Mortgage Rates Newsletter - Market Analysis

Provided courtesy of: http://www.mortgagenewsdaily.com/reports/mortgage_rates/archive

Mortgage Rates Maintain Recent Lows
Mon, 19 Nov 2018 23:06:12 GMT - Mortgage rates unexpectedly dropped to their lowest levels in more than a month as of last Friday. That assertion is at odds with quite a few media reports that cited Freddie Mac's weekly survey data saying that rates were essentially unchanged from the previous week. This occurred because Freddie's survey only captures the first few days of any given week and most of last week's improvement took place on Thursday and Friday. As such, this week's Freddie surveys should reflect that nice drop in rates. How nice is "nice?" In absolute terms, we're talking about something slightly less than an eighth of a percentage point in terms of a typical 30yr fixed rate from the average lender. That's actually a fairly quick move relative to the average pace of mortgage rate movement. In any event, it's
Mortgage Rates Lowest in a Month
Sat, 17 Nov 2018 00:23:41 GMT - Mortgage rates hit their lowest levels of THE month yesterday, and the lowest levels in A month today. It's a bit of a technicality, really. As of yesterday, there were a few days in mid-to-late October that saw lower rates. Today's drop means we'd need to go back to early October to see anything lower. What's the significance of being at the lowest levels in a month? None, really. It's just really fun to be able to say such things in an environment where such things haven't been easily said for quite some time! Perhaps more relevant and more tangible is the fact that we can say rates are nearly an eighth of a percentage point lower on the week, and that's a decent move regardless of the environment. Next week brings the Thanksgiving holiday, which tends to make mortgage lenders set rates more
Lowest Mortgage Rates This Month!
Thu, 15 Nov 2018 23:00:05 GMT - Mortgage rates hit their lowest levels of the month today! Sure, that's only 10 business days for the mortgage world, but we'll take every little victory we can get these days. Why is that? Because "these days" have been pretty rough. Exactly one week ago, rates were at their highest levels in nearly 8 years. The assertion about today's rates runs counter to quite a few news stories. Major media outlets are reporting rates as being 'unchanged' this week. That wasn't necessarily incorrect until today. In those cases, reporters are relying on Freddie Mac's weekly survey data. The survey only collects responses from Monday through Wednesday and the results tend to over-represent Monday and Tuesday's rates on any given week. Long story short, as of yesterday, it would have been fair to say rates
Afternoon Mortgage Rate Improvements For Most Lenders
Wed, 14 Nov 2018 21:57:08 GMT - Mortgage rates began the day in roughly unchanged territory. Some lenders were microscopically stronger or weaker compared to yesterday, but not enough to impact the average mortgage borrower. For the first few hours of the day, it looked as if rates would stay unchanged or possibly move slightly higher. That all changed when stocks began losing ground. It's always worth remembering (and this will be especially true when the next time it's proven) that there's no magic rule that says stock prices and interest rates must move in the same direction. It is true that there are frequent examples of such correlation, but there are plenty of other examples where the correlation complete breaks down. All that to say that stock losses helped rates today, but will not always necessarily help rates in
Token Improvement For Mortgage Rates
Tue, 13 Nov 2018 21:50:38 GMT - Mortgage rates improved by what could only be described as a token amount today. In other words, we're not talking about any major changes. In fact, mortgage rates themselves will be unchanged from Friday for almost any scenario. As is so often the case, we can only measure the change in terms of "effective rates" (which take upfront costs into consideration). In general, changes in mortgage rates are reserved for big market moves whereas upfront costs and effective rates allow for smaller changes in the overall cost of financing. The bond markets that underlie mortgage rates were closed yesterday for the Veterans Day holiday. In the meantime, the stock market lost ground rather abruptly . At times, bonds (rates) will take cues from stocks--especially when the latter is making a big move lower
Self Employed Borrowers

Self Employed Borrowers

Entrepreneurship should be rewarded, but when it comes to mortgages, it hasn't always paid to be self-employed. Although over 20% of Americans are self-employed, qualifying for a self-employed mortgage is more difficult because reducing your taxable income can make it difficult to qualify for the mortgage you deserve. If you are wondering how to improve your chances of qualifying for the mortgage, providing complete and current financial documents from the past two years is essential.

Self Employed? 5 Steps to Scoring a Mortgage

While getting a loan as a W-2 employee may be cheaper and easier than if you're self-employed, you don't have to go running back to your cubicle to qualify for a mortgage. Some lenders may be concerned that you won't earn a steady enough income to make your monthly payments, and others may simply not want to deal with the additional paperwork that can be involved in providing a mortgage to a self-employed person. But don't worry; if you're self-employed, there are mortgage products available as well as steps you can take to make yourself a more attractive loan candidate.

What to Expect

As someone who is self-employed, lenders may not see you as the ideal borrower. Expect to pay higher interest rates than the ones commonly advertised on mortgage websites; those rates are for prime borrowers, or borrowers who are considered to be particularly creditworthy because of their steady, verifiable incomes and excellent credit scores. Similarly, because you may be a less attractive candidate, you might have a reduced ability to shop around and negotiate a lower interest rate. You may also have to put more work into finding lenders who are willing to work with you in the first place.

Another problem you may encounter is that if you've used lots of business expenses to reduce your taxable income on your tax returns, lenders may wonder if you make enough money to afford a home. Finally, banks may want to see a lower loan-to-value ratio (LTV ratio), meaning that you'll need to come up with a larger down payment.

Mortgage Options

Due to the subprime mortgage crisis, it may become more difficult for the self-employed to obtain mortgages as banks shy away from riskier investments to protect their financial interests and their reputations.

However, some lenders may still be willing to give you one of the following types of loans.

  • Stated Income/Stated Asset Mortgage (SISA) 
    This type of mortgage is based on what you tell the bank your income is; the bank will not seek to verify this amount. Stated income loans are sometimes also called low-documentation loans; this is because while lenders will not verify how much you make; they may seek to verify the sources of your income. Be prepared to provide a list of your recent clients and any other sources of cash flow, such as income-producing investments. The bank may also want you to submit an IRS Form 4506 or 8821. Form 4506 is used to request a copy of your tax return directly from the IRS, thus preventing you from submitting falsified returns to the mortgage company, and costs $39 per return. But you may be able to request Form 4506-T for free. Form 8821 authorizes your lender to go to any IRS office and examine the forms you designate for the years you specify. This service is free.
  • No Documentation Loan 
    In this type of loan, the lender will not seek to verify any of your income information. This may be a good option if your tax returns show a business loss or a very low profit. Because it is riskier for the bank to lend money to someone with an unverified income, expect your mortgage interest rate to be higher with either of these types of loans than with a full-documentation loan. Low and no documentation loans are called Alt-A mortgages, and they fall between prime and subprime loans in terms of interest rates. For lenders, they are considered riskier than prime loans, but less risky than subprime loans.

While many self-employed individuals and couples may choose one of the above options due to the difficulty of sufficiently documenting their incomes, those who can prove their incomes and who are willing to submit the extra paperwork can still apply for full-documentation loans, which will have lower interest rates than their low- and no-doc cousins. While a traditional employee might simply need to provide copies of W-2s for the last two years, because self-employed individuals do not receive this document, they may need to provide information about their businesses, such as previous years' tax returns, a current business license, a signed statement from an accountant, profit and loss statements, and balance sheets.

Getting a joint mortgage with a co-borrower who is a W-2 employee, such as a significant other, spouse, or trusted friend, is another way to improve your prospects of getting approved for a mortgage if you are self-employed. This provides more assurance to your lender that there is a steady income to pay back the debt.

Finally, a parent or other relative might be willing to cosign your mortgage loan. Keep in mind that this person will need to be willing and able to assume full responsibility for the loan if you default.

Can You Really Afford It?

It can be easy to get into trouble with low- and no-documentation loans because it's easy to fudge the numbers. Realize that you, not the bank, know best about whether you can really afford the loan, and that you will be the one who truly suffers if you lose your home. Learn from the experiences of all the subprime borrowers who have gone into foreclosure and don't get in over your head.

Make Yourself an Attractive Candidate

If you know you can make the payments, you can do some of the following things to improve your chances of getting a loan.

  1. Max Out Your Credit Score
    In any type of borrowing situation, a higher credit score will make you a more attractive candidate to get the loan in the first place and to qualify for lower interest rates if you're approved.
  2. Offer a Large Down Payment 
    The higher your equity in the home, the less likely you are to walk away from it in times of financial strain. Therefore, the bank will see you as less of a risk if you put lots of cash into your purchase up front.
  3. Have Significant Cash Reserves
    In addition to a large down payment, having plenty of money in an emergency fund shows lenders that even if your business takes a nosedive, you'll be able to keep making your monthly payments.
  4. Pay Off All Your Consumer Debt
    The fewer monthly debt payments you have going into the mortgage process, the easier it will be for you to make your mortgage payments. If you pay off your credit cards and car loans, you may even qualify for a higher loan amount because you'll have more cash flow.
  5. Have an Established Track Record of Self-Employment
    If you can show that you know how to play the self-employment game and win, lenders will be more willing to take a chance on you. Some advice suggests that you should have at least two years of self-employment history; other advice, however, says that when interest rates are low, you should try to get a mortgage as soon as you're ready, even if you don't have a long history of successful self-employment.
  6. Be Willing to Provide Documentation
    Being willing to fully document your income through previous years' tax returns, profit and loss statements, balance sheets and the like will increase your chances of qualifying for a loan.

The Bottom Line

If a W-2 employee loses his or her job, the person's income will drop to zero in the blink of an eye in the absence of unemployment insurance benefits; those who are self-employed often have multiple clients and are unlikely to lose all of them at once, giving them more job security than is commonly perceived. Of course, if you're self-employed, you're already used to having to work extra hard to file additional tax forms, secure business licenses, get new clients and keep your business running. Don't let anyone tell you that you'll never get a mortgage if you're self-employed, or that you shouldn't quit your day job to pursue your dream of running your own business until you've already purchased a home. Armed with a little knowledge and patience, you'll be able to have your own home and work in it, too.

I Want a Better Mortgage has the knowledge and experience to find you the best mortgage product and help you prepare and improve your changes of a mortgage. We have access to many lenders and can offer a wide range of innovative mortgage options for self-employed Americans. Our range of mortgages for Self Employed offers competitively-priced financing for business owners and those who are self-employed. Contact one of our experts today and get the mortgage you deserve.

 

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