Non-qualified mortgage (non-QM) loans

CONFORMING LOAN A conforming loan is a mortgage that meets lending rules set by Fannie Mae and Freddie Mac and is within loan limits set by the Federal Housing Finance Agency (FHFA). Conforming loans are the most frequently used type of mortgages. If your credit score is above 620 and a loan amount is within $647,200, there is a good chance this is the type of home loan you’ll use. If you are considering using this type of loan, here’s what you should know about the requirements, rates, and loan limits for a Conforming Mortgage Loan. ABOUT CONFORMING LOANS Conforming loans are conventional loans. This simply means they are not funded by the federal government (unlike FHA, VA, and USDA loans). Conventional loans can be conforming—meaning they conform to Fannie Mae and Freddie Mac’s lending rules—or non-conforming (non-QM), meaning they don’t follow Fannie and Freddie’s guidance. Most of the mortgages in the U.S. are conventional conforming loans. However, non-conforming loans can be useful in special circumstances. Examples of non-conforming mortgages include jumbo loans (which exceed the conforming loan limit) and bank statement loans, no income verification loans, and DSCR mortgage loan (rental income based mortgage loans). For a borrower with 5% down and a credit score above 620, a conforming loan is often the most affordable option. Those with a lower credit score or special circumstances (for example, veterans) might choose between a conforming loan and a government-backed loan. CONFORMING LOAN REQUIREMENTS To qualify for a conforming loan, you’ll need a: Credit score of 620 or better Debt-to-income ratio (DTI) lower than 45% in most cases Down payment of 3% or more Stable record of employment and income going back at least two years It is not that hard to qualify for a conforming loan. You do not need 20% down or a perfect credit score. Lenders can often work with you; if your finances are a little weaker in one area but stronger in another, that could help you get approved. One thing to remember is that these are only requirements set by Fannie Mae and Freddie Mac. The actual lenders that can help you with conforming loans set their own requirements. Although Fannie Mae and Freddie Mac are not mortgage lenders, their role is to simply be in the background. CONFORMING LOAN LIMITS Fannie and Freddie are both regulated by the Federal Housing Finance Agency (FHFA), which is why their loan products are so similar. And, each November, the FHA updates its loan limits for the following year. These limits set the maximum amount you can borrow using a conforming loan. Most single-family homes in the U.S. are covered by the standard loan limit, which is $647,200 in 2022. If you’re buying a home in an area with above-average home prices, you may be able to borrow more: Anything between $647,200 and $970,800, depending on how high home prices are in your area. Conforming loan rates and PMI Conforming mortgages are considered low-risk thanks to Fannie and Freddie. That you can get a lower rate on these mortgages However, one important thing to note is that conforming loans depend heavily on your personal finances; specifically, on your credit score and down payment. The better your score and the bigger your down payment, the lower your interest rate will be. Something else that is important to understand is that conventional loans with less than 20% down require private mortgage insurance (PMI). This adds an additional monthly fee that helps protect lenders because low-down-payment loans are considered riskier. On the bright side, conforming loan PMI can be removed later on, whereas FHA mortgage insurance is often permanent. Conforming loan rates are often the most competitive on the market, aside from VA loan rates. But when this was written, mortgage rates were very volatile. And, when markets are disrupted, comparative rates across different mortgage types can temporarily fall out of alignment. OUR CONFORMING LOAN DETAILS: 30 YEAR CONFORMING: LTV up to 95% (MI applies fo LTV > 80%) Minimum FICO 620 “Full Doc” with up to 50% DTI W2 or Self Employed Borrowers Purchase Loan, Rate and term, or Cash-Out refinance Current conforming limit in CA for a single-family unit is $548,250. High Balance Conforming loan limits vary for each county Restrictions apply. Rates are subject to change without notice 15 YEAR CONFORMING: LTV up to 95% (MI applies for LTV > 80%) Minimum FICO 620 “Full Doc” with up to 50% DTI W2 or Self Employed Borrowers Purchase Loan, Rate and term, or Cash-Out refinance Current conforming limit in CA for a single-family unit is $548,250. High Balance Conforming loan limits vary for each county Restrictions apply. Rates are subject to change without notice

OVERVIEW As a self-employed person, you work hard to build a business. You take pride in what you have achieved and that your work ethic has put you in a position to be able to buy a home. So why should you be worried about being self-employed when submitting a mortgage application? Buying a home in today’s competitive real estate market can be challenging, period; that process can be even more of a challenge if you are self-employed. The part that can be the most difficult is documenting your income. Proving your cash flow as a business owner, contractor, or freelancer can require more paperwork than for W-2 employees. SO WHAT SHOULD YOU DO? You can start off by providing your lender with your tax returns, showing how much money you claimed. Although it is tempting to do so, lowering your taxable income by writing off expenditures could mean that you will not qualify for the home you would like. In fact, the lender will look at your debt-to-income ratio, which means if you have any credit card debt, auto loans, or student loans, the amount of your minimum monthly payments will be compared to your monthly income. If that ratio is too high, your dreams of owning a home will not become reality. How should you move forward? Thankfully here at LendingPlace we specialize in self-employed mortgage loans. We have access to special loan programs specifically for self-employed home buyers. The loan programs do come with a higher APR than some of the traditional mortgage programs; however, if you haven’t done your best at documenting your income, these programs could help. BANK STATEMENT ONLY LOAN The first program to consider is a bank statement-only loan. Bank Statement Only Mortgage Loans don’t require you to show your tax returns, W-2s, pay stubs, or employer verification forms. Instead, you can use your personal bank accounts, or personal and business bank accounts, to prove how much you make every month and year. Here are some important Bank Statement Mortgage Loan details: Business deposits verified by 3, 12, or 24 months of bank statements LTV up 90% for purchase and R/T AND cash-out refinances. Minimum FICO Score 620 No Business or Personal Tax Returns! Available for Primary, Second Homes, or Investment Properties 30-year fixed and 5/7/10 ARM options Interest-only payment options. Reserves: 6 to 12 months of PITI Loan Amount Limits: $200,000 to $3,000,000 Rates starting at 5.25% If bank statements do not work for you, we can also do a profit and loss statement loan. This program has the same credit score requirements as the Bank Statements Only Loan but requires at least 20% down. Your P&L statement will need to be prepared by a licensed accountant in order to be considered. WHAT IS P&L? A P&L, or profit and loss statement, is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a quarter or fiscal year. So basically, instead of using tax returns, we allow the business owner to have their licensed tax preparer provide a 1-2 year profit and loss (P&L) statement as income, which often provides a more accurate picture of your income. There are no prepayment penalties for owner-occupied and second homes, so the loan can be refinanced if desired as soon as the applicant qualifies for a traditional home loan. Many of our clients use this program to buy their dream home and decide to refinance it into a traditional loan once they and their tax advisers determine the optimal time. It allows the business owner to take control and buy a home on their terms. This loan program is similar to our Bank Statement Program, but the documentation requirements are much easier than providing 12-24 months of bank statements. Here are some important Profit and Loss (P&L) details: LTV up 80% for Purchase and Rate & Term Refinance/up to 75% for Cash-Out Refinances Minimum FICO 620 P&L prepared by a licensed accountant required Available for primary and second homes 30-year fixed and 5/7/10 ARM options Interest-only payment options Reserves 6 to 12 months of PITI—Cash-Out funds can be used as reserves! Loan Amount Limits: $200,000 to $3,000,000 Lastly, we can help you with a no-income-verification loan. The credit score requirement is 640, and the down payment must be at least 20% to be approved. NO INCOME VERIFICATION LOAN No-income verification mortgages, also known as stated-income mortgages, allow borrowers to qualify using non-standard income documentation. While most lenders ask for your tax returns, no-income verification mortgages instead use other factors such as available assets, home equity, and overall cash flow. This makes it easier to get a home loan if you’re self-employed or rely on seasonal commissions. Here are some important No Income Verification Mortgage details: LTV up 80% for Purchase and Rate & Term Refinance/up to 75% for Cash-Out Refinances. Minimum FICO credit Score: 740+ No income or employment documentation required, no VOE Just one month bank statement for Proof of Funds Available for primary and second homes 30-year fixed and 5/7/10 ARM options Interest-only payment options. Reserves: 3 to 18 months of PITI (based on borrower’s FICO)—cash-out funds can be used as reserves! Loan Amount Limits: $200,000 to $3,000,000 Rates starting at 6.875% The Process Isn’t Totally Different. Overall, the process of applying for and being approved for a mortgage as a self-employed worker requires a couple of extra steps, but it isn’t the end of the world. Before you apply, you should still make sure your credit score is in good shape and that other debt is minimal. Overall, as long as you have kept track of your income and expenses in a somewhat easy way to verify, you should be in good shape. If you are in need of a self-employed mortgage loan, give us a call at 818-900-2118.

The average time to close a mortgage ranges from 45 to 60 days, but many will close in 30 days or less This is how much time it takes from starting a loan application to getting your “loan funding,” which is when the new home or refinance loan is officially a done deal. Depending on the type of loan you are doing, credit profile, and loan purpose (purchase or refinance), your mortgage might be take a longer time or shorter time to close If you have not started the application, or if you have not found the home you want to buy, the time it takes too close could be longer. If you’re a first-time buyer or buying a home once again, you need to consider the house-hunting process. You need an offer accepted to get approved for a mortgage, so you can’t start the process in full until you’ve found the home you want. This could add an additional 1-2 months or more onto your timeline. Closing timeline: if you haven’t found a house yet, closing on a house takes time. Exactly how much time depends on your “starting point.” If you still have not found your dream home, you could still spend a month or two just visiting houses with a real estate agent. Once you find it, it could take one to five days to make an offer, have the seller look at your offer, negotiate, and come to an agreement on price and other aspects of the real estate transaction. Once this is done, you can make a full application for your home loan and get final approval for the specific home you’re buying You should always get a pre-approval before you start looking for homes to speed up the process. Don’t let that 30 to 60 days go to waste. Getting pre-approval means the lender gives a thumbs-up to all aspects of your home loan besides the property. Once you have an accepted offer, your lender already has a serious head start on your final approval. Closing timeline if you’ve already found a house If you’ve found a home already, it will probably take between 45 and 60 days to close the home mortgage, based on national averages. Keep in mind your situation can vary widely depending on your credit score, employment history, and other aspects of your financial life. Furthermore, you may be able to waive the appraisal requirement. But you can’t count on an appraisal waiver. Be careful not to over-promise closing speed to your seller. Your purchase agreement will state a closing date. You are expected to stick to it, or potentially lose the house and your earnest money. Above all, have a conversation with your loan officer about how long it will take to close your mortgage loan. Ask for a realistic or even pessimistic assessment, factoring in underwriting, processing, the appraisal, condition review, and closing/funding. It’s better to guess “long” than to have overly optimistic time frames you can’t reasonably hit. HOW LONG AFTER THE APPRAISAL TO CLOSE A MORTGAGE? If your house’s appraisal is complete, congrats. You’ve finished one of the longest steps in the mortgage process. You’re probably thinking about how much longer you’ll have to wait for the final walkthrough and your closing day. Typically, mortgage underwriters work on your approval while the home appraisal is going on. So when the appraisal comes in, the lender should be more or less ready to go. It shouldn’t take longer than two weeks to close on your mortgage after the appraisal is done. It shouldn’t take longer than two weeks to close after the appraisal is done. That’s not a promise, though. There are still plenty of potential hang-ups. Your lender could find an issue on the appraisal (peeling paint, a roof in need of repair, etc.) that needs to be addressed. Or the seller might have a problem with the home they are purchasing, delaying the sale. Don’t let these things worry you. They happen all the time and usually are resolved in one way or another. Still, be observant with your lender. Make sure it is speeding your file through the rest of the loan application process. MORTGAGE CLOSING TIMES: Conventional purchase: 47 days to close Conventional refinance: 48 days to close FHA purchase: 50 days to close FHA refinance: 54 days to close  Keep in mind closing times vary widely depending on the situation. A cash buyer, for instance, might close in a matter of days. A mortgage borrower with a questionable credit report and income verification may need 60-90 days or longer.