5 Ways to Get a Larger Mortgage

 Learn how to get a larger mortgage and buy a house you thought you couldn’t afford.
 
GoBankingRates.com | The process to buy a home is exciting but takes time, research and money. And larger mortgages or mortgages with better rates usually require a high credit score and high income, too. If your credit history or income isn’t up to what most lenders deem acceptable for a home loan, however, it’s time to explore your options.
 

Rebuilding your credit is one way to improve your chances of qualifying for a large mortgage loan, but it can take some time to accomplish. There are several easier alternatives to help you figure out how to buy a house with a large mortgage when you don’t meet certain mortgage requirements.

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How to Get a Larger Mortgage Even If Your Income Is Low

Before you even start the preapproval for mortgage process, use a mortgage qualification calculator to figure out how much you can afford. Many lenders advise not to spend more than 28 percent of your income on your mortgage.

Here are five ways you can get a large mortgage with low income:

1. Increase Your Qualifying Income

When underwriters look at income, they take a pretty conservative stance. For example, income from your part-time job might not be considered unless you have a history of working more than one job. And if you deduct unreimbursed business expenses on a Schedule 2106, your lender will probably also deduct them from your qualifying income.

However, sometimes the rules work in your favor. Per the Equal Opportunity Act Amendments of 1976, you can use income that you receive from public assistance programs to qualify for a loan if the income will likely continue for three years or more.

Here are other sources of income that you might not have considered:

  • Alimony or child support
  • Automobile allowance
  • Boarder income
  • Capital gains income
  • Disability income — long term
  • Employment offers or contracts
  • Employment-related assets as qualifying income
  • Foreign income
  • Foster-care income
  • Interest and dividends income
  • Mortgage credit certificates
  • Mortgage differential payments income
  • Non-occupant borrower income
  • Notes receivable income
  • Public assistance income
  • Retirement, government annuity and pension income
  • Royalty payment income
  • Social Security income
  • Temporary leave income
  • Tip income
  • Trust income
  • Unemployment benefits income
  • VA benefits income
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2. Choose a Different Mortgage

Some mortgages have more forgiving guidelines than others when it comes to income. VA loans, for example, calculate income two ways: the standard debt-to-income method and the “residual income” method, which is much more generous.

For people with lower incomes, a worthwhile option is Freddie Mac’s Home Possible program. To qualify, you must have a yearly income that’s either equivalent to or less than the area median income for the census tract in which the property is located. The only exception to this rule is if the property is in a designated underserved or high-cost area.

The Home Possible rules state that if the property is in a high-cost area, your annual income can exceed the AMI within certain limits. If the property is in an underserved area, the AMI requirements don’t apply at all.

An FHA loan might be another option to buy your dream home if you have a history of paying your bills on time, even if you experienced a period of financial hardship. FHA loan qualifications state that you might still be able to qualify for a loan, regardless of isolated cases of late or slow payments.

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3. Bring in a Co-Borrower

If you’re still wondering how to get approved for a higher mortgage loan, you can bring in a co-borrower — that extra income and equity will likely enable you to qualify for your home. Co-borrowers can be occupants or non-occupants. An occupying co-borrower lives in the home with you. A non-occupant co-borrower is more like a co-signer. This person doesn’t live in the house but is responsible for the payments.

Lenders are more likely to put restrictions on non-occupant co-borrower loans, such as requiring a higher down payment. Government loans typically come with fewer restrictions.

For manually underwritten loans, the income from a non-occupant co-borrower might be considered as acceptable qualifying income. This income can offset certain weaknesses that might be in the occupant borrower’s loan application, such as limited financial reserves or limited credit history.

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4. Get a Subprime Mortgage

The term “subprime mortgage” has a negative connotation because of the housing bubble and financial crisis it’s often associated with, but subprime mortgages can actually be a gateway to home ownership for some people.

A subprime mortgage is a home loan with higher interest rates than their prime mortgage counterparts. The higher interest rates are in place to offset the risk of loan default by subprime mortgage borrowers who are risky customers because of poor credit. These mortgages can be either fixed or adjustable.

The benefit of a subprime mortgage is that people with poor credit don’t have to wait as long to own a home. They can repair their credit by paying their mortgage each month, rather than waiting years to repair their credit and then buy a home.

The obvious disadvantage, besides higher rates, is that closing costs and fees associated with home loans will be usually higher for subprime borrowers. Although credit scorerequirements aren’t as stringent for subprime loans, borrowers must still show proof that they can afford the mortgage payments each month.

 
credit report on a digital tablet with paperwork.
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5. Strengthen Your Application

It might surprise you to know that income is actually one of the least important underwriting criteria. If you don’t believe it, try calling a few lenders. Tell them you make $1 million a year, but have a 500 FICO score and only 5 percent to put down. You will not get far.

However, people with low-to-moderate incomes get mortgages all the time, especially when they have excellent credit, a decent down payment and money in the bank. Some of the first few steps to buying a house are to establish great credit and substantial savings. It helps to have an emergency fund — enough in the bank to cover two to six months’ worth of bills — and a credit score of 720 or better.

Other compensating factors include low debt, additional savings, a secure job with excellent prospects and documenting extra “unofficial” income. Even if you know you can’t “officially” count some kinds of income, it’s smart to document its existence anyway.

Thank you to Barri Segal for writing this article.

Real Estate Market 2017: What to Expect

Real Estate Market

One of the most common questions we get at this time of year is, “What’s going on in the market?” It’s not just potential buyers and sellers who are curious; homeowners always want reassurance their home’s value is going up. The good news is the American real estate market is strong and healthy: home values are up, prices and sales are strong, and millennial first-time buyers are eager to become homeowners

We often use national real estate numbers to give us a clearer view of our local market. However, real estate is local, and while statistics and predictions help us understand the overall real estate market, our local market may be different. If you’re thinking of buying or selling, or just want to know how much your home is worth, give us a call!

What to Expect in the Real Estate Market in 2017

The American housing market is stronger than ever! Home values, prices and sales had their strongest numbers in 2016, a sure sign the market is healthy and strong. According to the Home Price Index from the Federal Housing Finance Agency (FHFA), property values have increased in 58 of the last 62 months and have increased more than 35 percent nationally. Homeowners continue to build equity in their largest investment—their homes.

First-time buyers are back.

Housing forecasts from the National Association of REALTORS (NAR), the Mortgage Bankers’ Association, Freddie Mac and Fannie Mae all predict existing-home sales will surpass 6 million in 2017, higher than anticipated sales for 2016. Who’s driving the surge? According to NAR, millennials who have put off buying a home are ready to buy. While they may have avoided buying a home due to student debt and limited employment, many are entering their 30s, a time when their attention turns to marriage, family and setting roots with homeownership. They’re predicted to be the driving force behind home and condominium sales from now until into 2020. (Source: MarketWatch)

What does this mean to you? If you’re a millennial who’s been on the fence about buying, now is the time to act. Give us a call to answer your questions about the market and the buying process.

Renters are embracing homeownership

Additionally, many renters who’ve resisted buying are starting home searches due to the economic weight of rising rents. This year’s home buyers seek to take advantage of comparatively low interest rates and, in most cases, static payments each month—an advantage of home ownership. Rental costs will only continue to rise; if you’re thinking of buying, now is an ideal time to do so.

What does this mean to you? Every month you pay rent, you lose the opportunity to build equity in a home of your own. Break free from the limits of renting and invest in your financial future. Come in the office and we’ll discuss your options.

Home prices are on the rise.

According to NAR, the median existing-home price not only increased 6.0 percent year-over-year in October, it’s also the 56th consecutive month of year-over-year increases. Prices are approaching the pre-recession peak.           

What does this mean to you? Home prices, and subsequently home values, are increasing. If you’ve been waiting to list your home until you know you can sell it for what you think it’s worth, now is a great time to do so. We’ll be happy to give you a comparative market assessment of your home and help you get your home in list-ready shape.

If you’re in the market to buy, be prepared to act.

Homes were on the market for the shortest amount of time recorded since 2009: 52 days. The increase of qualified buyers in the market along with the increasing efficiency of the real estate process means homes are selling faster than ever, and in many cases buyers are engaging in bidding wars and paying over the list price to get the home of their dreams.       

What does this mean to you? The home you have your eye on one day may be gone the next. In competitive markets, be prepared to come to the table with a competitive bid.

Looking for a new home?

New-home construction will increase to an average of 1.5 million per year to 2024, according to a report from NAR. However, experts anticipate housing starts will only increase to 1.22 million in 2017, which is less than the 1.5 million new homes required to keep up with growing demand. This inventory shortage of new entry-level homes—typically purchased by first-time buyers—may drive up prices in some areas. Home builders have been focusing on multi-family construction for the last few years, but this type of construction has begun to level off providing hope that builders will once again focus on single-family home construction. However, stricter proposed immigration policies may impact new home construction and tighten inventory.

What does this mean to you? First-time and repeat home buyers agree—there are plenty of advantages of buying a new home. Whether you want a home customized to your family’s needs or you don’t want to bother with age-related maintenance, a new home has much to offer. Give us a call to discuss your options.

Affordability pressures are increasing in many markets

Housing affordability in many of the nation’s largest cities has declined over the past few years, a trend that is expected to continue in 2017. However, there is hope. NAR created the Affordability Index to measure the affordability of homes across the United States. The Affordability Index assesses whether the typical family earning the median family income can qualify for a mortgage on a typical home based on the prevailing mortgage interest rate on loans closed on existing homes from the Federal Housing Finance Board.

The NAR Affordability Index is 170.2 (composite) and 169.8 (fixed), meaning a family earning the median family income has 170.2 percent of the income necessary to buy a median-priced, single-family home. Nationally, the qualifying income is $41,616, but it varies by region. In the Northeast, the qualifying income is $45,024. In the Midwest, it’s $32,640. In the South, it’s $36,960. In the West, it’s $61,824.          

What does this mean to you? If you’ve had your eye on a new home, but weren’t sure if you could afford it, you may be pleasantly surprised. We may have homes in our area that meet your needs and budget. Give us a call today to discuss your home search.

3 Things to Do Now if You Plan to Buy This Year

  1. Get pre-approved for a mortgage. If you’re like most buyers who plan to finance part of the home purchase, getting pre-approved for a mortgage will allow you to put in an offer on a home and may give you an advantage over other buyers. The added bonus: you can see how much home you can afford and budget accordingly.
  2. Start looking. While most buyers start their searches online, be sure to look at homes in neighborhoods you’d like to live in as well. Keep a notebook to write down what you like and dislike about each home you view in person or online. This will help you narrow down where to look and what to look for in your next home.
  3. Come to our office. The buying process can be tricky. We’d love to guide you through it. We can help you find a home that fits your needs and budget. Give us a call to make an appointment today!

3 Things to Do Now if You Plan to Sell This Year

  1. Make repairs. Most buyers want a home they can move into right away, without having to make extensive repairs. While the repairs may or may not add value, making them will give your home a competitive advantage over other similar homes on the market.
  2. Get a Comparative Market Analysis (CMA). A CMA not only gives you the current market value of your home, it’ll also show how your home compares to others in the area. This will help us price your home to sell in our market. Call us for your free CMA!
  3. Start packing. Help your buyers see themselves in your home by packing up items you don’t use regularly and storing them in an attic or a storage space. This will make your home easier to stage as well as make it easier to move later on.

Are you thinking of buying or selling?

Whether you’d like to buy or sell a home this year, want to know how much your home is worth, or have general questions about our local market, please give us a call! We’d love to discuss the market with you.