Financing
FIRSTLINE MORTGAGE, INC.
Firstline Mortgage, Inc. founded in 1984 by Vince Rinehart, specializes in assisting homeowners achieve below market rates with solutions to each unique borrower needs. Whether financing a new home or refinancing an existing loan, trust this major financial decision with a loan officer that has a track record of excellence (see partner biography).
Vince has over 25 years of experience, coupled with up to date trends and the accessibility to hundreds of banks to get you the best possible loan available. We use creative strategies to solve even the most complex scenarios, or even the easy ones.
HOME PURCHASE PROGRAMS
Every home loan program available has three things in common. They are all based upon the borrower’s credit (FICO scores are three numbers calculated by a combination of factors using a borrowers past credit history), income, and down payment. In addition, the amount of the loan and appraised value will dictate the maximum loan amount.
Owner occupied loans have the highest loan-to-value; banks will lend more money, and thus the borrower needs less down payment. However, with second homes and income property loans (usually called rentals), the banks will require more cash down payment. This is referred to as having a lower loan-to-value (LTV) loans. The minimum FICO score required can vary from 620 to 680 depending on the loan program. However, there are many exceptions, and we will explore all options to meet the borrower’s goals.
Rates vary between the loan amounts and county the home is in. There are four types of loans that are important to know for a home purchase. Conforming loans are for loan amounts up to $417,000 in Orange County, for single family residential and condominium. These loans are sold to Fannie Mae and Freddie Mac, as are the Conforming Jumbo loans noted below. Jumbo loans, are loans up to $729,000 in Orange county. Loans at this amount will usually carry a slightly higher interest rate. Super Jumbo are loans over $729,750, with loans available to homeowners up to $5,000,000. These loans are made by banks, and are kept as a bank portfolio loans. Again, these interest rates will vary as well depending on the scenario.
FHA loans are government insured and are among the most popular of government loans available.
The maximum FHA loan in Orange County is $729,750, and is excellent for low-down-payment buyers. The government requires monthly insurance premiums in all of their programs to insure the potential risk. VA also offers 100% financing options for veterans.
Custom loan solutions to fit most borrower requirement:
If looking for lowest rates – We survey over 100 banks and lenders to find the lowest rates anywhere.
If limited income – We will make use of special loan programs to reduce interest rates with “Buy Rate Down” programs. This allows paying more up front to get a lower rate; which results in a lower monthly payment. We also make use of various adjustable rate mortgage programs (ARMs) which allow the borrower to pay lower payments. The payments will adjust to fit the borrower’s requirements at periods that work best for the borrower.
Self-Employed – We work with experienced underwriters who want to fund loans, not deny them. We use specialty lenders that understand the special issues of the self-employed.
Credit challenges – We use unique programs to repair credit and/or special government programs (such as FHA) to assist the borrower in acquiring a loan.
Whether you’re a first time home buyer, or a seasoned one, be assured that Vince is the best choice in handling the financing of your loan. Vince has an impeccable track record and he will give you the same service that has made thousands of homeowners absolutely happy with his service and results.
SOLUTIONS
In depth definitions and guidance for borrowers to understand on how the market and process works for a loan.
We are a Wholesale Lender
The goal of Firstline Mortgage, Inc., as a wholesale lender, is to survey over 100 Banks and Mortgage Banks to find the best loan for each borrower. It is not unusual to use several different banks for each borrower in the search for the optimum SOLUTION of each individual loan request. There are many factors involved in determining the amount and price of each home loan; such as location, owner occupancy, and detached home or a condominium. However, there are three major issues facing each borrower who seeking the best program for their needs: DOWN PAYMENT, INCOME, and CREDIT. (Please see theTERMS section below). Second Homes and Investment Properties have slightly different parameters, most notably in the loan amount vs. purchase price.
DOWN PAYMENT OPTIONS
There are four main conduits for home loans available to home buyers and those who wish to refinance: FannieMae/FreddieMac, FHA, VA, and Bank Portfolio. Generally, placing a 20% down payment provides access to most loan programs. However, as the notes below show, there are scenarios where a 3.5% down payment is available.
FannieMae/FreddieMac
These Agencies provide the lowest rates for 30 year fixed loans. In Orange County, CA, the best rates are loan amounts to $417,000, and up to 95% LTV (condominiums and investment properties to 80% LTV up to $417,000). Both agencies will also do excellent priced loans to $729,750, and up to 85% LTV. Loan amounts above 80% require the additional cost and approvals of Mortgage Insurance. Investment properties are generally financeable with 20% down payment up to $417,000, and 25% up to $625,000.
FHA
In Orange County, CA, qualified buyers (owner occupied only) are able to obtain financing up to $729,750 with as little as 3.5% down. FHA also has a program called “203k”, which provides up to $35,000 for approved repairs on homes. The 203k program has many restrictions, however it does assist those homebuyers who need to make repairs and/or improve their newly purchased home.
VA
The Veterans Administration (VA) provides guarantees to lenders on 100% financed purchases, for qualified veterans, up to $417,000. As a general rule, the VA will also provide guarantees up to $1,000,000, with the veteran making a small down payment. The veteran receives an eligibility certificate which states the terms of financing they are entitled to.
Bank Portfolio
A few key banks provide loans to homeowners as high as 80% LTV to $2,000,000, 75% to $3,000,000, and 70% to $5,000,000. Seller carried financing, usually up to 85% LTV, is allowed behind loans up to $2M loans.
INCOME
Most Lenders will approve loans if the borrower has a DTI (debt to income ratio) at or less than 45. This is calculated by adding all the monthly payment obligations of the borrower and dividing by the gross taxable income. While there are whole books written on this subject, perhaps a couple points are worth noting. The monthly payment obligations include what shows on a credit report or tax return. This usually consists of credit cards payments, auto payments and real estate loans (less rental income). As for the subject property, the monthly payments are calculated by adding the principal, interest, taxes, home insurance, HOA and other applicable fees.
Some solutions to reduce DTI (which increases loan amounts) are to:
Reduce debt, decreasing monthly borrowers monthly payments.
Lower the interest rate on the home loan, thus reducing monthly payments. Consider paying higher up-front fees (points) to reduce the interest rate. A variable rate or shorter term fixed rate might assist in achieving this goal. The most loan programs are a 5 year, 7 year or 10 year loan which will reduce the interest rates and thus reducing the monthly payment. A recent trend in the loan industry has been 40 year amortizations, and this also reduces the monthly payment due to the extended term of the loan.
Self-employed borrowers have unique issues, some dealing with business losses that generally reduce the borrower’s income. Averaging an individual’s income is used were appropriate, as well as adding back deprecation for investors in some cases. The use of contracts for services to other companies may work and working with a borrowers CPA’s can also be beneficial. Even including constructing Income/Expense statements have saved many loans from not being approved.
Stated Income loan programs (when a borrower claims their income and doesn’t necessarily have to show documented proof) generally are not available at higher LTV’s. However, there are some exceptions, usually based upon larger down payments with slightly higher interest rates. These LTV’s are generally on loans over $300,000, and up to $3,000,000, and range from 50% to 60% LTV. Bank portfolio lenders make up this category, with the most aggressive lending to non-owner occupied home loans.
Down payments dictate the type and number of loans available. Generally a down payment of 30% or more, coupled with excellent credit will open up other possible loan programs that allow for slightly higher DTI’s. Alternatively, FHA will also allow higher DTI’s based upon all other factors in the application.
CREDIT
Generally, 680-719 is considered good in the lending world, 720-780 is very good, and over 780 is outstanding. While home loans to borrowers with FICOs from 600-680 are available, the LTV and pricing of the loan may be negatively affected. Many times working with a reputable “Credit Repair” company may improve FICO scores as much as 70+ points. It is also noted that many lenders have established their own criteria as to FICO limitations, credit card and mortgage late payments, and other derogatory credit matters. Credit Repair efforts can take up to 45 days, so addressing any concerning credit issues early in the loan process is the best strategy.
PRE-QUALIFICATION
Firstline Mortgage, Inc., for over 25 years, has provided borrowers with a CERTIFICATE OF LOAN APPROVAL. This approval is after an application has been processed by Firstline and underwritten by a major bank, providing the borrower’s real estate broker with the added confidence and leverage needed in today’s marketplace to get offers accepted! This is extremely important because many people in the industry, especially inexperienced loan officers, will rush to give a borrower a loan approval when it is truly just a loan officer’s approval. This is a common practice of many to secure your business; however, it can lead to a lot of false hope and ultimately be very disheartening.
TERMS
LTV “Loan to Value” ratio: Calculated by dividing the loan amount by the purchase price (or value).
DTI “Debt to Income” ratio: This is calculated by adding all the monthly payment obligations of the borrower by the gross taxable income
FICO “Fair Isaac Company”: They use predictive analytics to create a score (FICO), which is shown on a credit report, and used by Lenders to determine allowable LTVs and pricing (interest rates) for borrowers.
AFFORDABILITY ANALYSIS
This innovative tool allows you to select an interest rate and loan amount to determine a 30 year fixed rate payment. By increasing or decreasing the interest rate on the vertical axis you’ll see how your payment will change if rates go up or down. This enables you to see the effect of rates on your payments. As rates go up, you’ll need to borrow less in order to have the same payment.
By changing the loan amount in the horizontal axis, you’ll see the effect of borrowing different amounts and how the loan amount effects payments at varying interest rates.
This chart will help you understand how much house you can afford as interest rates change. By waiting for prices to drop, buyers also have to be concerned about rising interest rates which will counteract the effect of dropping prices.
For example:
If prices go down $25,000 and interest rates go up .25%, the payment is unchanged so any benefit from the price decrease is offset by rising interest rates.
Call us today and we’ll run various scenarios to help you budget and plan for the future.
Vince Rinehart
800-818-4238
Vince@Firstlinemtg.com
GETTING STARTED
Please click here to print out a loan application as well as a list of items needed to begin the loan process.
