The Self Employed Have a New Program – Income from Bank Statements

Stockton and Lodi is a market filled with self-employed borrowers that have been left out of the housing market due to unfair regulations.  Prospective home buyers who fall outside that box – even ones with good credit and a sterling history of repayment – might have found it difficult to qualify for a loan. We at the Mortgage House Inc. have been looking for ways to service those that didn’t quite fit into the conforming loan box.   I’m happy to announce we now offer several niche programs to fill that gap including bank statements for income and interest only options for loan amounts up to $3,000,000.

These new programs are some of the most innovative ways to put a self-employed borrower in a home.  However the new products aren’t for everyone. These programs will tailor to those with strong credit (700 min) with a history of financial responsibility while using the monthly deposits to help determine income for the loan.  These programs are critical of past credit events and restricts lending to those with negative credit events in the past five years (No charge offs, collections, or tax liens) and the bank statements shouldn’t reflect NSF charges or occurrences.

These programs are geared toward the purchase or refinance of an owner-occupied home.  It’s Maximum allowable LTV (loan-to-value) for the program is 70% for purchase loans and 65% for refinances.

On the surface these programs may raise eyebrows, but they’ve been carefully tailored to focus on credit behavior, healthy equity positions and realistic income calculations. You may ask “why offer these loans”? Because as the ability to repay is proven by the credit history, sizable equity positions and income is based on a non-biased asset statement that’s not watered down through a self–employed borrower’s accountant.

With 65-70% Loan to Value the borrower has a vested interest in keeping the loan current and provides enough skin in the game to make these loan programs viable for the lender.

Feel free to contact me directly if you’re interested.

Co-signing a loan can prevent home ownership

If you have stable income and credit you’ve probably been approached by friends, family, and/or Girlfriends and Boyfriends to co-sign for a loan.  Lenders look for good credit and income to evaluate the potential risk of applicants and those that pose and elevated risk need others to help reduce that risk.  It’s important to know what can happen if you decide to co-sign before you sign on the dotted line.


A co-signer accepts joint responsibility for another individual’s debt.  Both parties are responsible for the making sure the debts are paid. Credit of both parties involved may be positively or adversely affected depending on the payment history.

Understanding the risk

Credit scores are based on risk and those who can’t qualify for a loan may have limited/no credit, bad credit, too much credit, or not enough income.  All of the reasons listed should raise red flags for any lender and potential co-signer.

Mortgages consider co-signed loans in the DTI (Debt to income Ratio)

Mortgages treat co-signed loans like any other loan, even when it’s someone else’s.  The only way to remove the liability from consideration is if you can prove someone else has been making the payments for 12 months.  This can prove difficult if the account is paid in cash or unverifiable.

Questions to ask yourself before co-signing:

  • Are you willing to assume the debt if the co-borrower wasn’t able/willing to pay?
  • Have you looked at the co-signer’s credit to evaluate their risk?
  • Are you willing to trust this person to make the payments?
  • Are you willing to jeopardize home ownership?
  • Are they making a rash decision they aren’t financially prepared for?

Things you can do to safely co-sign (If you must)

  • Explain expectations to co-signer
  • Require all payments be auto paid through bank – so that all payments are made on time and can be verified.
  • Make sure your number and email are attached to the account so you may be notified in case of account issues.
  • Require the co-signer to allow you to evaluate and inspect their credit history.
  • Avoid co-signing for anyone that’s not part of your immediate family. Avoid boyfriends, girlfriends, friends, etc.

Fannie Mae’s Foreclosure and Short Sale Waiting Periods Updated

Fannie Mae recently changed their policies regarding the purchase of a home after a major credit event like a foreclosure, short sale and bankruptcy. The changes are both positive and negative, but seem to focus on reducing the wait times for those that encountered an “extenuating circumstance” or in layman’s terms a one-time or temporary event that led to the negative credit event. These changes show Fannie Mae’s focus on helping those that were hit hard by the recession.

Derogatory EventWaiting Period RequirementsWaiting Period with Extenuating Circumstances
Bankruptcy Chapter 74 Years2 Years
Bankruptcy Chapter 132 Years from discharge date
4 Years from dismissal date
2 Years from discharge date
2 Years from dismissal date
Foreclosure Included in Bankruptcy4 Years2 Years
Short Sale or Deed in Lieu4 Years2 Years
Foreclosure7 Years3 Years


After bankruptcy, foreclosure, or short sale a borrow must re-establish credit in order to meet minimum Fannie Mae guidelines. For specific down payment and documentation needed please contact me directly.


What’s considered an extenuating circumstance?

Extenuating Circumstances must be verifiable hardships that are considered out of the borrower’s control that significantly reduce income or expense. This can be anywhere from job loss to health issues.

I foreclosed when my property lost substantial value, is that an extenuating circumstance?

Unfortunately no, that falls under a strategic default and is exactly why Fannie Mae is drawing a line in the sand. If you fall into this category waiting 3 years and using FHA may be the best option for you.

Home Energy Ratings and Energy Efficient Mortgages

Feeling powerless against high energy costs isn’t acceptable anymore.

If you’re in the market for a home it would be wise to order a HERS report and possibly obtain an EEM.

Acronyms and programs may be a bit boring, but I assure you knowing the energy flaws of a home before you buy could save you thousands in energy costs.

  • HERS (Home Energy Rating System) is a powerful tool you can use to evaluate your homes energy consumption with an in depth diagnostic report.
  • EEM (Energy Efficient Mortgage) is added into your current mortgage to pay for energy upgrades on a home purchase.

Home Energy Rating System (HERS)
HERS inspection results are based on diagnostic testing using specialized equipment, such as: a blower door test, duct leakage tester, and infrared cameras to determine:

  • The amount and location of air loss/leakage throughout the home
  • Percentage of air loss/leakage through HVAC
  • The quality and effectiveness of current insulationgreener Solutions Energy Efficient Mortgage
  • Window and Door energy loss
  • Appliance energy assessment (Water heater, HVAC, Kitchen Appliances)
  • Solar benefit analysis

The report will produce a computerized simulation analysis with accredited rating software to calculate a rating score on the HERS index. The report will provide recommended improvements based on a cost benefit analysis and expected return on investment through energy savings. These energy upgrades can be financed through what’s called an EEM (Energy Efficient Mortgage).

Energy Efficient Mortgage
Energy Efficient Mortgage program (EEM) helps home buyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a home as part of their home purchase or refinancing mortgage. Items that can be included in an EEM

  • Appliances (Water Heater, Kitchen Appliances)
  • Insulation
  • HVAC and Duct repair
  • Windows and Doors
  • Solar

Loan amounts vary by county and price of the home, as well as lender limits. So we like to stress that the best way to approach the topic of EEM is during the Pre-Approval/Approval stage of the lending process, not when they are looking at homes or after they found one. It’s better to go into the search with open eyes knowing your options opposed to finding out later.

The EEM shouldn’t be an added stress, the process is simple, and when you think about it, you want the savings your upgrades will bring to be greater than the cost of the upgrades, we often use the analogy you give us $50 we will give you $51 and new windows! The program is set up to provide buyers the opportunity to upgrade the home without incurring additional costs; the additional loan payment should equal the energy savings. An EEM on an older home will provide the funds necessary to upgrade while also adding which should be a no brainer.

Who should obtain a HERS report and EEM?
All homeowners can benefit from the homes energy data; however homes built before 2000 would likely benefit more. Energy focused building has improved drastically in the recent years and older homes stand to save the more.

Is the EEM used in Stockton?
The amount of Energy Efficient Mortgages in Stockton is increasing, because of companies like ours that draw attention to the cost and energy saving potential. Stockton was built in phases and the majority of homes were built prior to 1980, which leaves thousands of potential homes without energy improvements. Think about single pain windows, ineffective insulation, Missing weather stripping, Old HVAC, and aging appliances.

HARP Extended Through 2015 – Great Opportunity For Stockton Home Owners

HARP Extended Through 2015 – Great Opportunity For Stockton Home Owners

Stockton | Lodi | Elk Grove  | Sacramento

Home owners who have a Fannie Mae or Freddie Mac backed mortgage now have until Dec 31st 2015 to take advantage of the HARP program.  The City of Stockton still holds thousands of underwater homes that have yet to refinance under the program.  This extension should provide much needed relief for those that have been hit the hardest.

Some areas of Stockton were hit with 75% home value loss and had left home owners unable to refinance with high interest, balloon and adjustable loans.  HARP is a way home owners can refinance out of risky and high interest loans.  Stockton HARP mortgage lenders have varying guidelines depending on investors they sell loans to; which tends to restrict qualified home owners from refinancing.  The Mortgage House sells loans directly to both Fannie Mae and Freddie Mac to eliminate the middle man extra guidelines and rate hikes.

Basic HARP Guidelines

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

HighlightsStockton HARP Refinance

  • 620 Credit Scores and above accepted
  • No maximum loan to value
  • Mortgage insurance is transferable
  • Flexible debt-to-income ratios
  • Finance costs – including impounds/escrow
  • No damaging credit
  • 30, 15, 10 year terms available
  • Non-owner and 2nd homes may qualify



Click to look up your loan to see if it’s owned by Freddie Mac or Fannie Mae

For those that don’t qualify for the HARP program currently may benefit from HARP 3 if it’s passed by congress.  Read about what may be covered in HARP 3 

How to Eliminate PMI – Private Mortgage Insurance

Remove PMI

Stockton | Lodi | Elk Grove  | Sacramento

Potential homebuyers without a sizable down payment will face the inevitable costs of “Private Mortgage Insurance” (PMI). This insurance shields the lender from losses in case of foreclosure, and can cost borrowers thousands over the life of the loan.

“It’s very common to get PMI insurance if you have less than 20% [to put down],” says Bob Walters, chief economist at mortgage lender Quicken Loans based in Detroit. “The price you’ll pay depends on your loan to value and your credit score.”

Private Mortgage Insurance is priced based on buyer associated risk; which centers on loan- to-value and credit score. For example, if a borrower with a 640 credit score takes out a $150,000 mortgage with a 95% loan to value, he/she will pay $120 per month in PMI, compared to $74 for a borrower with over a 740 credit score.

While PMI is annoying and costly, it’s not something borrower have to hold for the entire life of their mortgage. Here are a few tips to remove it sooner than later.

Reappraise Your HomeStockton PMI Home Loan Low Down Payment Option

If you notice homes in your area are increasing in value it may be a good idea to get a professional appraisal. With an appraisal showing equity of 22% or more in hand, your lender is obligated by law to remove the PMI. During a healthy real estate market home values increase yearly, but it may have increased more depending on upgrades and improvements a homeowner has made. Appraisals can range in price but the going rate in Stockton, CA is $425.

Wait Until Normal Amortization Pays it Down

Mortgage Insurance will eventually remove itself with normal amortization. As payments are made the gap between the original sales price and current loan balance increases, and once they reach 22% ownership PMI is removed.

Refinance Your Loan

Homeowners who are looking to drop their interest rate and PMI should strongly consider a refinance. During a refinance the lender will order an appraisal to verify value and remove the PMI with a loan-to-value of 80% (Must own at least 20% of appraised value). Dropping the monthly PMI and lowering the interest rate could substantially lower the monthly mortgage payment.

Upfront Mortgage Insurance/ Lender Paid MIP

Upfront Mortgage Insurance is an alternative to private mortgage insurance, which is when the entire MIP policy is paid upfront at the close of escrow. The policy can be paid by the borrower or the lender and ranges in price according to risk factors (credit score, LTV). Since the policy is paid upfront there isn’t a monthly fee charged. This is an excellent option for those borrowers who plan to refinance or sell the financed property within 5-15 years.