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What are Asset Depletion Mortgages?

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What are Asset Depletion Mortgages?

Asset depletion refers to a method that lenders use to calculate a borrower’s monthly income. In this calculation, they will divide the assets by a set number of months. You do not have to cash in your assets; however, they are used to tell whether you will be able to make your monthly mortgage payments. In this week’s blog post, Stonebriar Mortgage explains how asset depletion works for homeowners in the Dallas Texas and California markets.

How Asset Depletion Mortgages Work

When applying for an asset depletion or asset dissipation mortgage, you are using liquid assets to qualify for a loan approval. If you do not have a traditional monthly income or W2 to use with your loan application, then asset depletion may really benefit you. Let’s say you have significant assets such as funds in a bank, investment or retirement account—these can be used during the underwriting process to prove your worth as a borrower. If you are self-employed, wealthy, or retired/almost retired—then this program may be right for you.

How Asset Depletion Mortgages Get Approved

Lenders may use different methods with this loan, but they generally all work the same. A formula will be used to calculate the income that could be made if your assets were totally liquidated over a set period. An assumption is being made that you would be able to sell or use those assets to obtain cash during the mortgage. Of course, it is not expected that you are required to do this. A lender will add the total calculated amount to any other income you are making to determine what mortgage to approve.

Let’s say you are making money from retirement or social security—this will be added to your asset worth in order to obtain a debt-to-income ratio. While you may have substantial assets, you still may not get approved for a high-value home—so be reasonable in what you plan to buy. You need to recall that they are using a formula and a set period to determine how quickly your assets can convert to cash.

Finding the Right Asset Depletion Mortgage

Stonebriar Mortgage loves helping individuals with high assets and non-traditional income find their dream home in the Dallas, Texas and California markets. Your debt-to-income may range from 40-50% to get approved. If you are currently getting any income from dividends, this will be subtracted from the total amount of assets to avoid double-counting. However, this income will still help you qualify for the right-sized asset depletion mortgage.

Working with the right team is important. Stonebriar Mortgage has experienced professionals here to help you find a home in Dallas, Texas and California using your assets to qualify.

HARP 2.0

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HARP 2.0

H.A.R.P stands for Home Affordable Refinance Program. Several years ago, the government extended the program, creating HARP 2.0. Intended to help struggling homeowners after the mortgage crisis, HARP can be used to refinance homes with declining values. Typically, the value has declined well below what is owed on the mortgage.  Borrowers can refinance into a more affordable and sustainable home loan rate. Stonebriar Mortgage breaks down the HARP 2.0 program for Dallas, TX and California homebuyers in this week’s blog post.

Am I Eligible for HARP 2.0?

You may be asking yourself: this program is quite old, am I still eligible for HARP 2.0? Below are the basic eligibility criteria, you may qualify if:

  • The loan is owned or guaranteed by Fannie Mae or Freddie Mac.
  • The mortgage has been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  • The mortgage was not refinanced under HARP previously (unless it is a Fannie Mae loan that was refinanced under HARP from between March and May of 2009).
  • The current loan-to-value (LTV) ratio is greater than 80 percent.
  • You are current on your mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months.

The program known as HARP 2.0 expired in December 2018, however similar programs exist. The Federal Housing Agency has launched a Fannie Mae High Loan-to-Value refinance option and a Freddie Mac Enhanced Relief Refinance (FMERR). These programs extend HARP with slightly different requirements.

What Can I Do with These Refinance Relief Programs?

Through these various relief programs, homeowners can obtain lower interest rates (lowering monthly payments), shorten the term of their loan, and modify their loan from an adjustable-rate to a fixed-rate mortgage. There is no minimum credit score required, which has eased restrictions for struggling borrowers. Many people are saving thousands per year by taking advantage of these programs. Some are getting rates that are 30% lower than in the past.

If you choose to shorten your loan term, your monthly costs may go up, but you will build equity in the home more quickly. By applying to restructure or refinance the mortgage, you will have to go through an application and approval process. You may have to pay closing costs in the end to get paperwork completed.

How Do I Apply for Relief?

Start applying for relief by calling your mortgage company. Obtain information on all loans you currently have and gather your financial documentation for the application. You do not have to continue struggling with bad loans. Stonebriar Mortgage is here to help Dallas, Texas and California homeowners some relief. Contact our local offices today for more details!

2- and 4-Unit Multifamily Loans

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2- and 4-Unit Multifamily Loans

Buying a duplex or multifamily apartment complex can be a great way to generate steady income and build wealth through real estate. You can even live on-site while you build up savings and equity.  Financing two- and four-unit complexes can be like obtaining a mortgage on a single-family home. This week, Stonebriar Mortgage tells Dallas, TX and California homebuyers how to invest in real estate using two- and four-unit financing loans.

Is it a Residential or a Commercial Loan?

The first thing to understand about financing complexes with multiple units is to know which category the units fall into. Generally, the smaller buildings of two to four units fall into residential home mortgages. Properties with more than four units will likely require a commercial lender and additional requirements that you must follow. Stonebriar is here to focus on two to four-unit complexes for the purpose of this topic.

Loan Programs for Multifamily Properties

The same loan programs that help purchase single family homes can be used for multi-family properties. FHA Loans, VA Loans, and conventional loans all have programs available for this larger purchase. Obviously, FHA and VA Loans will have specific qualifications and criteria.

Using FHA Loans

Using an FHA loan will require you to live on the property, but the program can be more accessible financially. You can get as low as 3.5% down payment requirements, good rates, and qualify even if your credit score is not perfect. The eligibility may be less stringent, but the loan amount and property must be within the FHA criteria.

Using VA Loans

For this program, you must be a qualifying current or former military member. You must still also live on-site. However, in this program, no down payment may be required. Costs and requirements for the program are also very reasonable. VA lenders will not require you to get private mortgage insurance and as with FHA Loans, you do not need perfect credit to qualify.

Using Conventional Loans

Conventional loans are non-government sponsored. There are still limits on the size and costs on the properties they will pay for. These are private programs and may require you to pay mortgage insurance and place larger down payments than with FHA and VA Loans. Your financial information and credit score may be more heavily scrutinized, depending on the lender.

Loan Programs for Multifamily Properties

In purchasing the complex, you must clearly decide whether to live on the property as you apply for loans. If you decide to live off-site and be the landlord, then you must consider how you will manage the property remotely and pay for this. Stonebriar Mortgage enjoys helping clients find two- and four-unit complexes in Dallas, Texas and California, please feel free to reach out with any questions you have about financing.

Second Home Loans

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Whether its to vacation in a favorite spot, find somewhere cool to spend summer, or generate investment on another property—there are many reasons to get a second home. Before you decide whether to buy a second home, it is important to weigh your options carefully. You will need to consider if you can afford another mortgage and pay for the upkeep on another home. Below is more information on what to consider and some useful tax considerations. Stonebriar Mortgage helps Dallas, TX and California homeowners learn about options for second home loans in this week’s blog.

Can You Afford a Second Home Loan?

Real estate is a great investment. Even if you are buying a second home to use as a vacation or retirement property, chances are you will not be there year-round. You may be able to generate income off renting the property or owning a timeshare. Below are some factors to consider when deciding if you can afford a second home:

  • Down payment—do you have enough saved for a down payment that will get you good financing on the property?
  • Closing costs—what will the closing costs be? Can you earn them back in rental income or afford them in your budget?
  • Monthly mortgage payment—what will the monthly payments be combined on your current and second home? What about the maintenance costs and taxes?
  • Property Insurance—don’t forget to include any homeowners or mortgage insurance you will need to buy. Some companies charge more for insurance on a second home.
  • Utilities and landscaping—even if you are not there year-round, you will need to pay for utilities and landscaping. How do you manage these things remotely?

Considering the Purpose of Your Second Home

When considering the above costs and whether you can afford them, ask yourself if this is going to be a vacation or investment property. Perhaps it is a mixture of both. The purpose of your second home will impact your taxes. If you spend more than 14 days a year at the home, or rent it for 10% of the time, it is considered a vacation home. In this case, certain items may not be deductible on your taxes, such as utilities and taxes.

If you are using the second home to generate income from rent, then you may be able to deduct items like utilities, management fees, real estate taxes, and more. If the home is a mixture of an investment and vacation property, then get ready to keep detailed records on how you use the home. Your records will be used by your accountant to determine what may be deductible.

Stonebriar Mortgage enjoys helping clients find their second home in Dallas, Texas and California, feel free to reach out with any questions you have about the process.

Fixing and Flipping Houses

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If you learn to master the fix and flip real estate market, then you can increase your wealth and achieve great financial goals. Many investors use this approach and leverage the housing inventory of up and coming markets. This week, Stonebriar Mortgage helps Dallas, Texas and California homeowners with tricks and tips for fix and flip properties.

Learning the Art of Fixing and Flipping

Many people get into the business of fixing and flipping properties via classes or by shadowing an experienced professional. Even after class, it is important to network and stay registered to news and blogs. You need to stay current on the latest best practices. Be sure to consider reviews and feedback on courses before you pay. Many people say the best classes cover an array of topics. You will need skills in managing construction contractors, finding affordable properties, negotiating, selecting properties, and targeting your market audience.

Finding the Right Neighborhood for a Fix and Flip Property

When you look for the right neighborhood to buy your fix and flip house, focus on markets that have great growth potential, but that are not too expensive. Usually the local city is aware the area is poised for dramatic growth, and so they will upgrade the infrastructure to keep pace. Many up and coming neighborhoods exist in the Dallas and California areas.

Budgeting for a Fix and Flip Property

You will need to allot funds to purchase a home, pay contractors, legal fees, financing fees, and other costs. Even if you do not hold on to the property for a long amount of time, you may still need to pay HOA fees, taxes, and insurance on the home. You should have a budget and monitor expenses closely during each phase of buying and selling the property.

Finding the Right Property

Many people spend ample time learning how to find the right property to fix and flip. Older homes may be more affordable to purchase. You should thoroughly review the history of the home and neighborhood. If you do not inspect the house well, you risk finding an unfixable or unaffordable problem during your rehab. You should also be aware of the local laws governing the home and whether there is lead or asbestos to remediate. Some people even get a second opinion when inspecting the property.

Selling the Fix and Flip Property

You will want to ensure you get the home properly appraised and inspected for its value after you make the repairs. You will also want to recoup your costs for financing, rehabbing, and holding the property. If the home is taking too long to sell, you may need to adjust your price to attract customers. Stonebriar Mortgage can help you find fix and flip opportunities in Dallas, Texas and California. We welcome you to learn all you can about investing in real estate and contact our office for details.