Assets can make all of the difference in qualifying for a San Mateo mortgage loan. Your assets can be the ultimate compensating factor to offset your income and/or lower credit scores. This can also be the biggest obstacle to overcome as this is where your down payment and closing cost will come from. Also, depending on which program and lender you go with, 2 months up to 12 months of asset reserves may be required to close the loan. This means a lender would like to see 2 to 12 months of your principal, interest, taxes and insurance in some sort of account (checking, savings, stocks, bonds, 401k or other investment accounts) or source (car, antiques or something else of value that can be sold for a profit).

As I explained in my last few posts, the CIA of Lending Series, all is not lost if the A segment of your total CIA is lacking. There are other viable alternatives and sources to compensate for your assets, such as:

1. Gift funds from a family member to use for down payment
   
2. Seller paying a portion or all of your closing costs
   
3. FHA financing allowing just a 3.5% down payment
   
4. San Mateo first time home buyer loan programs with 100% financing
   
5. Payment and interest deferred 2nd loans to cover down payment and or closing costs
   
6. Selling or refinancing existing assets such as a car or boat
   
7. Non-occupying co-borrowers
   
8. Borrowing against a 401K or IRA
   
9. Pledged Asset Mortgages (borrowing against stock, bonds or CD’s without liquidating them)
   

As you can see, you do have options, but note that some of these alternatives may have tax ramifications as well, so you may want to get your tax advisor and financial advisor into the mix before making any final decisions.

I hope my series on the CIA of Lending has been helpful. If you want to see how far your personal CIA will take you in a home purchase, don’t hesitate to contact me at (650) 520-0915 or by email at info@SanMateoMortgageBlog.com. I am always available to provide you with additional insight on your financial matters.

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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

Related posts:

1. The CIA of Lending
2. The CIA of Lending: I is for Income
3. The CIA of Lending: C is for Credit

Continuing our discussion of the aspects of the CIA of lending, we turn our attention to income. As you would figure, income dictates exactly how much home you can afford. A San Mateo mortgage lender uses two ratios to determine this.

FRONT END RATIO – HOUSING EXPENSE

The first ratio is your housing expense. A San Mateo mortgage lender will total your principal mortgage payment, interest payment, taxes, insurance, mortgage insurance (if applicable) and home owner association fees (if applicable) and calculate the percentage of your Monthly Housing Expense compared to your Gross Monthly Income. This will make up your front end ratio. The Fannie Mae standard is 28% for your front end ratio.

BACK END RATIO – HOUSING EXPENSE + MONTHLY DEBT

The other ratio, which carries more weight than the front end ratio, is your back end ratio. The back end ratio consists of the housing expenses mentioned above plus all of your monthly debt (credit cards, student loans, car loans, alimony or other monthly financial obligations). This ratio should be equivalent to 36% or less of your monthly gross income.

IDEAL SCENARIO

Here is what an ideal scenario may look like:

Yearly Gross Income: $100,000
Monthly Gross Income: $8,333
Monthly Credit Card Debt: $110
Monthly Car Payment: $364.72
Monthly Boat Payment: $200

Purchase Price: $375,000
20% Down Payment: $75,000
Loan Amount: $300,000
Loan Program: 30 Year Fixed at 6%

Monthly Principal and Interest: $1,847.15
Monthly Taxes: $390.63
Monthly Hazard Insurance: $87.50
Total Monthly Housing Expense: $2,325.28
Front End Housing Ratio: $2325.28/$8333 = 28%
Back End Housing Liability Ratio: $3000/$8333=36%

OK………I know what you are thinking, this is San Mateo, what can you buy for $375,000? But, given the recent market events, there are quite a few properties for less than $375,000 (1746 listings in just San Mateo and Santa Clara County today…want a list? Send me an email.)

BUT WAIT….COMPENSATING FACTORS COUNT

The above ratios are just the industry guidelines and not necessarily the end all be all. With compensating factors, (i.e.…excellent credit score and/or assets) these ratios can be extended. For a San Mateo FHA loan, for example, the back-end ratio is set at 45% and I have seen this pushed as far as 50%. With conventional financing, I have seen the back end pushed to 60%.

If you are curious as to how much of a home you could qualify for, contact me at (650) 520-0915 or info@SanMateoMortgageBlog for a no obligation meeting to determine how far your personal CIA will carry you. What do you have to lose?

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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

Related posts:

1. Maximum Allowed Debt Ratios for San Mateo Mortgage Loans
2. Debt Ratio Guideline Changes and How it Affects Borrowers
3. The CIA of Lending: A is for Assets
4. The CIA of Lending: C is for Credit
5. The CIA of Lending

We ended last week by talking about the CIA of the lending world. CIA standing for Credit, Income and Assets. As the turmoil in the financial markets continues, lenders require more from you as a borrower when it comes to your CIA.

The Centerpiece of Your Creditworthiness – Your Credit Score

As we explore the components of the CIA in detail, we will start by looking at the centerpiece of your creditworthiness, your credit score. Your credit score is the first impression you send to a San Mateo mortgage lender. Your credit score reflects how you handle debt and a great indication of how you will handle your financial responsibilities in the future. Your credit score can affect every aspect of your San Mateo mortgage. It can determine the mortgage programs available to you, the upfront costs to obtain a San Mateo mortgage and most importantly, the interest rate you receive. Not only does your credit score affect all aspects of your mortgage, but can ultimately be the deciding factor in your loan approval.

How Your Credit Score is Reported

Your credit score can range from 350-850, the higher your score, the better your credit. There are three main credit bureaus: Transunion, Experian and Equifax. Each give you a grade according to what your creditors report to them. More than likely, each credit bureau will have three different scores for you. Some creditors do not report to all three bureaus and each bureau has small variables that differentiate their scoring. To compensate for the difference; a lender will use your middle score from the 3 bureaus in qualifying you for a San Mateo mortgage. Even though there are some differences in the bureaus, they all basically use the FICO (Fair, Isaac and Company) scoring model to determine your credit worthiness.

The Components of Your Credit Score

Want More FREE Information?

We are only scraping the surface when it comes to credit, as I could devote an entire blog to credit and have an endless amount of content. If you want to know more about credit and your credit score send me an email at info@SanMateoMortgageBlog.com and I will send you an audio CD which explains How the Credit Scoring Model Works and my 15 Things You Need to Know About Your Credit Score Handbook.

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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

Related posts:

1. Mortgage Myth Busted: I Must Have Steller Credit to Buy a Home
2. Free Credit Report
3. When Should I Run My Credit?
4. The CIA of Lending
5. The CIA of Lending: I is for Income

As we all know and hear on a daily basis, the lending landscape has changed and it is continuing to change. The majority of the changes are for the better, but some of the interpretations of the changes are not. One example being, in today’s market the qualifications required by a lender to obtain a San Mateo mortgage are much tighter than a year ago, but the interpretation by the general public is that obtaining a San Mateo mortgage in today’s market is nearly impossible. The truth is, lenders do require more stringent criteria when deciding to lend money for your San Mateo home purchase. Please note, the keywords in that sentence are ‘more stringent’ and not ‘near impossible’.

There are three key components that come into play when you apply for a San Mateo mortgage. In the lending world we label this the CIA of lending. The CIA stands for Credit, Income and Assets. All three factors determine your likelihood and ability to obtain a San Mateo mortgage and are considered in determining your risk factor to the lender or the likelihood of defaulting on your mortgage. The better your CIA, the higher the percentage you have of obtaining a San Mateo mortgage loan, the less you will pay upfront to obtain that loan, and the lower your interest rate will be.

The CIA can also compensate factors for one another. If you have a lower Credit Score, a high income and substantial assets can compensate. Minimal assets can be offset by a steady income and a higher credit score. Even if your CIA is totally out of whack and you do not qualify for a San Mateo mortgage loan at this time, all hope isn’t lost. My best advice is to sit down with your San Mateo Mortgage Advisor and they will be able to walk you through the appropriate steps in aligning your CIA.

Since the CIA can make or break you when it comes to obtaining a San Mateo mortgage, I will detail these individually over the next few posts. In the meantime, if you have any questions, comments or concerns don’t hesitate to drop me a line.

Enjoyed this Post? Why Not Subscribe?

If you have enjoyed San Mateo Mortgage Blog, please subscribe to our RSS feed.

Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

Related posts:

1. The CIA of Lending: A is for Assets
2. The CIA of Lending: I is for Income
3. The CIA of Lending: C is for Credit
4. If My Financials Aren’t Perfect, I Won’t Get a Loan in Today’s Market