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Other Home Loan Programs (not mentioned below)

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Conforming Home Loans

Conventional mortgages are non-government home loans. Conforming home loans are loans that meet Fannie Mae and Freddie Mac’s guidelines. Below are helpful highlights about these mortgage programs. 

Occupancy Allowed

  • Owner Occupied / Primary Home
  • Second Homes / Vacation Homes
  • Investment Properties / Non-Owner Occupied

Down Payment

  • Primary Home / Owner Occupied
  • Second Home / Vacation Homes
    • 10% minimum down
    • NOTE: do 20% down if possible to avoid higher rate and MI factors
  • Investment Properties / Non-Owner Occupied
    • 15% minimum down
    • NOTE: do 20% (or even 25%) if possible to avoid higher rate and MI factors

Max Loan Amount

Mortgage Insurance

Interest Rates

Points

  • Discount points to buydown the rate are optional. 
  • Note: since COVID the market is often priced where points may need to be charged to get a rate.
  • Note: since COVID, most second home and investment property loans will require points.

Closing Fees

Escrows

Seller Concessions

  • Check out our seller concessions page for more details.
  • Primary Homes
    • 3% max concessions if less than 10% down
    • 6% max concessions if the down payment is between 10% and 24.99%
    • 9% max concessions if putting down 25% or more
  • Second Homes
    • Same as primary homes (see above)
  • Investment Property
    • 2% max seller concessions

Gift Funds

  • Check out our gift funds page for best practices and more details.
  • There’s no limit the amount of the gift funds, and no minimum amount required from the borrower for a 1-unit property.
  • Note: for 2-4 unit properties, at least 5% of the funds at closing must come from the borrower. 
  • Gift funds must be documented (and seasoned) from the donor’s account. Meaning, the donor will need to provide a bank statement. 
  • Check out our Home Fund It program to simplify gifting.

Appraisals

Debt-to-Income Ratios (DTI)

  • Fannie Mae and Freddie Mac’s automated underwriting systems (AUS) determine what debt-to-income ratio (DTI) is allowed. 
  • More often than not, most approvals come with a DTI below 45%. There are some rare cases where the approval will be granted with a 49.99%. And in very, very rare cases (like almost never), we’ve seen approval with a 59.99% DTI. 

Underwriting

  • Fannie Mae and Freddie Mac use their own proprietary automated underwriting systems (AUS) to determine approval.
  • In other words, manual underwriting is not allowed. (Meaning, an Underwriter can’t override the system’s findings).
  • Note: Fannie Mae’s AUS is called Desktop Underwriter (DU). Freddie Mac’s AUS is called Loan Prospector (LP).

Credit (Minimum Scores)

  • Supposedly 620 but technically it’s whatever Fannie and Freddie’s automated underwriting systems allow.
  • We’ve seen lower scores (like 620) get approved, but there were significant compensating factors (like big down payment, lots of assets, etc.)
  • Note: due to Fannie and Freddie’s Loan-Level-Pricing-Adjustments with lower credit scores, often times FHA may make more financial sense with lower credit scores.
  • Check out our credit score overview page for how scores work as well as some tips and tricks to improving scores.
  • Note: for non-purchasing spouses (i.e. spouses not on the loan), their credit does NOT need to be pulled, nor do their debts need to be counted in the loan.

Chapter 7 (or 11) Bankruptcy

  • 4-year waiting period from the discharge or dismissal date
  • 5-year waiting period if there are multiple BK’s in the last 7 years
  • Freddie technically doesn’t list a seasoning requirement but they typically follow Fannie. Freddie’s Automated Underwriting System must approve it.
  • Check out our bankruptcy and foreclosure seasoning page for more details

Chapter 13

  • 2-year waiting period from the discharge date
  • 4-year waiting period from the dismissal date
  • 5-year waiting period if there are multiple bankruptcies in the last 7 years
  • Freddie technically doesn’t list a seasoning requirement but they typically follow Fannie. Freddie’s Automated Underwriting System must approve it.
  • Check out our bankruptcy and foreclosure seasoning page for more details

Foreclosure

  • 7 years when title transfers from borrower’s name (for Fannie Mae)
  • Freddie technically doesn’t list a seasoning requirement but they typically follow Fannie. Freddie’s Automated Underwriting System must approve it.
  • Check out our bankruptcy and foreclosure seasoning page for more details

Short Sales / Deed in Lieu

  • 4 years when title transfers from borrower’s name (for Fannie Mae)
  • Freddie technically doesn’t list a seasoning requirement but they typically follow Fannie. Freddie’s Automated Underwriting System must approve it.
  • Check out our bankruptcy and foreclosure seasoning page for more details

Repairs, Rehab, and Remodeling

  • Many lenders will allow escrow holdbacks up to $5,000 (and maybe $10,000) for small repairs.

Miscellaneous

  • Can be used with the Texas Veteran Land Board feature.
  • Manufactured homes, both single and double wide, are allowed. The interest rate will be higher than a typical detached single family.
  • Condos and townhome are also allowed, but the interest rate will be higher than a detached single family.

 

FHA Home Loans

FHA mortgages are government home loans. The “normal” FHA mortgage is called a “203b”.  This is only worth noting to avoid confusion since there are other FHA programs (like the 203k renovation home loan).

Occupancy Allowed

  • Owner Occupied / Primary Homes only.
  • No second homes or investment properties. 
  • Note: FHA does allow for a non-occupying co-borrower(s). Meaning, someone can cosign with the borrower and not occupy the home. 

Down Payment

Max Loan Amount

  • The maximum base loan amount is $531,300 for north Texas counties (like Dallas, Collin, Tarrant, Parker, Wise, etc.).  
  • FHA loan limits vary by county. Here’s the link to look up FHA loan limits by county.

Mortgage Insurance

  • FHA mandates both an upfront PMI as well as a monthly PMI, regardless of the down payment amount.
  • The monthly PMI is for the life of the loan when the down payment is less than 10%.  
  • See the FHA home loan page for more details on FHA’s Private Mortgage Insurance. 

Interest Rates

  • Rates change daily. We often reference www.MortgageNewsDaily.com for a quick check on rates.
  • FHA rates are often lower than conventional rates. 
  • The interest rates also don’t have as many adjustment for lower credit scores like conventional loans. Typically, the adjustment is made for scores below 660, 620, and 600. 
  • Note: the interest rate can be different if they choose to add-on the Texas Veteran Land Board feature.

Points

  • Discount points to buydown the rate are optional. 
  • Note: since COVID the market is often priced where points may need to be charged to get a rate.
  • Note: since COVID, most second home and investment property loans will require points.

Closing Fees

Escrows

Seller Concessions

  • Check out our seller concessions page for more details.
  • Primary Homes
    • 3% max concessions if less than 10% down
    • 6% max concessions if the down payment is between 10% and 24.99%
    • 9% max concessions if putting down 25% or more
  • Second Homes
    • Same as primary homes (see above)
  • Investment Property
    • 2% max seller concessions

Gift Funds

  • Check out our gift funds page for best practices and more details.
  • There’s no limit the amount of the gift funds, and no minimum amount required from the borrower for a 1-unit property.
  • Note: for 2-4 unit properties, at least 5% of the funds at closing must come from the borrower. 
  • Gift funds must be documented (and seasoned) from the donor’s account. Meaning, the donor will need to provide a bank statement. 
  • Check out our Home Fund It program to simplify gifting.

Appraisals

Debt-to-Income Ratios (DTI)

  • Fannie Mae and Freddie Mac’s automated underwriting systems (AUS) determine what debt-to-income ratio (DTI) is allowed. 
  • More often than not, most approvals come with a DTI below 45%. There are some rare cases where the approval will be granted with a 49.99%. And in very, very rare cases (like almost never), we’ve seen approval with a 59.99% DTI. 

Underwriting

  • Fannie Mae and Freddie Mac use their own proprietary automated underwriting systems (AUS) to determine approval.
  • In other words, manual underwriting is not allowed. (Meaning, an Underwriter can’t override the system’s findings).
  • Note: Fannie Mae’s AUS is called Desktop Underwriter (DU). Freddie Mac’s AUS is called Loan Prospector (LP).

Credit (Minimum Scores)

  • Supposedly 620 but technically it’s whatever Fannie and Freddie’s automated underwriting systems allow.
  • We’ve seen lower scores (like 620) get approved, but there were significant compensating factors (like big down payment, lots of assets, etc.)
  • Note: due to Fannie and Freddie’s Loan-Level-Pricing-Adjustments with lower credit scores, often times FHA may make more financial sense with lower credit scores.
  • Check out our credit score overview page for how scores work as well as some tips and tricks to improving scores.
  • Note: for non-purchasing spouses (i.e. spouses not on the loan), their credit does NOT need to be pulled, nor do their debts need to be counted in the loan.

Chapter 7 (or 11) Bankruptcy

  • 4-year waiting period from the discharge or dismissal date
  • 5-year waiting period if there are multiple BK’s in the last 7 years
  • Freddie technically doesn’t list a seasoning requirement but they typically follow Fannie. Freddie’s Automated Underwriting System must approve it.
  • Check out our bankruptcy and foreclosure seasoning page for more details

Chapter 13

  • 2-year waiting period from the discharge date
  • 4-year waiting period from the dismissal date
  • 5-year waiting period if there are multiple bankruptcies in the last 7 years
  • Freddie technically doesn’t list a seasoning requirement but they typically follow Fannie. Freddie’s Automated Underwriting System must approve it.
  • Check out our bankruptcy and foreclosure seasoning page for more details

Foreclosure

  • 7 years when title transfers from borrower’s name (for Fannie Mae)
  • Freddie technically doesn’t list a seasoning requirement but they typically follow Fannie. Freddie’s Automated Underwriting System must approve it.
  • Check out our bankruptcy and foreclosure seasoning page for more details

Short Sales / Deed in Lieu

  • 4 years when title transfers from borrower’s name (for Fannie Mae)
  • Freddie technically doesn’t list a seasoning requirement but they typically follow Fannie. Freddie’s Automated Underwriting System must approve it.
  • Check out our bankruptcy and foreclosure seasoning page for more details

Repairs, Rehab, and Remodeling

Miscellaneous

  • FHA typically only allows a borrower to have one FHA loan within the same metropolitan area. They don’t want FHA to be used as a financing vehicle for aspiring real estate investors. 
  • Can be used with the Texas Veteran Land Board feature.
  • Manufactured homes, both single and double wide, are allowed. The interest rate will be higher than a typical detached single family.
  • Condos and townhome are also allowed, but the interest rate will be higher than a detached single family.

 

 

 

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