Tuesday, December 9, 2014

Why Your Mortgage Didn't Close

How hard is it to get your mortgage loan to close?

Here is a list of income killers that can give you trouble if you were counting on that mortgage to close:

1)     Borrower works in a position where layoff is common, currently laid off.  Are there exceptions? “Yes.” However the details vary, talk with your mortgage professional.
2)     Child support with less than 3 years remaining.  This gets complicated with the typical clause “or through college or age 22 whichever comes first.”  General first rule, a child 15 years old or older is not going to have child support counted.
3)     Child support with no court order.  Possible to make it work, however it’s rare.
4)     Overtime is declining year-over-year.  Sometimes a 5 year average can solve the problem.  However, if a VOE (Verification of Employment) shows overtime being phased out, it’s not going to be counted without some written reason coming from the employer.
5)     Second job or income stream has less than 2 years of history being received by the borrower.  This gets complicated as the first definition of a “year” is two tax returns filed.  Assuming income is not declining, can be done with one income tax return in some cases.
6)     Self-employed less than 2 years.  Can be overcome in some situations, call your mortgage lender with particulars.
7)     Rent income from a primary home being turned into a rental with little equity and/or no landlord experience.
8)     Income is not taxable income.  First thought is under-the-table income, which is correct.  However, there are other income streams such stipends, educational grants, GI bill, which are generally not usable income.
9)     Parents making monthly “expense” payment to child for child’s expenses.  While very nice to have, not an income stream.
10)  Veteran will shortly be exiting the VA with no reenlistment or civilian job known.
11)  Expense reimbursement even when it’s given every month and may not have any expenses against it.  This can be overcome if there is an applicable expense.  i.e. $500 is given each month and a personal car payment is made with that $500 check.  There are specifics that need to be in place, be careful on this one.
12)  Some section 8 money.  This has been modified over the years.  Some section 8 money disappears when the applicant purchases a home.
13)  Housing allowance is a tough one.  If for student purposes, generally not allowed.  VA housing allowance and ministerial parsonage allowance generally is.  Here’s a catch on the parsonage allowance, it’s not generally taxable income – shows on a tax return as 1099 MISC or other ways based on Section 107 or 517 IRC; must have church board resolution and proof of payment.
14)  Money from loans.  While Bill Gates and Warren Buffet can get their income/cash flow this way, they aren’t applying for a mortgage.
15)  Commission income with less than 2 years history.
16)  Commission income from a change of job with less than 2 years history.  This one varies by the person.  Someone who was a commission only Toms vending machine driver will probably be fine as a Sara Lee commission only driver.  That same driver who goes into insurance sales on a commission only basis… maybe.
17)  Unsecured loans that you are the beneficiary of the payment with less than 12 months history and/or no contract.   One other note on this, the contract or note should be something that is standard and enforceable and/or properly document with a recording, UCC filing or as needed to perfect the contract or assure it is enforceable.
18)  Contract income that you cannot prove payments received or is seldom made such as a single payment annually with less than two years payments made and filed on tax return.  There are variations on this one, call your mortgage professional with the details.
19)  Tips not showing on the tax return and/or with less than a 2 year history.
20)  Seasonal income with less than two years history and/or not filed on tax return.  Christmas tree sales, fireworks stands, Alaska commercial fisherman, car sales without a dealer’s license are some examples.
21)  Annuity income that has less than 3 years remaining.
22)  Trust fund income that has less than 3 years remaining.
23)  One-time bonus or less than two year history of bonus.  Still works for savings, just not income.
24)  Marijuana sales from a state where it is not legal and/or borrower does not have a proper license.  Saved this for last to make everyone smile, this is for real.  Let’s assume they also did not file on their tax returns, a police report does not count.

Happy Investing!

Today's blog courtesy of Mark Palmer, Mark Palmer Group/ Guild Mortgage

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