Posted on: 16th Apr, 2009 08:15 pm
I wonder if I could get James (RBI) or John (Approved Funding) to expand a little on the possibilities of a stated-income in New Jersey, or anyone else for that matter. John, thanks a lot the other day for responding to my question on FHA loans ("Big Kiddie FHA loan").
I have studied the underwriting guidelines for Freddie very carefully, and the best hope I come up with for final approval is "Maybe", and I am beginning to think Stated might be a better way to go. My wife and I have 800 FICOs, liquid assets to cover much of the loan, and a wealthy parent who is willing and suited to be a non-occupying co-borrower. The crux of the problem is our income has been somewhat sporadic in recent years and consists of self-employment income, investment income (incl. cap gains), and an annual gift from the family. Now, nowhere can I find guidance for underwriters on how to handle income in this latter category! To not include it in our application would bring our DTI up to 60%, optimistically, and I think most lenders would choke on that.
If I went with a Stated Income (verified asset) program and put 30% down, I wonder how an underwriter would view gift income. It may not help that in some years, I didn't really need the money and refused some of it, so I'm not exactly sure how to go about proving it's a reliable stream, if that's necessary. I see rates as low as 5.375% for a stated 30 year in NJ, but is that realistic? Also, is it possible to buy down the rate of a stated-income loan with points they way one would with a different loan? I assume it's helpful to have a co-borrower with a Stated just as with a regular loan.
I have studied the underwriting guidelines for Freddie very carefully, and the best hope I come up with for final approval is "Maybe", and I am beginning to think Stated might be a better way to go. My wife and I have 800 FICOs, liquid assets to cover much of the loan, and a wealthy parent who is willing and suited to be a non-occupying co-borrower. The crux of the problem is our income has been somewhat sporadic in recent years and consists of self-employment income, investment income (incl. cap gains), and an annual gift from the family. Now, nowhere can I find guidance for underwriters on how to handle income in this latter category! To not include it in our application would bring our DTI up to 60%, optimistically, and I think most lenders would choke on that.
If I went with a Stated Income (verified asset) program and put 30% down, I wonder how an underwriter would view gift income. It may not help that in some years, I didn't really need the money and refused some of it, so I'm not exactly sure how to go about proving it's a reliable stream, if that's necessary. I see rates as low as 5.375% for a stated 30 year in NJ, but is that realistic? Also, is it possible to buy down the rate of a stated-income loan with points they way one would with a different loan? I assume it's helpful to have a co-borrower with a Stated just as with a regular loan.
Hi guest,
It wpuld definitely be good if you can apy some points upfront. This will bring down your interest rate, just as it does with a regular loan. Having a co borrower also helps you in qualifying, as the lender is assured that payments will be made by the co borrowers even if the primary borrower defaults. As far as the annual gift from the family is concerned, you need to talk with various lenders to know how they would actually consider this source of income.
It wpuld definitely be good if you can apy some points upfront. This will bring down your interest rate, just as it does with a regular loan. Having a co borrower also helps you in qualifying, as the lender is assured that payments will be made by the co borrowers even if the primary borrower defaults. As far as the annual gift from the family is concerned, you need to talk with various lenders to know how they would actually consider this source of income.
It's funny about the points. When I talk to lenders, they seem unwilling to give me a rate quote with a range of points. In fact, they seem quite taken aback by the question. Why is that? I would rather not wait until after receiving a GFE to request an increase in points (at which point, I presume they will shrink in value considerably).
guest, do you pay income tax on these annual gifts?
if you don't, it's not income in any underwriter's book.
a non-occupant coborrower will stand you in good stead if you choose to opt for an fha loan, but from what i've seen in the past few years, it'll do you no good with a conforming loan product.
if you don't, it's not income in any underwriter's book.
a non-occupant coborrower will stand you in good stead if you choose to opt for an fha loan, but from what i've seen in the past few years, it'll do you no good with a conforming loan product.
I am licensed in NJ and have originated a few stated income loans there lately. The required down payment will be 30%. Your self employed income will be the key to your ability to qualify. Banks have been unwilling to consider investment income as a source of income lately and my guess is that it is due to the horrible recent return on wall street investments.
Hi George, I most definitely do not pay tax on the gifts, that's the great thing about them. Come to think of it, an underwriter should gross them up for that reason. I know there are some non-taxable incomes allowed, but perhaps this is not one of them. However, since the donor would also be on the mortgage note, it would seem pretty secure (to me).
I'd have to dig deep for that 30% down, but I am pretty confident of my future self-employed income increasing (as well as my spouse's), but historically, it alone would not get me close to the DTI number I would need, strictly speaking. I can see why capital gains would be disregarded as income, but dividends too?
Now, do all these issues go away if the co-borrower becomes the primary borrower, and buys the house as a second home with me as a co-borrower?
I'd have to dig deep for that 30% down, but I am pretty confident of my future self-employed income increasing (as well as my spouse's), but historically, it alone would not get me close to the DTI number I would need, strictly speaking. I can see why capital gains would be disregarded as income, but dividends too?
Now, do all these issues go away if the co-borrower becomes the primary borrower, and buys the house as a second home with me as a co-borrower?
the likelihood of an underwriter 1) considering gifts as income to begin with; 2) grossing up gifts as non-taxable income; is so slim as to be incalculable.
i think your last paragraph makes a little sense, but that depends on there being stated income loans available on a second home. i'm not sure about that - check with "the jersey boys."
i think your last paragraph makes a little sense, but that depends on there being stated income loans available on a second home. i'm not sure about that - check with "the jersey boys."
Thanks again. What I meant in the last paragraph is that if my parent simply purchases the house as a second home with me as a co-borrower, and would have no trouble qualifying for it on his own on any terms, then it does not matter if my DTI ratio is 80% or something like that. Likewise, 20% down would probably suffice (but would it be okay for me to pay all of that, or does he have to have skin in the game as well?).
If you invite a co-borrower to the equation to help you qualify, then their income in addition to the income that you CAN verify may result in your ability to get a full doc loan instead of stated income.