Is it totally out of the ?
From what I've been reading, it requires a 5 yr. credit history, different types of credit (loan, etc. not just CC cards).
I know my scores are improving (although I'm still working on 'em).





Is it totally out of the ?
From what I've been reading, it requires a 5 yr. credit history, different types of credit (loan, etc. not just CC cards).
I know my scores are improving (although I'm still working on 'em).
MANY MEN WANTED TO LAY ME DOWN, BUT FEW WANTED TO LIFT ME UP
-Eartha Kitt





low doc and no doc mortgages were specifically addressed under the new regulatory guidelines sent out to mortgage lenders. This isn't to say that low doc and no doc mortgages are totally gone. However, in general, in order to get one today you're going to have to pony up at least a 20% down payment (exclusive of closing costs), you're going to be stuck with a 2-3% higher interest rate than a 'conforming' loan, you're going to need a 640+ credit score, and you're going to be limited to a lower debt to income ratio on the loan amount.
Dancers in particular will have a problem with the new regulatory guidelines, since one new requirement is that lenders not only verify current income but also project that such level of income will continue for the entire term of the mortgage loan ... which is a huge problem for dancers who do not have a college degree / professional credentials that would allow them to take a 'straight job' of similar pay rate to dancing five or ten years down the road. Without such college degree / professional credentials, the lender is going to (correctly) assess that the dancer will be forced to retire from dancing long before the (typically 30 year) term of the mortgage is fulfilled, and will face 'straight job' income / employment prospects five or ten years down the road where their continued ability to make mortgage payments for the next 20-25 years will become VERY questionable.
(snip)"The following is the list of actions that the FDIC is requiring of Fremont but could be applied to nearly every lender sub-prime or not:
* Bank’s analysis of a borrower’s debt-to-income ratio include an assessment of the borrower’s ability to meet his or her overall level of indebtedness and common housing expenses, including, but not limited to, real estate taxes, hazard insurance, homeowners’ association dues, and private mortgage insurance.
* In any case in which a loan would result in a debt-to-income ratio greater than 50 percent, the Bank’s policy should set forth specific mitigating factors (e.g., higher credit scores, significant liquid assets, mortgage insurance) that will permit the Bank to determine that the borrower possesses the demonstrated ability to repay the loan.
* Bank must verify the borrower’s income, assets, and liabilities, including the use of recent W-2 statements, pay stubs, tax returns, or similarly reliable documentation, and verify that the borrower remains employed. [ which is interepreted to mean several years worth of 'official' income documentation, PLUS reasonable assurance that the would-be borrower is presently earning a certain level of income plus will be likely to continue to earn that level of income over the term of the mortgage loan - sic]
* Provisions which require that when the Bank uses risk-layered features, such as reduced documentation loans or simultaneous-second lien mortgages, the Bank shall demonstrate the existence of effective mitigating factors that support the underwriting decision and the borrower’s repayment capacity, which mitigating factors cannot solely be based on a higher interest rate. [which is interpreted to mean high down payment %, pledging of other collateral, super-high credit score, very low loan amount requested versus the would-be borrower's verifiable income level, mandatory purchase of 3rd party mortgage insurance etc. - sic]
* Bank shall develop, adopt, and implement a policy governing communications with consumers to ensure that the borrowers are provided with sufficient information to enable them to understand all material terms, costs, and risks of loan products at a time that will help the consumer select products and choose among payment options.
* All communications with consumers, including advertisements, oral statements, and promotional materials, provide clear and balanced information about the relative benefits and risks of the products, and that such communications shall be provided in a timely manner to assist consumers in the product selection process, not just upon submission of an application or at the consummation of the loan."(snip)
from
Last edited by Melonie; 01-17-2008 at 04:10 PM.



First off, mind if I interrupt and ask for clarification on what exactly a low/no doc mortgage is?
And second, with the housing market down like it is, I don't understand why the powers that be have modified the rules to make buying even more difficult. ???





to answer your first question ...
(snip)There are three main types of low-doc/no-doc mortgages:
* Stated-income mortgages tend to be for people who work, but don't draw regular wages or salary from an employer. That includes self-employed people or those who make a living off commissions or tips. An example would be Sam Malone, the bar owner in Cheers.
* No-ratio loans are often the right call for wealthy people with complex financial lives, retirees who live off investments, and people whose lives are in flux because of divorce, recent death of a spouse, or career change. Think of the Clampett family in The Beverly Hillbillies.
* No-doc or NINA (no income/no asset verification) mortgages are for credit worthy people who want maximum privacy and can afford to pay for it. That's Tony Soprano of The Sopranos.
Someone who gets a stated-income mortgage must disclose annual earnings, usually for the past two years. Instead of backing up the income statement with pay stubs and W2 forms, the borrower might have to show tax returns, bank statements, assets and debts, and even profit-and-loss statements.
Stated-income mortgages are for people whose earnings don't show up on the bottom line of their income taxes, says Hugh McLaughlin, president and CEO of KMC Mortgage Services Inc., a lender and broker in Naples, Fla.
The borrower has to list debts because the lender wants to determine the percentage of gross income that is used to pay off debt--the debt-to-income ratio.
A borrower with a stated-income mortgage could expect to pay anywhere from one-eighth of a percentage point above the conventional rate to more than 1 percentage point above.
With no-ratio mortgages, the borrower doesn't declare income. No pay stubs, no W2s, no tax returns. They are called no-ratio mortgages because the lender doesn't compute the debt-to-income ratio. The borrower does list assets.
"The purpose of the no-ratio program is to provide expedited processing for creditworthy borrowers," says Brian Pawsat of Prosperity Mortgage in suburban Washington, D.C. "It's not intended as a means to qualify marginal borrowers."
The rate for a no-ratio mortgage would start out at about a half-point above the rate for a conventional mortgage and might be up to 3 points higher.
No-income/no-asset verification mortgages need the least documentation. In some cases the borrower provides his or her name, Social Security number, the amount of the down payment and the address of the property. The lender gets a credit report and a property appraisal.
An excellent credit score is required. Someone getting a no-documentation mortgage might pay up to 3 percentage points higher than the going rate for fully documented conventional mortgages. "(snip)
the short answer is that, as much as the gov't and bank regulators may be concerned that tighter lending and creditworthiness standards will reduce the number of people who can qualify for a home loan in the future, they are MORE concerned that the people who do actually get approved for home loans will be able to avoid bankruptcy and/or defaulting on their mortgage payments if future interest rates rise, if they are laid off from their job, if business conditions soften etc. Ultimately, the gov't will wind up picking up part of the tab on defaulting mortgage losses ... and they are looking to assure that the potential for future mortgage losses won't be anywhere near as high as it was allowed to become in the era of 'instant credit'.I don't understand why the powers that be have modified the rules to make buying even more difficult
With a fully documented loan application, the lender can confirm that a would be borrower actually earns X dollars per week, works for a company with more or less stable future business operations and employment levels etc. which all give would-be mortgage lenders at least some assurance that the would-be borrower will remain employed and will continue to earn a similar amount of money every week over the 30 year life of a mortgage loan.
Where dancers are concerned, would-be mortgage lenders now have all sorts of reservations. First of course is income variability ... i.e. even if you can show 3 years worth of tax returns with stable income, there's no guarantee that the passage of a new anti-strip club law couldn't instantly cut those earnings in half. The recent passage of a state-wide no contact law in Ohio is a perfect example of how a single legal change can produce an across the board reduction in the earnings levels (and creditworthiness) of an entire state's worth of dancers !
Next is stability of income over time ... i.e. the lender doesn't have to be a brain surgeon to figure out that while a mortgage loan may last for 30 years the profitable career of a dancer will end far earlier ... leaving the lender to question just what the then 30+ year old dancer is going to be capable of doing in order to produce the same level of income after retiring from dancing that she is now earning as a dancer which would allow the retired dancer to continue making another 20 years worth of mortgage payments ! This is where the lender starts looking at other aspects about the would-be borrower besides earnings i.e. does the dancer also have a degree in law / medicine / education such that she can earn good money as practicing paralegal / registered nurse / schoolteacher if she is no longer able to dance. If so, then she'll probably be approved for a 30 year mortgage where the payment amounts are inline with the earnings potential of paralegals / registered nurses / schoolteachers. If not, then the lender is probably going to have to assume that once the dancer is too old to dance effectively / profitably that she's likely to wind up in a 'menial' job like WalMart clerk, and the lender will have to consider that such a dancer presents a high risk of defaulting on her mortgage payments at the point that she can no longer dance.
~
Last edited by Melonie; 01-23-2008 at 10:41 AM.
Well, the rates were slashed today. 30 Year Fixed rates are at 5%. With the housing costs down and the rates down...you may want to consider buying a house.
A house that costs $180,000 at 5% is much more affordable than the same house at 8 - 9%.





I know where this new guideline is coming from and why, but seriously. Doesn't that seem a bit biased against ALL self-employed people? Because really, who (in any business or profession, self-employed or not) can reasonably project that they'll have the income to make mortgage payments for 30 years? With the recent trends in employment/unemployment, there is NO guarantee that ANYone will have a job next week, next month or next year. Much less for the next 30 years. Ugh. Shit like this just chaps my ass.





Bridget ... sure it's biased against self-employed people. However, this stems directly from the fact that self-employed people comprise a very and I mean VERY sizable chunk of delinquent 'liar' loans ... loans they obtained by 'lying' about their actual earnings ! Thus, by the same sort of logic that allows car insurance companies to raise rates for male drivers under 25, and by the same sort of logic that allows health insurance companies to raise rates for smokers, the mortgage insurers are raising rates on the self-employed ... via the fact that they are now forced to fall into the 'high risk' category of low-doc loans.





Ah, interesting!^
MANY MEN WANTED TO LAY ME DOWN, BUT FEW WANTED TO LIFT ME UP
-Eartha Kitt





Mel, my point was more that NO ONE can reasonably project ability to make mortgage payments for 30 years. Not self-employed people, and not "regular" employed people. Again I understand where the bias is coming from, but in my admittedly idealistic-yet-cyincal (HA!) mind it seems absurd all around. ehhh
On a side-note, I've found there's a whole heap of cheap repos for sale here in San Juan lately.....![]()
Until recently, the bank mantra was self employed equaled unemployed. They just saw it as bad news. No doc loans are a dead issue for now. There isn't any secondary market that will buy them. My guess, it will come back one day, but it is years off.





No argument from me re absurdity. Nonetheless the regulators have issued new guidelines that require lenders to 'go through the motions' in attempting to do so. So the lenders fall back on basics i.e. that an 'employee' with a good work history is likely to stay employed in some capacity at some similar earnings potential in the future, that a dancer with a college degree is more likely to maintain earnings levels after retiring from dancing than another dancer who is a high school dropout etc.Mel, my point was more that NO ONE can reasonably project ability to make mortgage payments for 30 years. Not self-employed people, and not "regular" employed people. Again I understand where the bias is coming from, but in my admittedly idealistic-yet-cyincal (HA!) mind it seems absurd all around. ehhh
The secondary mortgage market issue actually boils down to risk versus reward. Yes there will be investors out there that will put up capital for no-doc or low-doc loans that cannot be resold by the lender to Fannie Mae / bond funds etc., but they are going to expect to receive an interest rate which more realistically represents the default risk involved. Bottom line probably is that in comparison to a 5% 'conforming' 'full-doc' mortgage loan, the low-doc interest rate may be 8.5% and the no-doc interest rate may be 10%.No doc loans are a dead issue for now. There isn't any secondary market that will buy them. My guess, it will come back one day, but it is years off.
same in Detroit ! However, they both have similar issues re overall 'desireability'.On a side-note, I've found there's a whole heap of cheap repos for sale here in San Juan lately
I don't believe lender ask for level of education, do they? I've forgotten though, is it really a part of the underwriting consideration? And I also wouldn't recommend anyone write "exotic dancer" on any type of application whatsoever. Its just more likely to turn out badly than well.
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M
Whirlez,
If your income is mostly fixed, and your part-time work is out of the home, can you move to a less expensive area well outside of Greater Chicago, where home, and rental prices, are much cheaper?
When I was out in Chi last time, we drove about an hour to visit some friends, who lived in a cabin-like home off of a lake, near the state border (with Michigan maybe?), and their mortgage was very reasonable.
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M





It's now part of the 'other criteria' that regulators have mandated that lending institutions evaluate.I don't believe lender ask for level of education, do they? I've forgotten though, is it really a part of the underwriting consideration?





Yep, right you are, dear.
I've been looking (online of course) right now, about an hour or so away. I want to be away from this area anyway. O'hare the nearby airport is doing a big time expansion.
I'm also open to moving out of state. I def. don't want to rent again, it is prob. the cheapest where I am now. Thanks a lot hon.
MANY MEN WANTED TO LAY ME DOWN, BUT FEW WANTED TO LIFT ME UP
-Eartha Kitt
Probably Wisconsin. Michigan borders Indiana and would take much longer than 1 hour to get to from Chicago.
We actually live about an hour outside of Chicago. For the price we paid for our house, the house is actually about 2 1/2 times the size as we would have gotten in any area closer to the city (in the price range we were comfortable getting into). The other nice thing about getting out of the city? Property taxes. Cook County taxes are insane and those really make or break affordability. Get into a county like Kane, Lake, or even McHenry and the property taxes become much more palatable.
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