Tuesday, January 26, 2021

What Do Mortgage Lenders Look for on Your Tax Returns?

When you’re ready to apply for a mortgage loan, you can expect to submit a bunch of documentation. This is one of the biggest loans you’ll ever receive, and naturally, mortgage underwriters need to ensure your ability to repay it. This financial documentation will also include tax returns of 1 to 2 years. You’re probably wondering why underwriters would need to see your tax returns, and we have all the reasons explained along with advice on making sure your tax returns are good enough to qualify you for your mortgage loan.

Why do mortgage lenders look for tax returns?

  1. They use tax returns to verify your income
  2. Typically over a 2-year period (though sometimes one year will suffice)
  3. They may also take note of rising or falling income
  4. And ask for an explanation if applicable

Tax returns verify your income

Perhaps most importantly, lenders use your tax returns to verify your income. Your tax documents give lenders information about your various types and sources of income and tell them how much is eligible toward your mortgage application. Non-recurring income, such as any money received as a result of a one-off company signing bonus, a boat sale, or lottery winnings, wouldn’t typically be counted as loan-eligible income. Lenders use the income declared on your returns to determine the amount of money they are willing to loan you, as well as to assess your ability to repay the loan.

Tax returns determine your level of risk

Your reported income is also used to determine your debt-to-income ratio, which is simply the percentage of your monthly gross income that is used to pay your monthly debts. The higher your debt-to-income ratio, the higher the lender’s risk, and lenders are always concerned with risk. They will also ask you to fill out a form 4506-T, which is a request for tax return transcripts.  This is done to make sure everything matches up and to prevent fraud.  So, don’t submit bogus tax returns. If you claim a ton of business expenses, be careful that they don’t reduce your taxable income to the point where you no longer qualify.

Debt-to-Income Ratio

Your debt-to-income (DTI) ratio gives lenders an understanding of how much of a monthly mortgage payment you can afford in addition to your current debt responsibilities without financial difficulty. It is calculated by taking your current monthly debt payments (credit card bills, car payments, student loans, etc.) plus your future monthly mortgage payment and dividing it by your gross average monthly income — then multiplied by 100 to get the DTI expressed as a percentage.

Tax returns reveal your character

Character is defined as the mental and moral qualities distinctive to an individual. Banks want to loan money to people with good credentials and references, but they also consider how you take responsibility. If you have not fulfilled your obligation to file your business income taxes, this negatively impacts your character for both lenders and the SBA. The SBA will not approve a loan application if you have not filed your taxes properly.

Preparing for mortgage lenders

 

Pinpoint Potential Red Flags Before the Lender Does:

  1. A home loan application is like a job interview
  2. You only get one chance to make a good first impression
  3. Make sure you take a hard look at all your financials
  4. Before the lender does to avoid any missteps

Contact us at (605) 718-9820 or schedule a call and let our mortgage experts help you with your home loan.

SCHEDULE A FREE CONSULTATION

© 2021 Affiliated Mortgage, LLC. NMLS #14211: AZ NMLS#0947858. All Rights Reserved. Affiliated Mortgage, LLC is a Division of Lend Smart Mortgage NMLS #4474

Developed and designed by https://blairallenagency.com

The post What Do Mortgage Lenders Look for on Your Tax Returns? appeared first on Affiliated Mortgage.

Friday, January 22, 2021

Affiliated’s Win Of The Week – Ashley Weber

We Work to Help Our
Customers Achieve Their Dreams

Ashley Weber

Ashley recently moved back to South Dakota from New Mexico and is a pharmacist at Monument Health. She is a first time home buyer and her fur baby Paddington is really excited to have a new place to call home. Ashley is looking forward to many wonderful years and memories in her new home. Congratulations Ashley!

Welcome Home Video For Ashley Weber

Alesha Blair
Loan Originator - NMLS # 1817178
Phone: (605) 786-5405
Email: alesha@affiliatedsd.com

The Mortgage Broker Who Made It Happen

I began my career working in Rapid City as a senior account executive for a local TV-Radio network. In early 2010 my husband, our kids, and I had the opportunity to move to Scottsdale, AZ. While in Scottsdale I oversaw the digital marketing strategy for an international software company. In 2018, we decided to move back to South Dakota, because family is very important us, and we wanted to have our children know and understand the importance of family and have the opportunity to grow up around their grandparents and cousins. My husband and I have four wonderful children, two amazing grandchildren and a sweet little Chihuahua.

I am here to help and serve anyone who is looking to refinance their existing home or purchase a new home. I encourage you to contact me directly. I would love to start a safe and confidential loan application with you or answer any questions you may have.

Visit My Website

The Buyer Realtor Who Made It Happen

Athena Palmer

I have been a Broker Associate with the wonderful VIP Properties in Rapid City, SD since June of 2020. Raised in a family that traveled often and purchased homes in different areas of the country, I found a love for Real Estate early on. I have always had a passion for both Real Estate and Interior Design, which has lead my husband and I down the path of doing Real Estate investments over the past years. From rental properties, to flips, and recently – vacation rentals, this gave me the drive to get my license to become an agent so that I can help others to invest, sell, or find their forever homes.

Address: 2828 West Main Street, Rapid City SD 57702
Phone: (605) 431-2542
Email: Athenapalmerrealestate@gmail.com

Visit My Profile

The Insurance Company That Made It Happen

Brian Blair

As your local Farmers® agent in Rapid City, SD, I help customers like you identify the insurance coverage that best fits your needs. This process is straightforward and personalized to help make you smarter about insurance. I have the knowledge and experience to help you better understand your coverage options–whether that’s auto, home, life, renters, business insurance and more. Give me a call at (605) 348-4084 and I’ll be happy to answer any questions you might have.

Address: 201 Main St # 209 Rapid City, SD 57701
Phone: (605) 348-4084
Email: bblair@farmersagent.com

Visit My Profile

It’s Super Easy To Work With Us!

© 2021 Affiliated Mortgage, LLC. NMLS #14211: AZ NMLS#0947858. All Rights Reserved. Affiliated Mortgage, LLC is a Division of Lend Smart Mortgage NMLS #4474

Developed and designed by https://blairallenagency.com

The post Affiliated’s Win Of The Week – Ashley Weber appeared first on Affiliated Mortgage.

Wednesday, January 20, 2021

Purchase your new home with our USDA Loan!

A USDA home loan is a zero down payment mortgage for eligible rural and suburban homebuyers.

© 2020 Affiliated Mortgage, LLC. NMLS #14211: AZ NMLS#0947858. All Rights Reserved. Affiliated Mortgage, LLC is a Division of Lend Smart Mortgage NMLS #4474

Developed and designed by https://blairallenagency.com

The post Purchase your new home with our USDA Loan! appeared first on Affiliated Mortgage.

Tuesday, January 19, 2021

Rent-to-Own Homes | How the Process Works?

If you are like most home buyers, you will need a home loan to finance your home purchase. To qualify for a home loan, you must have a good credit score and cash for the down payment. Without this, the traditional route to homeownership is not an option for you. 

However, there is an alternative called, Rent to Own, in which you rent a house for a certain period of time, with the option to purchase it before the lease expires. Let’s go over how rent-to-own works and whether it is a good option for you or not. 

What is Rent-to-Own?

Rent-to-Own is an alternative route to homeownership which involves crediting a portion of your monthly payments towards the down payment on the property. The renter must pay higher rent to accrue down payment during the time of the lease. 

In a typical rent-to-own agreement, the renter and the property owner agree on the amount of monthly payments, the rental period, and the final sale price of the home. This way, the buyer is able to “lock-in” the property in advance and gets the first right to purchase the property. For a right person under the right circumstances, a rent-to-own agreement can make a lot of sense, but it has its own setbacks where it becomes less than ideal. 

Rent-to-Own agreements are typically of two types

Lease-option Contracts

A lease-option contract is similar to a traditional renting agreement, except you will pay an additional amount every month which will contribute towards the down payment for the house. Naturally, the rental charges will be higher than the similar rent-only properties in the area. 

After the agreed upon period of time, the renter gets the right to purchase the property. However, remember that this is only an option and the renter is not obligated to purchase the property. 

Lease-purchase Contracts

A lease-purchase contract works similarly like a lease-option agreement where you pay the rent to the property owner with an additional sum every month which contributes towards the down payment. However, the difference between the lease purchase and lease-option contract is that instead of having an option to purchase the property at the end of the lease, the renter is obligated to do so. The seller may even have the right to take a legal action against the renter if he is unable to afford it or changes his mind. 

Why Choose Rent-to-Own?

Rent-to-own is a reasonable option for homebuyer who are not quite financially ready to purchase a home. If you have found a house that you really like and want to purchase it, but still need time to build your credit score or accrue money for a down payment, a rent-to-own might be a practical solution for you.

A rent-to-own allows you to lock the purchase price in advance, which is ideal if the house prices in the neighborhood are continuously rising. It also allows you to move into your new home immediately without having to wait for the mortgage processing.

Contact us at (605) 718-9820 or schedule a call and let our mortgage experts help you with your home loan.

SCHEDULE A FREE CONSULTATION

© 2020 Affiliated Mortgage, LLC. NMLS #14211: AZ NMLS#0947858. All Rights Reserved. Affiliated Mortgage, LLC is a Division of Lend Smart Mortgage NMLS #4474

Developed and designed by https://blairallenagency.com

The post Rent-to-Own Homes | How the Process Works? appeared first on Affiliated Mortgage.

Friday, January 15, 2021

Purchasing a new home? Leave it to us

If you are thinking of purchasing a new home, leave it to us! Affiliated Mortgage has been voted #1 Best Mortgage Lender in the Black Hills Community in 2020!

© 2020 Affiliated Mortgage, LLC. NMLS #14211: AZ NMLS#0947858. All Rights Reserved. Affiliated Mortgage, LLC is a Division of Lend Smart Mortgage NMLS #4474

Developed and designed by https://blairallenagency.com

The post Purchasing a new home? Leave it to us appeared first on Affiliated Mortgage.

Wednesday, January 13, 2021

11 Most Important Mortgage Acronyms

Like every industry, the mortgage industry also has a set of specific acronyms. If you’re a first time home-buyer, these words may seem like a foreign language. Here is a list of the most common mortgage words you should be familiar with before going to a lender:

  1. Annual Percentage Rate-APR:

It is the annual cost of borrowing money as per the loan amount, interest rate, and other fees. APR also allows you to compare the true costs from several other lenders to find the best deal.

  1. Adjustable-Rate Mortgage-ARM:

In ARM, the interest rate is locked for a certain time period and the interest rate and monthly payments can change periodically. The ARM rate is set by summing the financial index value and margin value. ARMs start with a low-interest rate then after the pre-determined length of time, they will be adjusted based on the agreed-upon index.

  1. Debt-to-Income-DTI:

It is the ratio of debt payments divided by gross income. The lower the DTI, the higher the chances of getting a loan.

  1. Fixed-Rate Mortgage-FRM:

FRM has a fixed interest rate throughout. People who prefer stable monthly payments opt for this.

  1. Loan Estimate-LE:

It’s a federally required document that has your loan details and closing cost estimates, provided by the lender within 3 days of submitting the loan application.

  1. Loan Term-LT:

It is the duration of loan payments. The common ones are 15 or 30 year mortgages.

  1. Letter of Explanation-LOX:

These are short letters, explaining any unforeseen circumstances, such as changes in income, required by the lender.

  1. Loan-to-Value-LTV:

LTV is the loan amount divided by the home purchaser’s price. If you put down 20% when buying a home, your LTV would be 80%. The lowest value this can take is 3%. FHA loans require 3.5% and VA and USDA Loans allow buyers to put zero down.

  1. Principal and Interest-P&I:

It is a portion of your monthly mortgage payment that goes in paying off the money you borrowed to buy your home.

  1. Principal, Interest, Taxes, and Insurance -PITI:

It is the monthly mortgage payment that will cover the Principal, Interest, Taxes, and Insurance. PITI also lets you know where your payments go.

  1. Private Mortgage Insurance-PMI:

If you are unable to pay your mortgage, then PMI insurance will protect you from losses. Lenders collect this fee as part of your monthly payments if you make a down payment on a conventional loan that’s lower than 20%.  Your lender can help you determine any applicable fees and costs associated with your mortgage.  You’ll have to pay PMI until you can build enough home equity to request the lender to stop paying it.

Contact us at (605) 718-9820 or schedule a call and let our mortgage experts help you with your home loan.

SCHEDULE A FREE CONSULTATION

© 2020 Affiliated Mortgage, LLC. NMLS #14211: AZ NMLS#0947858. All Rights Reserved. Affiliated Mortgage, LLC is a Division of Lend Smart Mortgage NMLS #4474

Developed and designed by https://blairallenagency.com

The post 11 Most Important Mortgage Acronyms appeared first on Affiliated Mortgage.