Flexible Mortgage Financing - How to Use Your Bank Account to Get a Loan
Wednesday, June 18, 2014
Sometimes I come across borrowers who's tax return income is not enough to support approval for the loan amount they are requesting. All mortgage lenders use a debt to income (DTI) calculation to determine if a borrower has the ability to repay the loan. In today's world a DTI of 43% is about as high as can be approved. This means that a borrowers total monthly debt payments (house, car, credit cards, student loans, etc) should be no more than 43% of their gross monthly income (income prior to taxes). Some borrowers have more ability to make payments than their tax returns may reflect. Many self-employed borrowers may write off a lot of expenses thereby reducing their taxable income. I have a loan solution for some of these folks.
That solution is augmenting income by using assets. Here's an example; If a person's tax return shows a total income of just $24,000 ($2000 per month) and they are trying to buy a $300,000 house (total monthly payment of approx $1,700) they are never going to be approved because the house payment is 85% of their monthly income. Let's say this person also has $200,000 in a non-retirement investment account. What my nifty little loan program will do is take 70% of the value of that investment account and divide that over the next 5 years and consider it income. That would add $2,333 a month to income! ($200,000 x .70 = $140,000 / 60 = $2,333) Now our DTI is only 39% - loan approved!!
This is something you are not going to find being done anywhere but here! If you know of someone who's low income is keeping them from getting loan approval but that person has significant money in a bank or investment account then I may be able to help them. My goal is to make loans that make sense and I am always looking for new ways to do just that. So, when you are looking for creative and flexible solutions, I'm you're guy!
Happy Summer one and all! Read more...
