Ocean Mortgage 2020 Newsletter 005

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Bob: “I can’t believe my lender just declined my mortgage.”
Ocean Mortgage: “What happened?”
Bob: “They called my employer and some guy in HR told them that my pay was cut.”
Ocean Mortgage: “This is something you didn’t tell the lender?”
Bob: “It just happened, and I’m pretty sure it will be temporary.”
Ocean Mortgage: “You need to be honest – but you should be fine with a new lender if we show them that you can still qualify at the lower income, your employment is likely to continue, and you have sufficient reserves.”
Bob: “Lenders are being ridiculous and should be more empathetic to consumers’ needs.”

If you are currently seeking a mortgage, the big name-brand retail banks are requiring down payments as high as 30% – and most have eliminated their HELOCs. However, wholesale lenders (specializing exclusively in mortgages) haven’t changed their down payment requirements at all – you can still comfortably qualify for a loan up to 95% of the purchase price (97% for First-Time Homebuyers).

BUT:You are NOT going to get a traditional mortgage today if …

  1. You didn’t make your last mortgage payment or are actively seeking forbearance (or you missed one of the last three payments under your forbearance repayment plan)
  2. You lost your job or your business is closed
  3. Within two business days of your mortgage closing, your HR Department hedges on whether you are or will continue to be employed (or you cannot produce a current pay stub with year-to-date earnings)
  4. Your wages or self-employed income have declined, causing your debt-to-income (DTI) ratio to exceed 40% (or if you are working from home and do not have 3 months of mortgage payments in reserve)
  5. After returning from a leave of absence, you do not have 30 days of pay stubs (even if income is reliable)
  6. You rely on OT/bonus/commission income to qualify, but the lowest of your two-year average, year-to-date, or most recent pay stub causes you to exceed the maximum DTI threshold
  7. 75% of your self-employed earnings is insufficient to qualify you for a mortgage, unless you have 12 months of reserves

Finally, competitively priced jumbo or FHA loans (especially below a 640 FICO) are scarce – at a time when bargain-priced real estate is surfacing.

Here’s the Point:
"If your income has been adversely affected by COVID-19, your loan will be postponed or declined – unless you have acceptable, convincing documentation."

Mike Kanuka, Founder & President

NMLS #901949 (Company)
NMLS #880882 (Individual)

Equal Housing Opportunity