American Pacific Mortgage

American Pacific Mortgage

Tuesday, February 27, 2018

Home Financing Updates and Family News!

Rates have continued on a steady upward march this year. We are looking at rates on most programs in the 4's today, and some into the 5's. As always, much depends on loan-level pricing adjusters such as loan-to-value, loan purpose (purchase, cash-out refinance or rate and term refinance), FICO scores and property type. Good news is, many program types are opening up to more flexible underwriting guidelines, such as utilizing bank statements or assets to develop income. Home prices continue to rise with low inventory increasing demand.
There is much debate at to a possible "bubble" but most of the pundits are coming down on the side of strong employment increasing demand in the face of a relatively low affordability index. (below 30%)

We merged with a larger mortgage company at year-end, American Pacific Mortgage. We are now a division of APM and have some exciting new programs to offer: Keys on Time, a guaranteed close in 20 days; Bridge loan financing; Stars program for Teachers and First Responders; Secure Lock offering rate float-down; Jumbo Reverse Programs; and many more. We are a direct seller to Fannie and Freddie, and have many more jumbo loan programs available for loans over $679,650. Very exciting! We remain "Catalyst Lending" though, with our same great team of processors, underwriters and closers. Just part of a bigger machine.

Family news:

We had a great holiday season with family! We've learned as time goes on that in order to catch everyone together, we plan early and around the actual holiday.

Our New Years' was once again a lovely evening at the Dana Point Yacht Club with close friends. Steve has taken up racing at the yacht club, spending much time on weekends out on various sailboats. He tends to be the "muscle." We've also recently taken up golf with mixed results. I prefer not keeping score and just practicing my shots out on the greens. Steve has definitely improved however!

Our biggest news is the arrival of our new grandson Felix (Drew and MaryGrace) in November, and the upcoming birth of another grandson (Katie and Paul) in June. The family is growing!
That will make a total of five far.
Katie, who is working with me, has passed her loan originators license and will be an official Loan Officer sometime this month! Watch out!

We have not traveled far since our big trip last June (Bermuda and the BVI's) and we were somewhat devastated by the hurricanes that demolished much of the BVI's shortly after our visit. We did spend a weekend in Catalina in October, and had a fun scuba dive off Casino Point. I also made the trek with Steve to Dallas just before Christmas to complete my annual license renewal. I find it easier to do when I am out of my office.

Next up: We are planning to visit New Orleans in the next month or so, and are going on a fishing trip combined with scuba diving in Baja in October. With the new baby coming in-between, we'll likely stay close to home mid-summer.

Please call me if I can help with any home financing needs or questions. I love to hear about your updates as well!

Monday, February 5, 2018

Tips Before You File Taxes

Thinking of refinancing or buying a new home this year? Or, possibly a rental property?

It is strongly suggested you review your draft returns with a lender before you file for 2017, to be certain you will qualify for the loan you anticipate. Underwriting guidelines for loans oftentimes calculate income in a different manner than you might think. We don't go by adjusted gross income on the front page of the 1040. There can be many additions and reductions to income, depending on what 1040, 1120, and 1065 returns reflect.

Here are some noteworthy items to consider that are common issues in the loan underwriting process:

1. 2106 expenses (non-reimbursed business expenses noted on p.3 of the 1040) are not typically taken as a reduction of income anymore UNLESS the borrower income is more than 33% commissioned/bonused. A salaried W-2 employee can claim all the 2106 expenses they want and it won’t affect income. But for someone who is 100% commissioned, 2106 expenses would reduce income dollar for dollar.

2. Schedule C losses for 2nd jobs (“hobby” jobs) are ignored, so long as the borrower has full-time employment. Losses for MaryKay, Rodan & Fields, or other "hobbies" whether for borrower or co-borrower, will not reduce income if showing a loss, if borrower has a full-time job. Reasoning is, if they are actually losing money, they can stop anytime.

3. Items on Line 16 of Schedule L (balance sheet) on 1065 and 1120 returns are always deducted from income. I find typically the items shown here do not belong, as they will either renew automatically, be extended, or are already paid. We can disregard them with a CPA letter or other evidence that they are not actually due in full in the next year. Anything on line 17 is ignored. Best to place those short term liabilies on line 17 if at all possible.

Remember refinancing a rental property is typically limited to 75% of value. A cash-out refinance of a rental will be limited further.

I am seeing a lot of FHA borrowers wanted to refinance out of their MI due to higher property values. Even with a higher rate on the new mortgage, oftentimes their monthly payment will be lower without the pesky MI payment. Their future hold time should be taken into account, naturally.

Let me know if you have questions on anything!