Tag Archive for: credit score

Preferred Rate Financial Fitness: March 2024

March 6, 2024
Smiling indian business man working studying on laptop computer at home office.

Last month saw the start of the Lunar New Year, which is the Year of the Dragon. It’s an auspicious year, as it’s believed that children born this year are destined for success. Some famous Dragon babies: Keanu Reeves, Rihanna, Dr. Martin Luther King Jr, John Lennon and Peyton Manning.

No matter what year you were born in, you may have some serious assistance buying a home this year if you’re still renting! A bill introduced in 2021 may be passed soon, which would provide many first-time buyers with up to $25,000 in assistance. Read all about this bill below. Other topics: how to manage a home remodel, the latest on auto insurance pricing, and why you may want to check out your VantageScore.

Home Financing

Down Payment Assistance May Get Serious Soon

Even though the 20% down payment rule is no more than a myth, there are still plenty of potential home buyers who need to bump up their cash assets before buying their first home. If the Downpayment Toward Equity Act passes this year, these first-time buyers may receive a cash grant for up to $25,000.

This Act was created to help more Americans buy their homes and begin building a secure financial future. While it’s still in the works, it was recently announced that the Act is part of President Biden’s 2024 Fiscal Year budget proposal.

Here are the basics of this bill.

  • The Downpayment Toward Equity Act will bring home ownership within the reach of more people, including those with lower incomes.
  • The proposed program provides up to $25,000 to first-time buyers. First-generation homeowners qualify for $20,000, with $25,000 for buyers considered socially or economically disadvantaged. (First-generation homeowners are defined as buyers whose parents or guardians have never owned a home, or buyers who previously lived in foster care.)
  • Grant funds may be used to cover down payment and closing costs, and for buying discount points to lower a mortgage’s interest rate.
  • The cash funding is delivered to qualifying buyers when a home purchase is finalized.

Currently, the bill is still being considered by Congress and is subject to debate and potential changes before it can be approved and signed into law. For updates, visit the Congress.gov page featuring the bill’s history.1

Insurance

Auto Insurance Pricing Climbs Over 25%

If you’ve recently received your auto insurance renewal notice, you may have felt rear-ended by your new premium. According to recent data, drivers across the nation are paying an average of $212 for car insurance, which is over 25% from 2023 premiums.

While inflation is still playing a part in rising prices, other factors are driving up driving costs. One major indicator: where you live. If you’re in a state prone to natural disasters, your premiums were most certainly affected. For example, California drivers saw their insurance prices head north because of recent abuses meted out by Mother Nature, as natural disasters damage vehicles and repairs are becoming more expensive.

Other states’ drivers aren’t off the hook. Louisiana and Florida drivers are weathering more than hurricanes; over the past few years, they’ve been forking over the largest share of their paychecks toward auto insurance. Louisiana drivers shell out an average of 6.53% of their income for auto insurance while Florida drivers are tailgating them and paying 5.69%. Missouri won the prize for the largest year-over-year increase in premiums, with drivers spending around 40% more to ensure their rides than they did last year.

A few states’ drivers aren’t suffering as badly. For example, Massachusetts drivers enjoy some of the nation’s lowest premiums, as state law prohibits the use of age as a rating factor for setting insurance pricing. They’re paying just 1.76% of their income toward insuring their vehicles. Wyoming drivers were the only state where insurance costs fell, with average premium pricing falling by one dollar (hey, it’s better than nothing!).2

In the News

Inflation’s Down but Not Out

Recent news from the U.S. Labor Department included an unexpected rise in the Consumer Price Index (CPI), which plays a big role in inflation. January’s CPI posted a 3.1% annual increase —a bigger jump than expected—while monthly gains increased as well.

Core CPI numbers (which don’t include energy and food prices) rose 3.9% annually last month, which was the same as December. On a monthly basis, CPI rose 0.3% last month after rising 0.2% in December. Core CPI rose 0.4%, up from the 0.3% gain the previous month.

Even though overall price pressures have moderated, relieving some shopping stress, getting inflation completely back to normal may be more difficult than economists anticipated. The inflation slowdown over the past year happened alongside a solid economy, bucking predictions that the U.S. economy would have to experience a recession to bring down prices. The big question is whether this trend will continue in 2024.

While The Federal Reserve hiked interest rates several times in 2023 to rein in inflation, members of the Reserve are now attempting to determine whether to deliver the lower interest rates expected for this year. Recently, Fed officials are hinting that the lower rates may not arrive as soon as hoped, as they want more evidence that the war on inflation has been truly won before lowering interest rates.3

Credit and Consumer Finance

FICO Score, Meet VantageScore

Chances are you’re already familiar with the basics of credit scores, including how to manage your finances and credit accounts for a higher score. However, you may not be familiar with VantageScore®, an alternative to FICO.

VantageScore was created in 2006 as an alternative to traditional credit scoring. It processes credit and financial habits differently, giving more consumers the ability to build a good credit score. Two groups that VantageScore helps: college students and new immigrants. 

VantageScores are widely used by credit card issuers, with nine of the 10 largest banks using this credit score. Since your next credit application could be processed with your VantageScore, here’s a basic introduction. 

VantageScore considers four key money management factors when calculating your score.

  1. Extremely influential: Total credit usage, balance and available credit
  2. Highly influential: Credit mix and experience
  3. Moderately influential: Payment history
  4. Less influential: Age of credit history and new accounts opened

Similar to FICO, VantageScore scores you on a range from 300 to 850. Scores of 499 and under are considered Poor, and scores over 781 are graded Excellent.

If you’d like to see your VantageScore, there are several ways to do this. Many credit card issuers, like Chase and Capital One, give their cardholders free access to this information. You may also visit the VantageScore website for more options.4

Did You Know?

How To Keep Tabs on a Remodeling Project

If you’re planning a major remodel this year, you may be wondering how to best manage the project. Hiring a bonded, licensed contractor is an essential first step. The second step? Monitoring the work as it progresses, if possible, to make sure all workers are adhering to your original contract.

The unfortunate truth about remodeling is that it’s often difficult to determine if a contractor is cutting corners with sub-par materials, workmanship, or both. Here are some situations to watch out for, together with strategies for problem-solving.

Your contractor is using low-quality materials. This may happen when inflation causes the material prices to rise after you’ve signed off on the project, but your contractor feels pressured to stay within the original budget. One way to prevent this situation is to ask for a detailed estimate that describes the exact grade and brand of each material. When these arrive at your home, double-check to ensure they match your agreed-upon estimate. Another strategy: discuss the possibility of rising prices mid-project with your contractor before work begins, together with a contingency plan.

Some components are missing or don’t match. Make sure your remodel includes all the features you’ve paid for. If you’re missing electrical outlets, built-in shelves, or other features, it’s time to blow the whistle. Another red flag: tiles that don’t match or are a slightly different shape or color. This could mean that they were purchased from salvage or discount warehouses.

Drawers aren’t opening smoothly. You might assume that your drawers are getting stuck on something, but it’s often because they’re too small—a common money-saving tactic.

Gaps around windows or doors. These could be caused by improper installation or cheaper substitutes.

If you notice (or suspect) that your contractor is cutting corners, here are some steps to take.

  1. If you spot evidence before work is completed, take pictures of your concerns.
  2. Ask for materials invoices and compare them to your original plans.
  3. Next, schedule a meeting with the contractor.
  4. Be prepared to explain your concerns politely and produce evidence of items that need to be replaced.
  5. Keep in mind that your contractor may have made an honest mistake. Most will repair, replace or redo anything you’re not happy with.

If you’re not able to come to an agreement, bring in a second contractor or an independent inspector to assess the work and provide estimates for rectifying problems. Other strategies: seeking legal advice or contacting the state office or regulatory board that issued your contractor’s license.5 Still trying to decide if your remodeling plans make sense for your financial picture? We have a great article that covers the home renovations with the best return on investment. Still have questions? Locate a Preferred Rate Mortgage Advisor near you to learn more!

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What Is a Good Credit Score to Get a Mortgage Loan?

January 23, 2024
credit score concept on the screen of smartphone

Before you go too far down the house-hunting rabbit hole, you’ll want to ensure that you meet the credit score requirements to secure a mortgage loan. After all, this mortgage loan will allow you to purchase your dream home. And while many factors go into qualifying a good credit score is definitely one of them. 

We know that getting “rated” can make you feel like you’re back in school. Like in school, however, with a little hard work, discipline, and dedication, you can improve your credit scores quickly!

So let’s jump right in, starting with the obvious. 

What Is a Credit Score?

Credit scores range from 300 to 850. The Fair Isaac Corporation, also known as FICO, originally created this scale to help lenders and investors determine the creditworthiness of consumers. 

A higher credit score indicates that you’re a lower-risk borrower, which could lead to a lower mortgage rate over the life of the loan. That’s because a good credit score and a strong credit report imply that you can manage your credit wisely and make timely payments. Lenders are more likely to offer you a lower interest rate mortgage loan if you are a high-credit-score (low-risk) borrower.

Other agencies have adopted a similar scale and are expected to start playing a bigger role in credit scoring in the coming years. At the end of the day, your credit score is a tool that provides a snapshot of your credit history to lenders, essentially summarizing the risk of lending to you.

What Determines Your Credit Score?

Five factors help calculate your credit score. Here’s an overview of these elements of the credit scoring model.

1. Payment history (35% of your overall score)

Paying your credit accounts on time—including credit cards, auto loans, student loans, medical bills, and any personal loans—can increase your credit score. In the same vein, late payments can negatively impact your credit score.

The credit scoring model considers the frequency and severity of these late payments. A 90-day late payment, for example, will have a larger negative impact on your credit score than a payment that’s 30 days late. Ultimately, you want to do what you can to pay your bills on time to ensure that you don’t make bad credit worse or reverse all the work you’ve done to improve your credit score. 

2. Utilization rate (30% of your score)

The ratio of your credit account balances to your available credit limit is known as the utilization rate. The credit bureaus consider the utilization rate of your individual cards, as well as your overall cumulative credit limits, in this factor. A balance-to-credit-limit ratio below 30% may improve your credit scores, while a ratio above 30% may lead to bad credit.

3. Length of history (15% of your score)

The age of your credit accounts matters. What we mean is that it pays to establish a long history of credit usage and on-time payments. Credit accounts that have been open and utilized for years can improve your credit score. 

Many people use their credit cards for their monthly expenses, which earns them perks and helps establish their reputation as responsible borrowers. This is a good idea only if you know you can pay your balance off every month. 

With this in mind, you might think that it makes sense to open a bunch of new credit accounts, just as long as you pay off the balance at the end of the month. However, opening new credit accounts lowers the length of your credit history.

This can result in a lower credit score in the first 12 months. Once an account reaches 24 months or longer, however, it becomes a more established account. That’s when you can expect to see a positive impact.

This is also why a mortgage lender may tell potential homebuyers not to open new lines of credit when they’re preparing to buy a house. It can lower your credit score and potentially affect your debt-to-income (DTI) ratio. 

4. Type of credit (10% of your score)

Also known as credit mix, credit scoring models consider what type of credit you have. Generally speaking, a mix of different credit types is more favorable than only one type of credit. Various types of credit may include a revolving credit card, an auto loan, and an installment loan, for example. This mix of credit types can produce a higher score than using revolving credit cards.

5. Inquiries (10% of your score)

When a lender pulls your credit, it is considered a “hard” inquiry. That can have a negative impact on your credit score. That means you could be dinging your score every time you apply for a new credit card or loan.

Not all inquiries negatively impact your credit, though. Pre-approval and employer inquiries that check your credit aren’t detrimental and don’t trigger calls and letters from other parties trying to sell you their latest and greatest credit card. Multiple inquiries from mortgage companies made within a 45-day window will ding your credit score only once, allowing consumers to do their research without lowering their credit score.

Of course, not all inquiries negatively impact your credit. “Soft” inquiries, such as a potential employer checking your credit, aren’t detrimental. Multiple inquiries on a single new account, such as multiple credit checks for your mortgage, ding your credit score only once, as long as these checks are all made within 45 days of one another. 

What if you want to check your credit scores yourself? Any request regarding your personal credit is considered a soft inquiry and won’t count against you. 

What Are the Credit Score Requirements to Buy a House?

Every mortgage lender is different. No magical number will suddenly unlock a home loan, but there are credit score ranges that lenders generally view more favorably than others. 

Credit scores are typically viewed this way:

  • 800–850: Excellent
  • 700–799: Very good
  • 680–699: Good
  • 620–679: Fair
  • 580–619: Poor
  • 500–579: Bad
  • 499 and lower: Very bad 

A higher credit score can lead to a more favorable home loan interest rate. However, it’s important to note that credit score is just one part of the equation, and other factors such as income and DTI ratio also play a role in home loan qualification.

Each mortgage lender has its own strategy, including the level of risk they finds acceptable for a given credit product. So remember that there’s no standard “cut-off score” used by all lenders. Instead, these general ranges can tell them whether a potential borrower has a good or bad credit score or is somewhere in the middle. 

Don’t forget: When it comes to qualifying for a loan, your credit score is only one part of the equation. A borrower can have a perfect 850 score, but if their income and DTI ratio don’t support the loan amount they’re requesting—say they make $30,000 a year and are looking at homes in the $800,000 range with no other liquid assets—their desired amount can still be denied. 

How Do You Check Your Credit Score?

You can request a free copy of your credit report once a year from each of the three credit bureaus: TransWestern, Experian, and Equifax. You can contact these bureaus directly or go to Annual Credit Report to get all three.

This is a solid strategy if you’re looking to get a mortgage loan in the next three months. If you have some time and want to improve your credit, you can always request one report from each credit bureau every four months to track your progress.

Once your credit report is in hand, review it for accuracy. Call the credit bureaus if you find any errors or if you have questions about anything in the report. 

How Do You Improve Your Credit Score?

If you find that your credit needs some work, remember the five factors determining your score and then set about optimizing your credit.

The most effective ways to do this:

  • Make payments on time every time.
  • Pay credit cards down to 30% or less of their credit limits.
  • Limit the number of accounts you apply for at one time.
  • Leave established, older accounts open even if they’re paid off.

Keep in mind, too, that you might be able to qualify for a mortgage loan even if your credit score is in the “poor” to “fair” range. That’s because credit is not the only factor considered. 

Preferred Rate’s specialty programs can help individuals who have previously had a short sale, pre-foreclosure, or foreclosure reenter the housing market. There is no need to count yourself out of the market just because your credit score is less than perfect. your credit score is less than perfect.

If you have questions about your credit or want to learn more about the homebuying process, click here to connect with an Preferred Rate Mortgage Advisor in your area.

Can I Qualify for a Mortgage With Student Loan Debt?

May 11, 2022
mortgage blog, student loan debt, graduation

Graduation season is here! For many college graduates, student loan debt can turn into long-term financial stress. Even years after graduation, student loan debt can keep people from realizing dreams of homeownership. Add the recent economic shifts and inflation, and buying a house right now might feel downright impossible. This article can help bring some good news and help you make a plan.

If you’re getting ready to buy a house for the first time, but you’re worried about how your student loan debt will affect your mortgage, keep reading. A steady job and a good handle on your monthly expenses will take you farther than you think, especially if you’re a first-time homeowner. 

One of the best moves you can make is to lock in your rate today by getting pre-approved, which we blogged about here.

How to Buy a House With Student Loan Debt

This article will explain how student loans affect your home loan eligibility and how to qualify for a mortgage. Specifically, how to apply for a mortgage and get a home loan while you’re still paying off your student debt. 

A great first step is to connect with a mortgage advisor. You’ll be able to get personalized advice about your situation and find out about custom mortgage options. Start here to find a local advisor.

Three Factors That Affect Your Eligibility When You Apply for a Mortgage

#1 Debt to Income Ratio (DTI)

Your debt-to-income ratio impacts your buying power the most. Lenders compare your gross monthly income against your monthly debt obligations to determine how much you can afford to borrow. A DTI ratio higher than 43% can make it difficult to qualify. But there are select options for borrowers with student loan debt.

#2 Credit Score

A good credit score will get you a better home loan and a lower mortgage rate. But there are also special programs available for first-time homebuyers who have a lower credit score.

It’s always a good idea to download a free copy of your credit report. This will allow you to fix any errors, dispute incorrect information, and know your credit score.

#3 Down Payment

A larger down payment can often lock in a better rate and a more affordable mortgage payment. Ask your mortgage advisor about using investment stocks, retirement funds, gift funds, or borrowing from other sources.

Related: How to FAST TRACK your mortgage pre-approval

Best Home Loan Options for Homebuyers With Student Loan Debt

Related: Does every mortgage need an escrow account?

How Debt-to-Income Ratios Affect a Mortgage Application

When you apply for a mortgage, your debt-to-income ratio directly impacts your eligibility, your rate, and your loan terms.

Why? Lenders compare your total monthly income with monthly debt repayments to determine how much you can afford. For this reason, it can be difficult to qualify if your monthly debt payments are higher than 40% of your pre-tax income.

This is where student loan payments make a significant impact.

Student loan payments are automatically included in your monthly debt balance, so they directly affect how much you can afford for a home loan. Since there are different student loan repayment programs, the structure of your specific student loan payment plan can make a big difference.

First, let’s look at how debt-to-income ratios are calculated. Then you can decide whether or not it’s a smart idea to restructure your student loan debt.

How to Calculate Your Debt-to-Income Ratio (DTI)

Figuring out your debt-to-income ratio (DTI) is easy.

First, write down your gross monthly income, then list all your recurring monthly payments.

Leave out expenses that vary each month, such as utility bills, entertainment, groceries, transportation, etc.

To calculate your DTI, combine your required monthly payments such as:

  •  Monthly rent or mortgage payment
  •  Student loan payment
  •  Minimum credit card payment
  •  Monthly car payment
  •  Any court-ordered payments (child support, back taxes, etc.)

Related: Boost your credit score in less than 60 days

Example: Calculating Your Debt-to-Income Ratio with Student Loans

For example, if your gross monthly income is $6,000, 43% would be $2,580. This is the maximum amount a lender would approve for a monthly mortgage payment for a conventional loan.

Next, it’s time to subtract your monthly debt repayments. For example:

  • Monthly car payment = $200
  • Credit card payment = $135
  • Student loan payment = $250

In this scenario, your monthly debt repayment would be $585. From the lender’s perspective, this means you have $1,995 available to make a monthly mortgage payment ($2,580 – $585 = $1,995.)

Note that your new monthly payment will need to cover your mortgage payment, homeowner’s insurance, property taxes, and mortgage insurance if required.

There are several loan options and custom mortgages available. Many home loans for first-time homebuyers offer home loans with 0-5% down. FHA loans only require a 3.5% down payment. Conventional 97 requires only a 3% down payment.

How Different Student Loan Repayment Programs Affect Your Mortgage Application

Finally, restructuring your student loans can help lower your debt-to-income ratio and be a better option than paying off your student loans.

Why? To apply for a mortgage, you’ll want to have a down payment ready as well as emergency funds. So you don’t want to deplete your savings to pay off your student loans.

If your monthly student loan payment is high, you might consider restructuring your student loan debt to lower your monthly payment. This will help lower your DTI.

Contact your student loan program and ask about the following options:

  •  standard repayment plan
  •  deferred student loan
  •  income-driven payment plan
  •  graduated payment plan

Don’t Let Student Loans Keep You From Buying a House

Buying your first home might be closer than you think, even while you’re paying off student loans. And several loan programs can work to your advantage, especially for first-time homebuyers.

Plan for your down payment, find out your credit score and calculate your debt-to-income ratio. Once you have a clear financial picture, you can consider restructuring your student debt to lower your DTI ratio.

Taking Action

Working with a local mortgage advisor can help you compare your best mortgage options, lock in the lowest mortgage rate, and secure the best home loan that fits your life goals. Even with student debt. Connect with a local mortgage advisor to discuss your options and save money on your mortgage. We’d love to help.

Can a Co-Signer Help Me Get a Better Mortgage?

August 31, 2022
mortgage blog, cosigner, preferred rate

Mortgage rate increases have begun slowing down but there’s no getting around the fact that 3% mortgage rates are well in the rearview mirror. Higher mortgage rates turn into higher mortgage payments and for a lot of homebuyers, this means they can no longer afford houses with a higher price tag. Especially for first-time homebuyers who have been saving diligently over the past few years, watching mortgage rates rise can be discouraging. Asking a family member or friend to be a co-signer on a mortgage application could help you qualify for a better home loan.

If you’re ready to buy a home but the mortgage rates are pushing up faster than your savings account, a co-signer might be worth considering. A co-signer can help you meet some of the requirements for a home loan and may help you qualify faster. That said, having a co-signer on your mortgage isn’t always the best choice and there are a few restrictions to keep in mind.

This article can help.

When is a co-signer a good idea for a mortgage?

In general, most homebuyers benefit from a co-signer when they need a boost with their income, employment history, or credit score.

A good fit for a co-signer will be a person with a high credit score, steady income, stable employment history, and solid credit history. If you’re falling short in any of these four areas, then adding a co-signer to your mortgage application could help you get approved faster and secure better terms on your home loan.

In many cases, adding a co-signer to a mortgage application can help push your mortgage approval across the finish line, but it’s not a guarantee.

For example, if a mortgage applicant doesn’t have the means to pay back the mortgage or if the lender considers the homebuyer a high risk, adding a cosigner typically won’t sway the lender’s decision.

Connect with a local mortgage advisor to talk through your specific situation. You might be closer than you think to a great mortgage and the keys to your dream home.

Related: How to boost your credit score in 60 days

TOP 3 BENEFITS TO HAVING A CO-SIGNER ON A MORTGAGE

1. A co-signer can help you meet the credit score requirements.

In general, a cosigner will not be able to override negative marks in your credit history, such as bankruptcy or loan defaults. But a cosigner with a strong credit history can give your credit profile a bit of a bump if you land in the medium range. The typical mortgage lender will look at your mortgage application in its entirety to determine risk and decide if you’ll be able to pay back the loan as agreed.

If your credit score is in the midrange and you have a cosigner with a strong credit history, this reduces risk in the eyes of the mortgage lender. More importantly, it increases your chance to secure a great mortgage.

2. A co-signer can provide support to help you meet employment criteria.

If you have good employment but a short employment history, a cosigner with stable long-term employment can help you qualify for a preferred mortgage. In many cases, borrowers just beginning their career or starting a new career path might have a good employment profile, but it isn’t steady enough for the best mortgage. A co-signer can help boost your profile in this area.

Related: How to Qualify for a Mortgage if You’re Self-Employed

3. A co-signer may help you qualify for a larger home loan.

To qualify for a mortgage with a co-signer, the mortgage lender considers both incomes. For this reason, you might be able to qualify for a bigger home (and a better loan) by having a co-signer on your mortgage application. The co-signer will be responsible if the borrower defaults, so verifiable income for both parties is an important factor. That said, an individual borrower will only qualify if they have the independent resources to pay back the loan as agreed. Ultimately, the mortgage lender will decide the level of risk and whether or not they approve the mortgage application.

Who can qualify as a co-signer on a mortgage application?

To be eligible as a co-signer, the individual must be a family member close to the borrower. Family members such as parents, siblings, grandparents, aunts and uncles all qualify by definition. Family-type relationships are also eligible for a cosigner on a mortgage. For example, friends in this category would be someone you’ve had a close, long-term relationship with for most of your life, or someone you’ve lived with for an extended period of time.  

This requirement is in place to protect the borrower from having a cosigner who has divided interests. For instance, a real estate agent or a builder might want to be a cosigner since they would directly benefit if your mortgage application is approved. For this reason, non-family members are not eligible to cosign a mortgage.

Related: Buying a House With a Friend or Relative–Everything You Need to Know

3 THINGS A CO-SIGNER ON A MORTGAGE APPLICATION CAN’T DO 

A co-signer cannot make the minimum down payment on your behalf.

The homebuyer must meet the minimum requirements for making the down payment, typically 5% for most home loans. Fannie Mae sets this guideline, which requires that the home must be the borrower’s primary residence, and the loan-to-value ratio cannot exceed 95%. The cosigner can increase the down payment, but the resident borrower must provide the minimum down payment required.

A co-signer cannot improve your debt-to-income (DTI) ratio.

The homebuyer must meet the minimum requirements set by the lender for the DTI ratio. In most cases, mortgage lenders allow borrower’s a maximum DTI of 43%. This is your debt-to-income ratio. DTI is calculated by combining all recurring debt payments such as credit cards, car loans, and student loans and measuring the total debt against your income.

Therefore, even if your cosigner has ample assets and minimal debt, the main borrower must meet the loan requirement with a DTI ratio of less than 43%.

A co-signer cannot override or erase your credit history.

While a co-signer’s credit history can help boost your mortgage application, it cannot override substantial credit implications such as bankruptcy, foreclosure, or a credit score below 580. If you have a credit score in the mid-range, check out our recent post on how to boost your credit score in 60 days.

Are there risks to having a co-signer on a mortgage?

Deciding to ask a family member to cosign on a mortgage is a serious decision. For the most part, the co-signer takes on more risk than the designated borrower. This is because the cosigner will be legally responsible for the mortgage, along with the borrower, until the mortgage is paid off.

For this reason, the borrower should make every attempt to remove the cosigner from the mortgage as soon as reasonably possible. The best option is to refinance the mortgage as soon as the homeowner can qualify for their own mortgage.

In addition, the mortgage will be reflected on the cosigner’s credit report. As such, it will affect their buying power for future opportunities. Finally, late payments will be reflected on the credit reports for both the borrower and the cosigner as well. Download a free copy of your credit report here.

An important note–if the borrower defaults on the mortgage, the cosigner will be legally responsible for paying the loan obligations in full. If the cosigner isn’t on the title of the property (which is often the case), they will have to meet the financial obligation with their own assets.

Taking Action

One of the best first steps you can take is to start your mortgage application. Once you’ve started the process, talk with your mortgage advisor about adding a co-signer. Adding a co-signer to a mortgage application can be a difficult decision but it may help you qualify for a better mortgage. We can guide you through the process and help you determine if a co-signer on your mortgage will help you qualify for a preferred home loan. Either way, discussing your options can give you a jump start on your mortgage goals. Connect with a local mortgage advisor to get started. We’d love to help.

Should You Have a Co-Signer on a Mortgage?

October 12, 2021
blog signature, mortgage blog, preferred rate

Adding a co-signer on a mortgage application could help you qualify for a better home loan. Mortgage rates are still low and no one knows how long it will last. If you’re ready to buy a home but in a tough financial position, you may have considered applying for a mortgage with a co-signer. A co-signer can help you meet some of the requirements for a home loan, but not all of them.

When is a co-signer a good idea for a mortgage?

In general, most homebuyers benefit from a co-signer when they need a boost with their income, employment history, or credit score. A good fit for a co-signer will be a person with a high credit score, steady income, stable employment history, and solid credit history. If you’re falling short in any of these four areas, then adding a co-signer to a mortgage application could help you get approved and secure better loan terms.

In many cases, adding a co-signer to a mortgage can help push your mortgage application across the finish line, but it won’t make up for everything. For example, if a mortgage applicant doesn’t have the means to pay back the mortgage or is considered too high risk by the lender, adding a cosigner typically won’t sway the lender’s decision.

Related: How to boost your credit score in 60 days

TOP BENEFITS TO HAVING A CO-SIGNER ON A MORTGAGE

1. Provide flexibility with credit score requirements

In general, a cosigner will not be able to override negative marks in your credit history, such as bankruptcy or loan defaults. But a cosigner with a strong credit history can give your credit profile a bit of a bump if you land in the medium range. The mortgage lender is looking at the mortgage application in its entirety to determine risk and decide if you’ll be able to pay back the loan as agreed. If your credit score is in the midrange and you have a cosigner with a strong credit history, this reduces risk in the eyes of the mortgage lender.

2. Provide backup with employment requirements

If you have good employment but a short employment history, a cosigner with stable long-term employment can help you qualify for a preferred mortgage. In many cases, borrowers just beginning their career or starting a new career path might have a good employment profile, but it isn’t steady enough for the best mortgage. A co-signer can help boost your profile in this area.

Related: How to Qualify for a Mortgage if You’re Self-Employed

3. Opportunity for a larger home loan

To qualify for a mortgage with a co-signer, the mortgage lender considers both incomes. For this reason, you might be able to qualify for a bigger home (and a better loan) by having a co-signer on your mortgage application. The co-signer will be responsible if the borrower defaults, so verifiable income for both parties is an important factor. That said, a borrower will only qualify if they have the resources to pay back the loan as agreed. Ultimately, the mortgage lender will decide the level of risk and whether or not they approve the mortgage application.

Who can qualify as a co-signer on a mortgage application?

To be eligible as a co-signer, the individual must be a family member close to the borrower. Family members such as parents, siblings, grandparents, aunts and uncles all qualify by definition. Family-type relationships are also eligible for a cosigner on a mortgage. For example, friends in this category would be someone you’ve had a close, long-term relationship with for most of your life, or someone you’ve lived with for an extended time.  

This requirement is in place to protect the borrower from having a cosigner who has divided interests. For instance, a real estate agent or a builder might want to be a cosigner since they would directly benefit if your mortgage application is approved. For this reason, non-family members are not eligible to cosign a mortgage.

Related: Buying a House With a Friend or Relative–Everything You Need to Know

3 THINGS A CO-SIGNER ON A MORTGAGE CAN’T DO 

A co-signer cannot make the required down payment.

The homebuyer must meet the minimum requirements for making the down payment, typically 5% for most home loans. Fannie Mae sets this guideline, which requires that the home must be the borrower’s primary residence, and the loan-to-value ratio cannot exceed 95%. The cosigner can increase the down payment, but the resident borrower must provide the minimum down payment required.

A co-signer cannot change your DTI (debt-to-income) ratio.

The homebuyer must meet the minimum requirements set by the lender for the DTI ratio. In most cases, mortgage lenders allow borrower’s a maximum DTI of 43%. This is your debt-to-income ratio. DTI is calculated by combining all recurring debt payments such as credit cards, car loans, student loans and measuring against your income. Therefore, even if your cosigner has ample assets and low debt, the residential borrower must meet the loan requirement with a DTI ratio less than 43%.

A co-signer cannot override your credit history.

While a co-signer’s credit history can help boost your mortgage application, it cannot override substantial credit implications such as bankruptcy, foreclosure, or a credit score below 580. If you have a credit score in the mid-range, check out our recent post on how to boost your credit score in 60 days.

What are the risks to having a co-signer on a mortgage?

Deciding to ask a family member to cosign on a mortgage is a serious decision. The cosigner will be legally responsible for the mortgage, along with the borrower, until the mortgage is paid off. For this reason, the borrower should make every attempt to remove the cosigner from the mortgage as soon as reasonable. The best option is to refinance the mortgage as soon as they can qualify.

In addition, the mortgage will be reflected on the cosigner’s credit report. As such, it will affect their buying power for future opportunities. Finally, late payments will be reflected on the credit reports for both the borrower and the cosigner as well. Download a free copy of your credit report here.

An important note–if the borrower defaults on the mortgage, the cosigner will be legally responsible for paying the loan obligations in full. If the cosigner isn’t on the title of the property (which is often the case), they will have to meet the financial obligation with their own assets.

Next Steps

Adding a co-signer to a mortgage application can be a difficult decision. We can guide you through the process and help you determine if a co-signer on your mortgage will help you qualify for home loan. Either way, discussing your options can give you a jump start on your mortgage goals. Connect with a local mortgage advisor to get started. We’d love to help.

How to Buy a Duplex with FHA Financing

November 9, 2021
mortgage blog, buy a duplex, preferred rate

Deciding to buy a duplex or multi-family property can put you on a path toward financial freedom. Whether you’re a first-time homebuyer or you already own property, buying a multi-family property can generate passive income, extra cash flow, and build home equity. You can buy a duplex with FHA financing or conventional financing. Each option comes with a different set of requirements and benefits.

In short, a duplex is a residential property with two units. A multi-family property is a residential property with up to four units. To get approved with FHA financing, you’ll need to be the owner-occupant in one of the units. This holds true for duplexes, triplexes, and multi-family properties up to four units.

Note: If you’re looking to buy a multi-family property with five units or more, it’s considered commercial property. Getting financing for commercial property is a different process with a number of requirements.

Connect with a mortgage advisor if you’re ready to take action and discuss the advantages.

Top 3 Mortgage Options to Buy a Duplex or Multi-Family Property

FHA Loans

FHA loans are government-backed home loans. To get approved when you buy a duplex, you’ll need to live in one of the units. By living in one of the units, the property is considered your primary residence, and you can also use rental income to help you qualify. FHA financing is often the best choice for first-time homebuyers and buyers who want a small down payment. FHA loans have fewer requirements, lower closing costs and down payments as small as 3.5%.

Conventional Home Loans

Conventional loans are the best option if you have excellent credit and plan to make a large down payment. Getting approved for a conventional mortgage offers more flexibility since they’re offered through private lenders (mortgage lenders, credit unions, and banks). You can buy a duplex or multi-unit property with a conventional mortgage. In general, a conventional mortgage may be the best option if you have strong credit and plan to make a large down payment.

VA Loans

If you qualify, VA loans offer several advantages — no minimum credit score, no down payment requirement, and no private mortgage insurance (PMI). To be eligible for a VA loan with 100% financing when you buy a duplex, you must be one of the following:

  • An active-duty service member
  • Military veteran
  • Surviving spouse of qualifying service members
  • Eligible members of the National Guard and Reserves

Do I need to occupy the property if I buy a duplex or multi-family property?

When you apply for a mortgage, you’ll need to declare the property type: principal residence, a second home, or investment property. So when you buy a duplex as an investment property, declaring it as your principal residence will give you the best mortgage options and the lowest mortgage rates.

You can declare yourself the owner-occupant by living in one of the units then get the benefits of a principal residence mortgage.

If you decide on a conventional mortgage, you don’t need to live at the property. However, it’s a requirement to live in one of the units if you want FHA financing. What’s more, there are a number of discounts, low down-payment options, and other advantages when you declare your property as a primary residence, which we blogged about here.

RELATED: How to declare your property as a primary residence (and why it matters)

Can I use the FHA 203K loan to buy a duplex that needs work?

With the FHA 203k loan, you can buy a duplex that needs a lot of work and make the repairs manageable with one mortgage. The 203k combines the price of the property with all renovation costs and finances the total with one mortgage. With an FHA 203k, the mortgage includes the purchase price plus all the renovations, so you’re able to spread the renovation cost over the life of the loan. One mortgage, one monthly payment. There are great benefits and a few restrictions, which we blogged about here. 

RELATED: When is it smart to use a home equity loan or home equity line of credit for home renovations?

What credit score do I need to buy a duplex?

Buying a duplex or fourplex as an investment property can be a lot less stressful when you know what to expect. Mortgage lenders look at your credit report and your debt-to-income ratio to evaluate risk, which affects the terms of your loan offer. 

Conventional mortgages typically require a credit score above 700, though mortgage lenders have flexibility. FHA financing requires a credit score above 580. Find out your credit score by downloading your free credit report. You can fix any errors, dispute negative marks, and take action to boost your credit score in less than 60 days, which we blogged about here.

A good credit score will help you secure the lowest mortgage rate. What’s more, there are specialty loan programs available for homebuyers who want to buy a duplex or multi-unit property.

Talk to a mortgage advisor (for free) to discuss options that can save you money.

Take Action

If you’re ready to buy a duplex or multi-family property, we can guide you through the process and help secure the best financing. There are several loan options and different advantages available depending on your homeownership goals. Connect with a local mortgage advisor to get started. We’d love to help.

Finance a Fixer-Upper with the FHA 203(k) Home Loan

September 9, 2021
Finance a Fixer-Upper with the FHA 203(k) Loan

The FHA 203k home loan is a smart move if you’re looking to buy a fixer-upper. The housing market is still strong in many areas, bidding wars are slowing down and foreclosures are starting to pop up. Fixer-uppers offer a financial opportunity to buy a home priced below market in a great location.

With the FHA 203k loan, you can buy a home that needs a fair amount of work and make the repairs affordable with one mortgage. The 203k combines the price of the home with all renovation costs and finances everything with one mortgage. Since the home loan covers the purchase price plus all the renovations, you’re able to spread the cost of repairs over the life of the loan with one affordable mortgage payment. 

What’s more, all the repairs and renovations must be approved in advance for a 203k loan so that you won’t end up in a money pit with endless repairs. There are a few restrictions along with great benefits, which we cover in this post. 

RELATED: When is it smart to use a home equity loan or home equity line of credit for home renovations?

Is the FHA 203k loan a good idea? Here’s how it works.

The FHA 203k home loan is a government-backed mortgage that’s insured by the Federal Housing Administration. It’s created to help homeowners buy and remodel a home that needs work. It has a few common names: FHA 203(k) Home Loan, Section 203(k) Home Loan, Mortgage Rehab Loan, 203k Loan Program. 

The FHA 203k loan combines the purchase price of your home with the total cost of repairs into one mortgage, including labor and materials.

That said, there are rules and regulations you have to follow to get approved for a 203k mortgage. For example:

  • The property must be your primary residence*
  • Renovation costs must be greater than $5k
  • You must work with a HUD consultant
  • All repairs must be completed by a licensed contractor
  • FHA 203k loan requires mortgage insurance
  • An FHA appraiser approves final estimates

*If your residence isn’t safe to live in during construction, the FHA 203k loan will cover your mortgage payments. Also, the 203k loan isn’t available for investment properties or homes priced above current conforming limits ($822,275 in high-cost areas, $510,400 in lower-cost areas). 

What is covered under FHA 203k?

Homebuyers can use a standard FHA 203(k) mortgage to do almost any type of renovation except for luxury amenities (e.g., a swimming pool or backyard kitchen). Also, all updates and repairs must be considered “permanent” for the home. A few popular renovations that are covered:

  • Upgrades to remove health and safety hazards
  • Improve accessibility for a disabled person
  • Update plumbing and sewer systems
  • Structural changes such as adding bedrooms
  • Remodel bathrooms and kitchens
  • Install or replace flooring, windows, roofing
  • Major landscaping projects

It’s a good idea to meet with contractors early to make sure your project can get started as soon as the loan closes. Make sure to find a contractor with experience working on projects financed with an FHA 203k loan. 

All renovations financed with a 203k loan must be finished within six months.

RELATED: The Fannie Mae Homestyle Renovation Loan for Fixer-Uppers

How much do you have to put down on a 203k loan?

The minimum down payment is 3.5% for applicants with a credit score above 580. For homebuyers with a credit score between 500-580, the typical down payment required is 10%. Gifted funds are allowed from friends and family, and there are also down payment assistant programs that might be available. Connect with a mortgage advisor to decide which mortgage program will save you the most money.

If your credit score is wavering, learn how to improve your credit score in less than 60 days which we blogged about here.

Can I use a 203k loan to flip a house?

To qualify for a 203k loan, the property must be your primary residence. So, if you’re planning to flip a house quickly while living in a different property as your primary residence, then the FHA 203k home loan won’t be a good fit.

The upside is that all repairs and renovations must be completed within 6 months for an FHA 203k loan. When all is said and done, there’s nothing keeping you from selling the house once the repairs are complete.

If you’re buying a fixer-upper as an investment property, connect with a mortgage advisor to discuss home renovation options. You could also apply for a home equity loan or a home equity line credit to finance your remodel, which we blogged about here.

How to qualify for an FHA 203k (and why you need an FHA-approved mortgage lender)

Working with the right mortgage lender is essential when it comes to the 203k loan. For one, the Federal Housing Administration (FHA) will only approve 203k home loans from an FHA-approved mortgage lender. Second, financing a fixer-upper with an FHA 203k loan is different from other types of home loans. There is a fair amount of paperwork required to meet application requirements. You’ll need to work with approved contractors and verify all estimates for repairs and materials. In addition, you will often work with a HUD consultant. 

Talk to your mortgage advisor about home renovation loans to find out which loan is the best fit. Buying a fixer-upper in 2021 can put you on the fast track to financial freedom, and getting approved for an FHA 203k loan might be the best next step.

Once your 203k loan is approved, you can rest assured you’ve got the financing you need to finish the work on your new home. It’s a helpful safety net, especially if this is your first fixer-upper.

RELATED: How to find the best mortgage lender in your area

Summary

Buying a fixer-upper can be a smart financial decision. In general, the FHA 203k loan is a good fit for a property that needs a substantial amount of work and is priced within FHA conforming limits. The property must be your primary residence and all work must be approved by the FHA. Requirements are set by the FHA, such as limits on how much you can borrow and how you can spend the money.

The main benefit is that all the construction work and repairs are estimated at the onset and rolled into one mortgage. You’ll be protected from over-extending yourself or falling into a money pit after you buy the property.

Quick reminders: Properties that need less than $5k in repairs won’t qualify for a 203k loan. Also, the FHA 203k loan has a limit on how much you can borrow, so it’s not a good fit for luxury renovations.

Take Action

There is a lot of paperwork and requirements to get approved for an FHA 203k loan, so it’s better to be prepared before you make an offer. If you’re considering buying a home that needs work, we can help you decide what type of mortgage is best for your renovation. Connect with a local mortgage advisor to get started. We’d love to help.

Now Use Rental History to Get Approved for a Mortgage

August 16, 2021
blog family on grass

We’ve got good news for qualified renters who are ready to buy a home. Fannie Mae recently announced a new mortgage lending rule that will make it easier for homebuyers to get a mortgage even without a long credit history. This new update expects to produce greater eligibility and higher approval rates for homebuyers with good rent payment history.

Why the Breakthrough Rule is Helping Homebuyers

Applying for a mortgage can feel like a huge undertaking. You’ve got to save for a down payment, organize all your financial documentation, verify income and employment status, and decide how much you can afford. Then there’s your credit report. If you have a high credit score, this is just a simple task to cross off the list.

But what if you don’t have an established credit history? What if you pay your bills on time and save every month, but you don’t have credit cards or car loans? It’s almost like you get penalized for living debt-free and managing your money well.

This new rule is shifting the tide. Higher approval rates are in store for homebuyers with good rental history.

RELATED: Find out if you’re eligible for additional first-time homebuyer advantages

How to Use Rent Payment History to Get Approved for a Mortgage

Just say yes! The new change will allow mortgage lenders to automatically integrate rent payment history to establish creditworthiness. Fannie Mae has updated the underwriting system to automatically pull rent payment history from your bank account. Your mortgage lender only needs one thing: your approval.

Why is this valuable?

Mortgage lenders look to credit history to assess risk. When a homebuyer has a high credit score and a solid credit history, they might qualify for a better mortgage. On the other hand, mortgage applicants with thin credit or short credit history are typically considered higher risk.

With the new rule in place, mortgage lenders can automatically include rent payments during the underwriting process. The updated software integrates with banks and credit unions to automatically recognize rent payments and populate your mortgage application with your rent payment history.

Based on Fannie Mae research which sampled mortgage applicants who were declined, “17% could have received an Approve/Eligible recommendation if their rental payment history had been considered.“

How will homebuyers benefit from the new Fannie Mae initiative?

Renters with “thin” credit and a consistent rent payment history will benefit the most. “Thin” credit typically refers to a homebuyer who doesn’t have much credit history to assess. So while there might not be any negative marks on their credit, there also isn’t much payment history to pull from.

For example, perhaps you don’t have any credit cards and never had a car loan. Or maybe you have student loans or credit cards, but the accounts haven’t been open for very long. In these situations, a rent payment history that shows consistent on-time payments could help you get approved for a better mortgage.

Before this new approach, mortgage lenders would ask landlords to verify rent payment history. The process was tedious and not always accurate.

Now, mortgage lenders can automatically integrate rent history into mortgage applications to help homebuyers establish creditworthiness.

What’s more, the new update will only affect positive change for eligibility. According to the press release, “the new update is a positive change for eligibility – only consistent rent payments will be considered to improve eligibility. For qualified renters who may have limited credit history but a strong rent payment history, [it] creates new opportunities for homeownership. Any records of missed or inconsistent rent payments identified in the bank statement data will not negatively affect the applicant’s ability to qualify for a loan sold to Fannie Mae.“

Side note, if you’re still paying off student loan debt, check out this recent post. You’ll find strategic tips to help you qualify for a mortgage.

How do I apply for a mortgage using rent payment history?

  1. Find out how much you can afford using this free mortgage calculator.
  2. Connect with a local mortgage advisor.
  3. Tell them you’d like to automatically include your rent payment history.
  4. Discuss your home loan options.
  5. Get your best mortgage!

A qualified mortgage advisor will help you build a credit profile to your advantage using your rent payment history. Once you start your application and access your rental history, your mortgage advisor can secure the best mortgage possible at the lowest rate.

What if I have a low credit score or bad credit? 

Rent history that shows on-time payments will help, but your credit report will have a bigger impact on a mortgage lender’s final decision. In this case, it’s better to work on raising your credit score quickly. Check out this short read with actions you can take to boost your credit score in less than 60 days, which we blogged about here.

Another option is to consider buying a home with a family member or good friend, which we blogged about here.

Summary

Fannie Mae recently announced a new rule which makes it easier for renters to become homeowners. Mortgage lenders can now automatically include rent payment history to help establish creditworthiness.

So if your credit report is thin or not well-established, but you have a long history of on-time rent payments, this can help you get approved for a preferred mortgage.

Take action now to apply for a home loan and get approved while mortgage rates are low.

Next Steps

When you’re ready to apply for a home loan, an experienced mortgage advisor can help you put together a solid credit profile and help you get approved. We offer homebuyers preferred rates, custom loan options, government-backed mortgages, conventional loans, and more. Connect with a local mortgage advisor to discuss your options and get approved. We’d love to help.

Jumbo Loans and New Conforming Limits for 2022


December 14, 2021
mortgage blog, jumbo loan, conforming limits 2022, preferred rate

The Federal Housing Finance Agency recently announced the new conforming loan limits for 2022, which will increase the amount you can borrow without needing to apply for a jumbo loan.

For a single-family home in most of the U.S., the new conforming loan limit has increased to $647,200 and up to $970,800 in areas with a substantially higher cost of living — such as Hawaii, Alaska, Washington D.C. and many high-cost counties throughout California.

Visit the FHFA site here to see the loan limits in every U.S. county.

If you’re looking to purchase a home that goes above conforming limits in your area, consider applying for a jumbo loan. Jumbo loans have stricter criteria to qualify, but a jumbo loan can provide extreme flexibility and make your dream home a reality.

Jumbo loans are available for single-family homes, multi-unit properties, vacation homes, and investment properties. Qualified borrowers will have a low debt-to-income ratio, verified income, a 20% down payment and high credit score.

Jumbo Loans, Conforming Loans, and the FHFA

A conforming loan is often referred to as a “regular mortgage.” Conforming loans fall in a broad category of home loans that meet the mortgage limits set by the FHFA (Federal Housing Finance Agency). Each year, the FHFA adjusts these limits based on a number of economic factors in order to regulate the secondary mortgage market and keep lending practices competitive and efficient.

In short, conforming limits determine the maximum amount homeowners can borrow to purchase a home with a government-backed loan. For example, FHA loans, VA loans, USDA loans are all government-backed home loans.

Related: How to buy a duplex with FHA-financing

When you want to purchase a home above conforming limits, you can apply for a jumbo loan. Jumbo loans aren’t guaranteed by Fannie Mae or Freddie Mac and therefore are considered riskier for lenders. But mortgage lenders are ready and eager to approve jumbo loans for qualified borrowers.

Jumbo loans are also more flexible. Since the FHFA doesn’t limit jumbo loans, mortgage lenders can decide how much risk they’re willing to take with each borrower. So if you have strong credentials, such as a high credit score and a low debt-to-income ratio along with a 20% down payment, you’ll be a good candidate for a jumbo loan.

Related: How to Get A Fast Mortgage Pre-Approval

How to Qualify for a Jumbo Loan in 2022

The criteria are more strict for jumbo loans since the loans are larger. Also, since jumbo loans are government-backed, mortgage lenders assume more risk. As a result, jumbo loans typically have slightly higher mortgage rates and stricter requirements.

High Credit Score

To qualify for a jumbo loan, most borrowers will need a credit score above 700. The higher your score, the better home loan you’ll get. A high credit score will give you the best rate, better loan terms, and the lowest mortgage rate.

Related: How to boost your credit score in less than 60 days

Low Debt-to-Income Ratio

Your debt-to-income ratio is one of the biggest factors that mortgage lenders consider. A low DTI shows the lender that you have the cash flow necessary to afford a big mortgage payment. Also, with a low DTI, the lender can see that you’re not overextended when it comes to debt or other financial obligations.

High Cash Reserves

Jumbo loans typically require at least a 20% down payment. Giving evidence of high cash reserves shows the lender that you won’t be house poor once your mortgage gets approved. In some cases, mortgage lenders want to see that a homebuyer has at least one year’s worth of mortgage payments in cash assets.

Bigger Down Payment

Jumbo loans often require 20-30% down for the best home loan. Some lenders will approve a jumbo loan with only 10% down. In contrast, government-backed conforming home loans such as FHA loans only require 3.5% down, and conventional loans only require 3%.

Formal Home Appraisal

Mortgage lenders will sometimes require a second home appraisal. Home appraisals verify the current market value of the home. Since your home will be the collateral for your mortgage, lenders often want to secure a firm confirmation that the home in question is valued correctly.

Related: What to Expect with Your Next Home Appraisal

What documentation will I need to apply for a jumbo loan?

Applying for a jumbo loan is similar to most home loan applications. Notably, jumbo loans have stricter qualifying requirements. For this reason, make sure you have all the required documentation and that your financial and employment information is verifiable.

Mortgage lenders typically require the following documentation to apply for a jumbo loan:

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • RSU, ESPP shares, or other stock options
  • Tax returns for the past two years 
  • Recent bank statements
  • Investment account statements
  • Down payment source
  • Current credit report

If you’re self-employed, ask your mortgage advisor about additional information that might be required.

RELATED: How to apply for a jumbo mortgage if you’re self-employed

Next Steps

When you’re ready to apply for a jumbo loan, an experienced mortgage advisor can help you get approved, lock in the lowest mortgage rate, and secure the right home loan. Connect with a mortgage advisor to discuss your options and make a plan that can help you save money on your mortgage. We’d love to help.