All Forum Posts by: Chris Mason

 I mean, yes, that's what it looks like when you go to court and trust the other side's lawyer to adequately represent your interests. 

 Certainly, but that 70% is the Fannie/Freddie limit for the exact scenario you described. The programs that don't follow those rules don't get the Fannie/Freddie subsidy on the back end, so that loss of back-end profit will be made up for by you, on the front-end, paying a higher rate, higher fees, worse terms, some combination thereof. Otherwise, the lender in question wouldn't lend you that money at all, they'd lend it out as Fannie/Freddie money to maximize profit. 

A lot of people don't offer those programs, since the pull-through is so small. If I offer someone Fannie AND "alternative" with horrible rates/fees, the number of people who think I'm trying to scam them (and, thus, take their business elsewhere entirely) is actually higher than the extra business I pick up by offering that alternative. That's speaking in aggregate averages, one particular person may differ. But if it seems like lots of people have good reason not to bring these alternative programs up, what's why... same reason why we don't talk about adjustable rate mortgages even when it might be a good fit ("I am 100% certain I will sell this home within 5 years"). If the people sketched out outnumbers the people that like the alternative-to-the-standard, then at some point the market punishes us sufficiently for offering the alternative, that we stop offering it. 

If something is being marketed to you (such as a list on a mailing list sent to 5000 other people, etc), it's by definition not "off" market. It's on market. That's why it's being marketed to you! 

Off market means you aren't in that bustling marketplace where everyone is trying to sell their wares for top dollar. You're down the street, in a metaphorical parking lot or a literal dining room, talking to someone who wants to unload their stuff fast and on the cheap. They don't want the drama of an auction or bidding war, they want to work one-on-one with someone for some combination of speed, convenience, or certainty. They don't want to talk to a zillion people, so you're not going to find them in some crowded space with a zillion people in it!

Note: Yes, I will acknowledge that there's this fake "off market" thing wherein that term is used, abusively and ironically, as a marketing line (rendering it tautologically false). Consider that puffery and move on.

VA loans are for owner occupants. VA IRRRLs are for former owner occupants, but you can't do an IRRRL cash out refi.

You're only being told about conventional loans because your scenario is a conventional scenario. 

The good news is that the conventional cash out refinance will free up your VA loan entitlement. Fun fact: VA loans aren't "one time use only."

It's reasonable to grant a lot of leeway to taking 3+ months to close a simple refi once in a while if it's Spring/Summer 2020, since after all that was everyone's first pandemic-driven refinance boom, volume went up 500% in a month, it was chaos, etc.

 But, it's not Spring/Summer 2020 anymore. Take your business elsewhere. Possible reasons why you might think you should "stay the course," and why I disagree with them.

- You haven't yet paid for an appraisal, so no financial skin in the game.

- After 3 months, all the bank statements and paystubs you submitted have "expired," the underwriter is going to request fresh/new everything anyways, so there's no ADDITIONAL paperwork you will be doing that you aren't ALREADY going to have to do, by sticking with the slow lender. 

- Oh, also: your credit report is about to expire. So that's water under the bridge, too -- your credit will be run again, either way, no matter what.

Literally, there is absolutely no reason to stick with this lender. No financial reason (no new cost incurred), no hassle reason (since your paperwork is expired, you're starting from scratch either way), and not even that most paltry of justifications (the 'hard' credit pull, which again is going to happen again either way).

You've probably never spent 5 hours running, exhausting yourself, only to realize that you're on a treadmill and haven't moved a single foot. Until now. Now, you have. So you can tick that off of your bucket list. :P Zero reason to reward bad customer service with loyalty. 

All the regulations that came into place after 2008 were addressing lenders closing too fast, without asking enough questions (old timers tell stories of originating and closing SAME DAY). There are functionally zero government protections in place against lenders taking too long, asking too many pointless questions, and re-requesting the same paperwork over and over again, because that wasn't the itch they were trying to scratch with the post-2008 rules. If you're a congressperson and know nothing about mortgages, then all you know is "2008, never again, 2008, never again," and if you questioned an executive at one of these stupidly slow lenders they would say "oh we're just doing our due diligence, no one wants 2008 all over again, after all, don't you know," and this would line up with your preconceived biases/notions, so you as a congressperson wouldn't question it (you would accept it as "due diligence" rather than accepting the truth of it being "horrible customer service"), and wouldn't feel the need to introduce any new legislation. 

 It's not going to be an ongoing complication. You're going to write a check once a month and place it in the mail. If that website is as you say it is, I wouldn't personally trust it.

No one has a monopoly on retaining, or selling, the serving of your loan. That's some back end profit which may, or may not, have translated into a better deal on the mortgage. Some lenders with great customer service actually feel it's more profitable to retain the servicing, the idea being that between the good customer service and retaining the servicing, they have a good shot at repeat business. Other lenders with lower repeat business find it's more profitable to just sell it after closing.

Lurkers FYI: It's disclosed ahead of time, at the very start of the escrow process, what the lender's intent is. Check out the bottom half of this document on page 3: https://www.consumerfinance.go...

If it's important to you that servicing be retained, you can ask up-front and then verify at the very start of the escrow process. No one is going to guarantee that your loan will never be sold over the course of the full 15 or 30 years, but if their immediate intent is to sell it within a couple months of closing, they have to disclose that.

TLDR: if anyone cares about anyone's DTI, today or tomorrow, then no one should be cosigning anything, for anyone else, unless they're married (or in a relationship similarly serious in nature, with integrated or near-integrated total overall personal finances, where "can always cosign as needed and it's not a big deal" is viable). Period, full stop.

Here's how it looks in a couple years. Your cosigner, Sally, wants to buy a primary residence, or refinance, or whatever. Her credit report and that settlement paperwork says she's on the hook for the mortgage she cosigned with you, but it's not a severable or partial obligation. If the payment due is $2k, she and you are both individually on hook for the full $2k (let's suppose this is PITIA) (when you have a boyfriend/girlfriend tenant sharing a unit, you don't let the girlfriend say "here's my half of the rent, please evict my bf but not me, thanks!" do you? Same thing here, we don't let you do that either, for the exact same reasons you don't let your tenants do it), not just half of it. So in the D column of DTI, you each have the FULL $2k. But, look at this, you probably each report only half of the rental income. The total rent might be $2700 (let's stipulate that this is after write-offs for repairs, utilities, etc), but you each tell the IRS that you individually get $1350, so all we have to offset the $2000 of D is $1350 of I.

$1350 minus $2k is a negative number, unless I'm mistaken. No different than having an extra $650/mo car payment. That will reduce each person's buying power by roughly $120,000, all else equal, and making some reasonable assumptions for what we see "in the wild" and in the real world. 

Re: "What about if we..." - nope. "But what about..." - nope! "OK, but then we can just..." - NOPE!

"But what if I make so much money that I really don't need to worry about my DTI, I'm a senior executive at a tech company drawing a $3.5m W2 annual salary and I only want a $1.25m primary residence" -- ok, yeah, you're probably fine, you can disregard this post, $650/mo isn't going to move the needle in an amount that we're likely to care about.

Good luck. :)

 Google search "mortgage overlays," post back if that does not answer the question.

This may very well be your first or 2nd time getting a mortgage, but you've been to the dentist. Not particularly fun, you go there for the outcome, not the process, though sometimes the process can be more or less painful, sometimes substantially so. And the quality of work can vary. Yes?

 If I need some dental work done and I'm new to town, I could call around and get 10 quotes. One says $250, one says $1200, two don't get back to me, and 6 are all in the range of $600 to $700. OK, so I'm ruling out four of those dentists, the one way below market is probably sketchy, and whatever it is that attempts to justify $1200, I probably don't need it (if I did need that expensive special sauce, I'd already know, and btw this will be the dentist that says "all dentists charge the same," wouldn't it?), and the 2 that didn't get back to me don't want my business, that's totally fine, no need to tell me twice. Of the 6 left, I'm going to check reviews, take some time to figure out who I'm most comfortable with based on the interactions so far, maybe even think about the professionalism of the person that answered the phone. 

But I'm probably not going to worry about $625 v $675 v $635.

We do mortgages in the high 40s for DTI. FHA sometimes goes into the low/mid 50s, that can be scary.

But a lot of the time those "scary DTIs" are because there's some income that we can't "count." Like, I can see that the self employed person had $7k/mo deposits this month and $5500/mo that month, with only about $1k/mo going out in expenses. Unfortunately, I can also see that they, ahem, "under-estimate" their income each year come tax-time and, ahem, "over-estimate" their expenses (AHEMtaxfraudwhichalotofselfemployedpeopledoprobablywellover50% buttheyrarelygetcaughtsowhatever itmayaswellbejaywalking itssocommon AHEM, wow, I must have covid or something, to be doing all this coughing). So we have to use the income according to tax returns, even though we know it's an understatement. In my case all I can do is console myself that our high 40s DTI loan is actually in the 30s "in reality," but if you don't have the handcuffs that I do, you could treat that IRL average $6k net profit per month as what it actually is, and probably rent to some really solid people that I can't do a mortgage for at the desired/relevant price points (unless I'm veering into the non-qm stuff).