if you have cash reserves in your savings account, or if you pay your bills on time.

These elements are good indicators of a person’s creditability, despite the absence of a traditional source of fund and depending on what the lender determines, can still gain you an approval when you least expect it.

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Think out of convention

Government-backed loans are strict about their guidelines and most likely only lend money to people who can tick the conventional income availability requirement off the list. Instead, look for lender alternatives when loan shopping. These are lenders who offer non qualified loans that defy some of the guidelines set by the Dodd-Frank Act. They are more flexible at giving out approvals to those who fit their non-conventional criteria.

Enlist Co-Signor Help

If you don’t want to get in a subprime mess because you’ve been persuaded by tons of articles online about its potential disaster, you can always enlist the help of a co-signor who has the income and the credit to fill up the void of your credentials. This should be someone who can vouch for your creditworthiness and who trusts you as a financially-capable person.

Remember that when you fail to make your payments, they are held accountable as well. Plan this properly and make sure the person fully understands his or her responsibility in the situation.

Getting a mortgage without an income source can be a bit risky, both to you as a borrower and your lender. Before you finalize your decision, see to it that you have properly evaluated your finances and are confident of your ability to repay. After all, it’s your burden in the end. Be wise and know that there are options to turn to should you decide to push through.

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Regulations Result to Lower Non-QM Originations

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Regulations Result to Lower Non-QM Originations

Per an American Bankers’ Association’s Real Estate Lending Survey released recently, tight regulations have never been helpful in serving the business objectives of bankers. A good 95 percent of bankers say current regulations are basically hindering credit availability towards consumers. They highlight the toll in cost that they needed to integrate into their processes for compliance. The report was released during the association’s annual Real Estate Lending Conference in Orlando, Florida.

Report highlights

Among the highlights of the report include the fewer non-qualified mortgage originations in 2016. In total, they have originated 5 percent less in non-qualified mortgages last year. In 2015, non-qualified mortgages made up 14 percent of all mortgage originations but decreased to only 9 percent in 2016. Over 30 percent of these bankers stopped originating non-QM loans due to the stricter regulations.

ABA EVP Bob Davis says “Non-QM loans have been subject to heightened regulatory requirements and risk, reducing the willingness of banks to extend these loans to even the most creditworthy borrowers. Despite ongoing regulatory hurdles, community banks remain resilient in their ability to manage risk levels, increase productivity and introduce more first-time homebuyers into the market.”

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Record-breaking numbers

The survey yielded some surprising numbers, aside from the highlighted non-QM decline. In its 24 years of establishment, first-time homebuyers mortgage lending on single-family abodes hit the highest. Last year’s record was a 16 percent rise from the previous year’s.

Foreclosures fell as well. In 2015, foreclosures were at 0.63 percent. This year, it decreased to just 0.37 percent.

Meanwhile, delinquencies on single-family home loans increased to 1.42 percent from 1.27 percent in 2015.

It also appears that consumers still bank on stability by the number of fixed-rate mortgage originations which remains the most popular loan type, according to the survey.

Aside from the tightened regulations, other concerns among realtor circles include the rising interest rates, continued scarcity in available housing, and the increasing cost of operation.

The survey was participated by 159 banks, 76 percent of which with less than a billion dollars in assets.

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How Does My Debt Affect My Loan Approval?

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How Does My Debt Affect My Loan Approval?

The type of debts you carry can mean the difference between getting an approval on your loan or not. Even if you only hold one debt but its terms hold significant weight on your overall finances, you may end up getting denied on your application.

Before you step into the loan acquisition process, it’s important to know how a type of debt can impact your potential approval.

First, know that there are two types of debt:

(a) secured debt – these are loans that are backed by a collateral. Collaterals are properties that serve as a guarantee of security should you default on your loan payments. The most common collaterals are vehicles and real estate properties which have significant market value. If you fail to meet your payments, the lenders have the right to take these guarantees in exchange for the money you were not able to return.

(b) unsecured debt – these are loans that are not backed by a collateral. Unsecured loans are usually lent to borrowers who are determined to be good risks. That is, they were able to show that they are financially stable and therefore capable of taking the burden of the loan and repaying it to its full term.
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A question of risk

The thing is, lenders are not really picky as to what debt a borrower carries. A secured loan is not favored over the other, but they do care about how you spread your risk.

For example, in the case of credit cards which are unsecured loans, it will give the lender an impression of a continuous stream of credit responsibility. One or two may seem fine but too many credit card debts may pose the question of payment capacity. (Hence why your DTI ratio matters as well!) Can you pay these balances in full? Can you carry the burden of revolving credit and accruing interest?

A secured loan such as an auto debt – which is a significant debt – may still be favorable, but as long as you show as a consistent history of paying them on time, you shouldn’t have a problem.

How about a mortgage?

A debt as large as a home loan may play a large part on your DTI ratio which means if you get approved with the current loan and it will exceed the ideal DTI ratio limit, you may have a hard time paying it back.

How you pay your mortgage also reflects on your score so your lender shouldn’t have a hard time recognizing your repayment capacity. If you are able to show good history, backed by stable income sources, qualifying for an additional loan may not be much of a difficulty.

However, if you are taking another mortgage, expect lenders to probe you more about your current home loan. Are you refinancing? Getting a reverse mortgage? Selling your current home and using the proceeds to get the new loan?

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A bottomline

And of course, the type of loan that you are courting, per se, is also a major determining factor in getting an approval. Prime lenders usually have stricter requirements and are therefore less inclined to give out loans to those who carry a suspicious number of debts, especially those in the subprime levels.

Meanwhile, there are a growing number of lenders who are all too willing to give you the money despite your risk, regardless of the debts you carry.

When applying, be honest to yourself and recognize your own risk as a borrower. Finding the right lender matters as much as getting the needed money.

A Primer Into Refinancing with Negative Equity

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A Primer Into Refinancing with Negative Equity

Having a negative equity means you owe more on your house than it is worth in the current market. This remains a problem among many Americans. Good to know there are existing refinance options that can provide you a way out of this terrible financial condition.

But first, you need to evaluate the gravity of the situation. This will help you determine whether refinancing is really the better option. Sometimes, a drop in your neighborhood’s home values does not automatically mean you already have a negative equity on your home. Other times, the decline of home values is only temporary and they rise back up without the need for alarm.

To know if refinancing is the best option for your current equity dilemma, it’s best to talk with a professional who can offer you insights on current market trends and possible future estimates. He or she will also walk you through the process and its potential costs.

Speak with your lender

Most of the time, your lenders are willing to negotiate the terms of your loan in order to keep your business. There are various refinance programs available today, but your lender might give you an option that addresses your unique needs.

They may be in the form of a refinance program or a mortgage modification which modifies the terms of the loan to accommodate the change in your situation. Such a modification can include:

    • Stretching your loan term
    • Lowering your interest rate
    • Writing off principal

These might sound too ideal but are not unheard of.

Consider government-insured loans

It might be hard to find conventional lenders who will approve your refinance application. In this case, turn your focus into government-backed refi programs such as FHA’s and VA’s streamline refinance programs. These refi options usually have looser guidelines and can give you the loan you need without verifying your income, assets, or home value. However, you have to prove to the lenders that you have good payment history.

Refinancing under the FHA and VA, however, cannot proceed if the refinance will not result in a better outcome for the borrower. That is the main goal of the refinance. It can be in the form of a lower payment, or a lower interest.

Gear up

Now that you know your options, you can start prepping for the move. There’s work to be done and delaying it might not be a wise option.

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Getting a Non-QM Loan if You Are Newly Self-Employed

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Getting a Non-QM Loan if You Are Newly Self-Employed

A stable employment record is one of the most common qualifications for getting a mortgage. This leaves out a large chunk of the borrower market who are either self-employed or have seasonal jobs.

For individuals who have just ventured into self-employment, the common barrier is in showing evidence of steady income for the past two years. The shift in employment status will typically not look good for qualified mortgage lenders.

Good to know, however, that there are non-qualified mortgage alternatives that you can look into if your mortgage needs are urgent.

Non-Qualified Mortgage Defined

Non-Qualified Mortgages are simply home loan programs that do not meet the standards set by the Dodd-Frank Act of 2010. This rule establishes certain qualifications that serve to protect the lender and the borrower from the mess of default. These requirements include:

  • a DTI ratio not exceeding 43 percent
  • standard proof of income
  • standard amortization
  • points not exceeding 3 percent of the loan amount

Newly self-employed individuals would normally have a problem with giving a proper proof of income. That makes it hard for them to qualify for qualified mortgages. But that does not mean getting a home loan is impossible.

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A non-qualified mortgage is any of the available home loan programs today that have qualifying requirements not consistent with the aforementioned.

That means if you are newly self-employed, have a commission-based or seasonal job, or receive income from different sources, a Non-QM loan can get you covered.

From the look of it, it seems like Non-QM loans are risky business for borrowers, only taking advantage of their vulnerable situation. Fortunately, this is not the case. Non-QM loans still abide by the Ability to Repay Rules which ensure that the borrower’s income, employment, and credit history are duly verified. The lender still ensures that you have the capacity to repay the money you owe.

The Problem with History

Another common hindrance to loan approval for many newly self-employed individuals is the lack of income history as basis for the loan. If you have just started your slate, it’s likely that you still have very short history to show for your income. Lenders would like to see a positive possibility from your income sources, no matter the period. You can make this possible by:

a) opening a business within the same industry that you had been working for prior to your self-employment
b) partnering with someone who is experienced in the industry
c) being able to show the availability of financial reserves which can cover you should your business fail
d) showing non-delinquent payments from the time you started your self-employment

Non-QM loans are not backed by secondary markets that is why the programs are as diverse as they are. Lenders formulate their own qualifying criteria. You can ensure the approval of a non-QM loan if you have good income history no matter how short and a good financial backing via assets.

Speak with a lending professional today to be guided in your Non-QM application process.