How to Get Bank Transaction History for Your Mortgage Loan Officer?

The home mortgage application process is filled with the paperwork that the mortgage loan officer requires to process your loan. The necessary information can include pay stubs, tax records, and bank information, including bank statements and bank transactions.

But why do loan officers need bank statements? What is the difference between a bank statement and a transaction history?

Bank transaction vs. bank statement

Bank statements and bank transaction histories are both supporting documents often asked for when applying for a home mortgage. What are they, and what are their differences?

Bank statement

A bank statement is a document provided by your bank, typically every month, either online or received in the mail. It reports banking activity for a standard timeframe, often by the month. A bank statement will contain the following information:

• Your bank’s logo
• Your full name and address
• Your account number
• The opening balance for the statement period
• The closing balance for the statement period
• A list of the transactions during the statement period

Bank transaction

Like a bank statement, a transaction history shows a list of your banking transactions, including deposits and withdrawals. However, unlike a bank statement, you can choose the time period. If you want to see your last two weeks of transactions during the period, you can enter dates in your online banking portal and generate a transaction history report. It will show the following:

• Your bank’s logo
• Your account number
• A list of all transactions in the given time
• A running balance

Why do you need a transaction history?

Given that both bank statements and transaction histories provide your banking history, why would a loan officer need both? In some cases, they don’t. The request for both often has to do with when you apply for your loan.

Let’s say you are applying for a mortgage on the 15th of July. Your bank statements run from the first to the last of the month. In this case, your loan officer would request the last two months of bank statements. So, you would provide statements for both May and June. But what about the last 15 days in July? The statements you provide do not show current bank activity. This is when a loan officer would request a bank transaction history covering July 1-15th. This allows them to get a clear history of your banking transactions and your current account status.

What do lenders check on bank transaction history and bank statements?

Lenders require your bank statements and your transaction history to verify that you can afford the down payment, closing costs, and monthly payments associated with a new mortgage. They are looking to verify where your income comes from, what your monthly expenses currently are, and that your current balance is enough to cover those obligations and the necessary down payment and closing costs for your new mortgage.

Common factors lenders look for include:

• Regular income from verifiable sources
• Consistent monthly payments
• Regular expenses
• Cash reserves in your accounts
• Bounced checks or overdrafts
• Direct debits to individuals
• Large deposits without a documented source

When going over your bank statements and history, certain things are likely to send up red flags and require additional documentation for the underwriters. These can include:

• Bounced checks and overdraft fees show the inability to balance the account and make necessary payment obligations.
• Large deposits that are not from verified sources such as a family member’s gift. In many cases, the family may offer financial assistance to help you purchase a home, but the underwriters will require a letter stating that these funds are a gift and do not require payback.
• Monthly payments or direct debits to an individual can show that you may have an undisclosed personal loan you are paying back. You may need to provide written evidence of what these payments are for.

How to provide transaction history to your mortgage loan officer?

When you are asked to provide transaction history, the lender will request certain dates. You can simply log into your online banking program and choose the date range for the report to get the data. Once the system generates the report, you can print it and deliver it to your lender. In some cases, you can email a scanned or pdf copy of the report directly to your lender. If you do not have access to online banking, many bank branches can generate and print a transaction history for you.

Bank transaction history plays a major role in home financing.

Bank transaction history and bank statements are normal requirements for lenders. We understand how these document requirements and gathering all the correct documents can become overwhelming. Our goal is to help new homebuyers through the lending process, helping to find the best loan programs and offers available. Contact Hero Home Programs today.

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Should You Avoid Buying a House with a Sump Pump?

When looking for a new home, your focus tends to be on the number of bedrooms and bathrooms, whether it is in the right school district or how close it is to your place of employment. Unless they are from a flood-prone area, most homebuyers think about things like a sump pump, but the truth is it can make a big difference when choosing a new home.

When do you need a sump pump, and what should you know before buying a house with a sump pump?

What is a sump pump?

A sump pump is a device installed in the basement or lowest level of a home. It is usually placed in an area prone to flooding or rapid snowmelt. The sump pump pumps water out of the home through a system of pipes into another area, such as a storm drain. The idea is that the sump pump keeps your home dry and helps avoid potential water damage on the property.

Are sump pumps bad?

In areas prone to flooding, heavy rains, and rapid snowmelt, sump pumps can actually save your home from potential water damage. If you are looking for homes in a flood-prone or high precipitation area, you will find homes with sump pumps. While the addition of these in a home can be very beneficial, there are some things to consider when looking at a home with a sump pump.

Advantages

Having a home with a sump pump can provide many different benefits for your property and your health. Common advantages include:

• Prevents flooding: there is nothing worse than waking up to a basement full of water. Having a sump pump means that as water comes in, it goes out, reducing the risk of indoor flooding and damage to your home’s foundation.
• Saves money: Water damage to your home’s foundation can be expensive. So can replacing items in your home that are damaged when the water rises.
• Keeping your basement dry ensures that your foundation and your belongings are safe.
• Mold prevention: When water enters your basement, the additional moisture can contribute to mold growth, making you and your family sick.
• Lower your insurance costs: Your insurance company knows how much it costs to repair flood damage, and if you live in an area prone to flooding, the presence of a functional sump pump can help keep your insurance premiums down.
• Keeps you and your belongings safe: With many basements being finished and used as fully functional parts of the home, it is likely going to be filled with your belongings and may even have bedrooms. A sump pump works automatically when it senses water, so you don’t have to worry about waking up to your bed floating and all your belongings soaked.

Disadvantages

Although there are benefits to having a sump pump, there are some things to consider as a new buyer. These include:

• Was the sump pump installed after damage? Oftentimes, homeowners will install a sump pump after a flooding event. So, damage may have already occurred.
• Sump pumps require regular maintenance. Like most home devices, a sump pump will require regular maintenance to help ensure it operates correctly when you need it to.
• Regular replacement is necessary. The average sump pump lasts about ten years, so you will need to budget for regular replacement.

Four things you should know before buying a house with a sump pump

When looking at a home with an existing sump pump, you don’t want to go in blind. You should ask the seller some questions and some extra considerations the home inspector should follow to ensure that the sump pump is effective, not hiding previous damage, and does not require immediate replacement.

Here are five things you should consider when looking at a home with an existing sump pump.

Is there water or structural damage?

In many cases, sump pumps are installed after a major flooding event. When looking at a potential new home, you want to make sure that you look for any signs of water damage in the home.

• Does the basement smell musty?
• Do you see signs of mold or mildew?
• Do the walls have flaking or peeling paint?
• Does the floor seem uneven?

While some of these signs you may notice right away, others require a trained eye. Make sure your home inspector looks for signs of potential water damage that may need addressing. Also, ask the sellers if there is a history of water damage. If requested, they are required to disclose this information.

Does the pump work properly?

Just because you can visibly see a sump pump doesn’t mean it is working correctly. Make sure that you inspect the sump pump to ensure that it is working properly and that there are no leaks. In addition, ask when the current sump pump was installed. Keep in mind these have an average life of only ten years. So, if it’s more than that, you may want to request a replacement before you sign a buyer’s agreement.

Are the sump pump lines buried deep enough?

If the home you are looking for is in an area prone to freezing temperatures, it is essential to make sure the lines from the sump pump are buried deep enough to avoid freezing. If these lines freeze, they can develop cracks and not work efficiently at removing water when it floods.

Is there a backup system?

Unfortunately, heavy rains and flooding are often accompanied by power outages. When the power goes out, so does the sump pump. If there is not a battery-operated backup system, there is a chance that flood damage may have occurred. If not, it may be a good idea to consider adding a backup system if you purchase the home.

Maintaining your sump pump

If you purchase a home with a sump pump, you will need to perform regular maintenance to ensure your pump works when you need it. This maintenance includes keeping the sump pump clean and clear of debris, checking the valve and filter regularly, and testing the system at least once a year.

Understanding a sump pump is essential before purchasing your dream home.

Depending on the area your new home is located, adding a sump pump can be very beneficial. However, before you agree to the sale, you need to understand all the things discussed above.

At Hero Home Programs, we work with borrowers to help them find a quality home and the best possible lending options to help them achieve homeownership. If you are interested in learning more about how we can help, contact us online today.

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Conventional Loan for Mixed-Use Property

Not all properties are created the same. While most residential homes are zoned residential, you may find a home that is zoned as both residential and commercial, or what is known as mixed-use. But, how is buying mixed-use property different than buying a residential property? Can I get a residential loan on a mixed-use property?

Here we take a look at the differences between traditional zoning and mixed zoning and how that can affect the ability to receive a conventional loan for the home of your dreams.

What are mixed-use properties?

When properties are built, they are typically zoned for either residential, commercial, rural, or industrial. However, in some cases, properties hold more than one zoning designation. For example, an apartment complex that also houses a gym or a commercial storefront that also has a residential home on the second and third floor. When a property offers a combination of these different zoning classifications, they are considered multi-use properties.

The construction of multi-use properties has grown in popularity and allows for the integration of different property types within a singular development. If you are self-employed or own your own business, these mixed properties allow you to combine your home and business within a single location. However, when it comes to mixed-use properties and finding a mortgage, there are some differences to consider.

Types of mixed-use loans

Mixed-use loans are available in four different categories: government-backed, commercial, short-term, and residential. The most commonly used loans for this property type are government-backed loans through the SBA or USDA. However, we will look at each type and how they can work for you.

Commercial mixed-use loans

A commercial loan is used typically for commercial properties, such as an office building or shopping center. You can also apply for commercial loans on a mixed-use property, and, unlike government-backed loans, there are no requirements for occupancy. Buildings, however, must be in good condition to qualify. These loans are typically 15-to-30-year loans with interest rates starting as low as 5%.

Eligibility and Requirements

In order to qualify for a commercial mixed-use loan, there are certain criteria that you must meet. Because this is a commercial loan, there is no requirement for occupancy, but you will need to meet the following requirements:

• Security in the property – lenders will expect at least 25% down payment and the addition of property insurance
• LTV Ratio of 75%
• A debt-service coverage ratio (DSCR) of 1.25 or higher
• Lenders will check your business credit score but also require a personal credit score minimum between 660 and 680
• Minimum of two years in business
• May require additional collateral

Government-backed mixed-use loans

Government-backed mixed-use loans, such as through the SBA and USDA, are commonly used for mixed-use properties. The loans available are the SBA’s 7(a) and 504 loans and the USDA Rural Development business loans. These loans often offer lower interest rates on mixed-use properties because they are backed by the government. In addition, these loans allow up to a 90% LTV, helping to reduce the down payment requirement. However, they do have more stringent requirements when it comes to mixed-use property.

Eligibility and Requirements

In order to be eligible for a government-backed mixed-use loan, the main requirement is that at least 51% of the property must be occupied by the owner. If your mixed-use property is intended to be your home residence as well as your business, this should not be a problem. Other additional requirements and eligibility include:

• 680 minimum credit score
• Down payment between 10-20%
• Clean financial history
• A debt-service coverage ratio (DSCR) of 1.25 or higher
• Jobs must be created – for the SBA 504 loan, you must show how the commercial part of the property will create jobs
• Business must have a net worth of less than $15 million
• LTV Ratio of 80-90%

Short-term mixed-use loans

Short-term mixed-use loans can include commercial bridge loans and hard money loans. When purchasing a mixed-use property, these loans are often used when a property does not qualify for other commercial loans due to the disrepair of the property or for buyers that are working to compete with all-cash buyers and need faster funding time for the loan. These loans have higher interest rates, ranging between 5% and 16%, and much shorter terms, averaging six months to six years.

Eligibility and Requirements

Short-term mixed-use loans do not have any occupancy requirements but can be more difficult to obtain. Some of the common requirements include:

• Minimum credit score of 600
• A debt-service coverage ratio (DSCR) of 1.25 or higher
• At least two years in business or at least two to three past rehab projects

Residential mixed-use mortgage loans

In addition to commercial loan options, residential mixed-use loans from Fannie Mae, Freddie Mac, and FHA are also available. However, there are strict requirements that focus more on the residential portion of the property, restricting the amount of the property space that can be used as residential. The types of properties that typically qualify for these mixed-use loans include residential homes with attached offices or studios that are used for business, such as a professional office, beauty salon, or daycare facility.

Eligibility and requirements

Because the goal of these loans is to help people achieve a primary residence, the property must be the borrower’s primary residence. In addition, the borrower must also be the primary owner and operator of the business located on the property. Other requirements include:

• Traditional Fannie Mae/Freddie Mac requirements of 620-640 credit score,
• DTI ratio no higher than 45%
• No more than 25% of the property can be dedicated to commercial use for Freddie Mac/Fannie Mae
• No more than 49% of the property can be dedicated to commercial use for FHA

Advantages and disadvantages of mixed-use developments

As an investor, there are many advantages and disadvantages to purchasing mixed-use properties.

Pros

• Less risk to borrowers: Because of the diversity provided by a mixed-use property, you don’t face as big a risk if you lose a tenant, as income can still come in from other tenants/renters
• More convenient for consumers: mixed-use properties allow for a wide range of businesses, allowing for more consumer traffic
• Mixed-use can be more environmentally friendly: Mixed-use properties allow for the combination of residential and commercial businesses together, in less land. In areas with multiple mixed-use buildings, there is less land dedicated solely to commercial space and customers can walk from home to business, reducing the automobile pollution in the area.

Cons

• Deals can be complex: Mixed-use loans can be time-consuming and complicated to complete. In some cases, financing can take more than a year.
• Properties can be hard to manage: Because your property may include both residential and commercial tenants, property management can be challenging.
• Loans are often hard to find: Not all banks and lenders are willing to offer mixed-use loans, meaning it may take time to find financing that will work.

A mixed-use property can become your dream home

If you are looking at a property that includes both a residential and commercial aspect, you may feel frustrated when trying to find a loan. While mixed-use loans are available, they are not always easy to find and can be very frustrating.

At Hero Home Programs, we understand this frustration and are here to help. For more information, contact us online today.

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ITIN Mortgage Loan Program

When looking to buy a home, many borrowers face numerous challenges when it comes to the application process. Will their credit meet the requirements? Do they have enough income and assets? However, for many foreign nationals without a social security number, the idea of applying for a traditional home mortgage may seem out of reach. The good news is the ITIN number mortgage loan allows many individuals to apply for a foreign national mortgage and achieve the American dream of owning a home. What is an ITIN number, and how do these loans work?

What is an Individual Taxpayer Identification (ITIN) Number?

A Tax Identification Number (TIN) is an umbrella term used to describe various forms of identification used and provided by the Internal Revenue Service (IRS). For most American citizens, the number issued by the IRS is a social security number (SSN). However, not everyone living in the United States is eligible to receive an SSN.

For resident aliens, non-resident aliens, and their dependents or spouses that are not eligible for an SSN, the IRS issues an Individual Taxpayer Identification Number (ITIN) that allows them to file U.S. tax returns and apply for credit. This number may be used as an alternate to a social security number when applying for certain credit, including an ITIN mortgage.

What is ITIN mortgage loan program?

The ITIN mortgage loan program was developed to allow those without a social security number to buy and finance a home in the United States. For example, many Europeans come into the US for business and leisure, only staying for six months as allowed by their visa. In these cases, they often pay taxes to the government and may already have an ITIN number. Instead of renting every time they come to the US, they can purchase a home. This is where the ITIN mortgage loan program offers a solution. When applying for this home loan program, the person uses their ITIN number in place of a social security number in order to verify identity and check credit history.

How Do ITIN loan programs work?

When individuals without a social security number want to apply for a home mortgage, they can use their ITIN number. If they do not have this number already, they can apply to the IRS to issue the number. When applying for a mortgage, they will need to find a lender that offers an ITIN loan program and, when applying, use the ITIN number in place of the social security number. When applying for these loans, the borrower will also need to meet the additional loan requirements. Once completed, the application is processed, similar to a traditional mortgage loan. The buyer then receives the keys to their new home.

Eligibility for an ITIN

As with any mortgage loan, an ITIN loan has minimum requirements to qualify. These requirements can include:

• A Non-Resident in the United States
• Two documents proving identities, such as passports, driver’s license, or national ID card
• Minimum down payment between 10-20%
• Two years of tax returns
• Minimum of two months of bank statements and income verification, such as pay stubs
• Debt-to-income ratio no more than 43%

For those with an ITIN number, building a traditional credit score can be difficult. If you do not have an established credit score, lenders use “non-traditional” credit. Instead, they will require examples of regular, timely payments with items such as rent, utility payments, and insurance.

Advantages and disadvantages of tax-ID loans

As with any traditional loan, there are advantages and disadvantages associated with the ITIN loan program.

Advantages

• No social security card necessary: Using the ITIN number allows you to purchase a home and still abide by the U.S. tax laws.
• No green card needed: You do not need to prove legal residency to qualify.
• Use it to refinance mortgages: You can opt to refinance later down the road when interest rates are more beneficial.
• Build credit with an ITIN: An ITIN number allows you to build credit.
• Better than hard money loans: Hard money loans are often high-interest rate loans that focus on the property's value as collateral. An ITIN loan offers interest rates closer to conventional mortgages.
• Online: In most cases, the entire process can be completed online.
• Allows you to live the American dream: Qualifying for an ITIN loan will enable you to purchase your first home and achieve the American Dream of homeownership.

Disadvantages

• Time constraints: Applying for and receiving your ITIN number can take more than six weeks, so applying well before you plan to seek a mortgage is essential.
• Higher interest rates: This is considered a non-traditional loan, so interest rates are slightly higher.
• Higher denial rates: There is a high rate of ITIN denials due to improper identification. When applying for your ITIN number, you must ensure you provide the proper identifying documentation.
• Not offered by all banks: ITIN loans are not offered by all banks and financial institutions.
• Requires higher down payment: In most cases, an ITIN loan will require a higher down payment than is seen with traditional home loans.

Let us help you achieve homeownership.

The ITIN loan program is designed to help foreign nationals achieve the American dream of homeownership. However, at Hero Home Programs, we understand that the process can be intimidating and difficult to understand. Our goal is to help everyone achieve homeownership, and our team is available to help. Let Hero Home Programs walk you through the home buying process and help you receive the keys to your new home. Request a consultation with us today.

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What is the CalHFA Program?

California has some of the highest property prices in the United States, and this can often be intimidating for first-time home buyers. Established in 1975, the California Housing Finance Agency (CalFHA) was created to support renters and homebuyers by offering financing programs that serve low to moderate-income Californians. These programs provide financing solutions and down payment assistance to first-time homebuyers in California.

What is the CalHFA Program, and how can it help you? What are the CalHFA guidelines, and do you qualify?

CalHFA Home Loan Programs

The CalHFA offers a wide range of first-time homebuyer loan programs that work for both conventional and government-issued loans. They provide access to fixed-rate loans and the options to roll in down payment and closing cost assistance. In addition to traditional borrower requirements, the CalHFA programs require additional requirements that borrowers must meet. These include:

• A minimum credit score of 660
• A debt-to-income ratio below 45%
• Must meet specific income requirements based on your location in California
• Must be a first-time homebuyer (this means no homeownership within the last 3 years)
• Must be a U.S. citizen, permanent resident, or qualified alien
• Attend a home buying counseling course and provide a certificate of completion

In addition, the CalHFA programs have requirements when it comes to the property you are looking to purchase. These can include:

• Sales price must be less than $970,800
• Property must be located in California
• Property must be used as a primary residence
• Property must be a single-family home, though some condos and manufactured homes may be considered
• No land trusts or leaseholds

Once these requirements are met, there are different programs under CalHFA that you may be eligible for. Here we take a closer look at each one.

CalHFA Conventional Mortgage

This program is a first mortgage loan insured through private mortgage insurance on the conventional market. These loans offer a fixed-rate mortgage throughout a 30-year term. The program uses Fannie Mae’s HomeReady underwriting guidelines and offers lower down payments and closing costs. This can be used with the MyHome Assistance program discussed below.

CalPLUS Conventional Mortgage with ZIP

The CalPLUS conventional mortgage offers a slightly higher interest rate on a conventional 30-year fixed mortgage. However, first-time homebuyers can take advantage of the MyHome Assistance program and the Zero Interest Program, or ZIP for closing costs. The ZIP program is a deferred payment, zero-interest second mortgage only available with the CalPLUS Program. With these additional programs, borrowers have access to money that will assist with the down payment and cover all the closing costs, making homeownership easier for low to moderate-income families that cannot come up with a substantial amount of funds at closing.

CalHFA FHA Mortgage

The CalHFA FHA mortgage program offers a 30-year fixed low-interest rate mortgage insured by the Federal Housing Administration. To qualify for this option, you must meet specific borrowing and property requirements put in place by the FHA. Borrowers can also choose to add the MyHome Assistance program to help cover the down payment and closing costs.

CalPLUS FHA Mortgage with ZIP

The CalPLUS FHA with ZIP offers a 30-year fixed-rate mortgage that can be combined with the ZIP program to help cover closing costs. First-time buyers can also take advantage of the MyHome Assistance program to add additional funds toward the down payment and closing costs.

CalHFA Energy Efficient Mortgage

The CalHFA Energy Efficient Mortgage combines the CalHFA FHA loan with an EEM Grant that allows for energy-efficient improvements over and above the maximum FHA loan limit. This grant is for up to 4% of the initial loan and is only available in this program.

CalHFA VA Loans

This loan program provides a VA-insured 30-year fixed interest first mortgage. To qualify, you must meet the VA requirements and the requirements for CalHFA. This can also be combined with the MyHome Assistance Program detailed below.

CalHFA MyHome Assistance Program

CalHFA’s MyHome Assistance Program is a deferred-payment secondary loan that provides borrowers with a loan equaling 3% of the purchase price (conventional loan) up to 3.5% for an FHA or government loan. This loan is designed to home borrowers pay towards down payments and closing costs.

Helping you navigate the CalHFA Programs

At first glance, all these different available assistance programs can be overwhelming for first-time home buyers. At Hero Home Programs, we understand the frustration that comes with the home buying process, and we are committed to helping ensure everyone can achieve home ownership. At Hero Home Programs, we work with borrowers to help them find the best loan options and assistance programs available and walk them through the home loan process. Talk to us today if you want to learn more about how the experts at Hero Home Programs can help you get into the home of your dreams.

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When Do Buying Mortgage Points Make Sense?

When you want to reduce the interest rate on your mortgage loan and, in turn, lower your monthly loan payments, mortgage points are an option. While taking advantage of mortgage points can benefit buyers in the long term, they are not beneficial for everyone. So how do you know if it is worth buying mortgage points? What do the points on home loans really mean for you? To better understand, we offer you a closer look at mortgage points and how they can work to your advantage.

What are mortgage points?

Mortgage points often referred to as buying down the rate, are a way for borrowers to lower the interest rate on their mortgage, which will lower the monthly payments you make and reduce the total you pay throughout the life of the loan. A single mortgage point equals 1% of your total mortgage amount. For example, if you have a $300,000 loan, a point would be $3,000. Paying this $3,000 at closing would unlock a reduced mortgage interest rate by around 0.25%. While you are paying this amount at closing, it is not considered as an addition to your down payment. Essentially, you are purchasing this point from your lender in order to unlock the lower interest rate.

Types of mortgage points

There are two different types of mortgage points when it comes to your new home loan: Discount points and origination points. While both are often simply called points, only one can save a borrower money on the loan's interest.

• Discount points – These points work as described above. The more points you purchase upfront, the lower your mortgage interest rate will be. How many points you can purchase depending on your lender, the type of loan, and the overall housing market at the time.
• Origination points – These points cover the costs of the lender to process your loan. These fees can vary from lender to lender, but you can negotiate these points and, in some cases, roll them into your loan and pay them over time.

Mortgage discount points vs. APR

When you purchase mortgage discount points, they lower your interest rate for the life of the loan, but they will still be a part of your annual percentage rate, or APR, and the true cost of the loan. You are just paying the portion of the interest upfront.

How to calculate mortgage points

Typically, mortgage discount points are 1% of your total loan amount, and each point can lower your interest rate by 0.25%. For example, if your initial loan amount is $200,000 with an interest rate of 4.25, each point would cost $2,000. Purchasing two points would require a $2,000 payment at closing and reduce your interest rate from 4.25 to 3.75. This would decrease your monthly interest payment by $57.65 a month, and you will save $20,753.05 in interest over the life of the loan. However, in order to yield these savings, you will need to stay in the home for at least 49 months without moving or refinancing. Moving or refinancing before this period expires means you will lose money on the points your purchased. This time period is considered the breakeven point.

Is it worth buying mortgage points?

Buying points and whether they will truly benefit you depends on various factors. Buying points may be beneficial if you:

• Plan to stay in your home for a long time
• You understand the breakeven point and do not anticipate the need to refinance or move before that point.

In many cases, buying points is not beneficial for the borrower. These times can include:

• You do not plan to stay in the home for the length of time required to reach the breakeven point
• You plan to pay extra on your monthly mortgage payments
• You do not have the extra money to purchase points
• Buying points will reduce the amount of your down payment – a higher down payment often means a lower interest rate, reduced home mortgage insurance, and lower monthly payments.

Negotiating mortgage points

In theory, all mortgage points are negotiable. The best way to negotiate lower points and closing costs is to apply for mortgages from multiple lenders. When loan offers come in, you can advise each lender that you are talking with other lenders and make them work to earn your business by negotiating lower rates and closing costs. Applying for multiple mortgages will not negatively affect your credit report, as those submitted around the same time are often considered one check. They assume you are shopping around for the best available rates, which is actually encouraged.

Deducting mortgage points on your income taxes

Mortgage discount points are essentially prepaid interest on your loan. So, just like standard mortgage interest, these payments for mortgage points can be deducted from your taxes. The expenses for mortgage points can be itemized on Schedule A.

Mortgage points and closing costs

Mortgage points, both discount and origination points, add to your down payment and additional closing costs, meaning they will increase your upfront expenses when closing on your loan. However, these points do not go toward the equity of your property.

Mortgage points can make a difference.

Mortgage discount points are optional payments offered to borrowers in order to provide savings, but they are not mandatory and, for some, are not beneficial. If you plan to stay in your new home for years, the use of points can be very beneficial in the long term. However, you need to consider things such as how much money you have available for the down payment and additional closing costs. While this may all seem overwhelming, the team at Hero Home Programs is here to help. We strive to help everyone attain homeownership and are here to answer questions and help you find the best mortgage loans, including points, possible in order to help you achieve those goals. To learn more, contact Hero Home Programs today.

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What is an AKA Letter?

Your lender will undoubtedly require you to complete the forms and disclosures required to process the mortgage loan when applying for a mortgage. While many are pretty straightforward, the paperwork can be intimidating. In some cases, your lender may require an AKA letter, triggered when your credit report returns inconsistencies.

But what is an AKA letter, and how do you write an AKA? Let’s take a closer look below.

What is an AKA letter?

An AKA letter stands for ‘Also Know As’ and is a document required to verify that you are who you say you are. Your lender needs to know exactly who they are providing a loan to. And in some cases, your credit report can return to the lender with multiple names used. When this occurs, the lender requires an AKA letter to confirm that the person's name on the loan application is the same as those that appear on the applicant’s credit report. While you may think this sounds odd, the fact is that it is very possible that your credit report has more than one name appearing on it, and the lenders need to know why.

Reasons for an AKA letter

To better understand why you received a request for an AKA letter, let’s take a look at what triggers these requirements.

Every time you apply for any type of credit, it reports your name and address to the credit bureau, providing that information at the time of application. Your credit report maintains this information. So, when a lender pulls your credit report, they can see all of your previous addresses and names used to apply for credit. Why would you have multiple names?

Let’s look at two different scenarios.

Scenario one

In this scenario, John Quincy Smith applies for his first credit card while in college and follows his parent’s advice to use his full name on the application. At this point, the name John Quincy Smith is recorded on his credit report. A few years later, John applies for a car loan but only uses John Smith on the application. At this point, a new name, John Smith, is added to the credit report. In another instance, John applies for another loan over the phone, and the person processing the application spells John’s name wrong, entering it as John Smyth. This goes into his credit report as a third name. You can see how, through your life, you can incur many different variations of your name on your credit report, but they are all you.

However, given John has such a common name, there may be cases where a listing for John Smith may not really be the same as John applying for the mortgage. This is where an AKA letter is necessary.

Scenario two

In the second scenario, we look at Jane Doe. Jan has applied for a few loans or credit cards over the years under Jane Doe, so that name is listed on her credit report. However, a few years ago, Jane married and changed her last name to Smith. However, sometimes she uses her married name and maiden name when applying for loans, so she has Jane Doe, Jane Smith, and Jan Doe Smith all in her credit report. She then gets a divorce and a few years later remarries, changing her last name to Jones. Now there are four different names on her credit report.

How does an AKA letter work?

When your lender requests an AKA letter, they are simply looking for confirmation that the names that appear on your credit report are actually you. At this point, you need to review your credit report to ensure that there is not an incidence like John in the above scenario where there was a listing on his report for another John Smith. Once you confirm the information on your credit report, you can write your AKA letter. This letter does not require a bunch of information and is simply used as a record of identity in your loan file.

Looking at scenario one, we can create a sample letter that John could write to his lender. John’s AKA letter could look like this:

To Whom It May Concern,

During the course of my credit history, I have used different variations of my legal name to include John Quincy Smith, John Smith, and an incorrect spelling of John Smyth, which a creditor inadvertently used. These instances are all me. However, the John Smith listing residing in Los Angeles is not me.

Sincerely,
John Quincy Smith

A similar letter from Jane could read:

To Whom It May Concern,

My maiden name is Jane Doe. I have been married twice, which changed my name to Smith and Jones. All names shown on my credit report are indeed me.

Sincerely,
Jane Jones

While all of these instances may seem obvious and minor, they help protect the lender and ensure that the money they are providing for the loan is going to the correct person.

An AKA letter is a common part of the home lending process.

An AKA letter is a commonly required piece of documentation during the lending process. In most cases, these letters are straightforward to fulfill, unlike many other documents that may be necessary during your mortgage lending process.

At Hero Home Programs, we understand that the home buying process can be intimidating and strive to help everyone achieve homeownership. If you have questions about the lending process and would like help finding the perfect options for your situation, Hero Home Programs is here to help. Contact us online today to learn more.

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Condotel Financing: How Does It Work?

Many homeowners are struggling to finance a condotel or luxury condominium. These properties do not meet the conventional loan requirements of Freddie Mac or Fannie Mae, so there are a limited number of mortgage lenders who will finance these properties. Many specialized lenders will finance a condotel or non-warrantable condominium. What is a condotel, and how do you get a condotel mortgage?

What is a condotel?

A condotel is a combination of a condominium and a hotel and is a unique type of property ownership. Each condotel is a part of a large-scale property that operates similar to a hotel, with a wide range of amenities and resort-style features. A condotel owner purchases a unit within the property and uses it as a second home or vacation spot while renting it out through the main property. Because of this unique arrangement, loans for condotels require different financing requirements and allow for different things. This includes:

Loan information

• Down payment minimum of at least 15%
• Available financing for vacation/second homes up to 85% LTV to $3M
• Available financing as an investment property up to 85% LTV to $3M
• Classification as a second home allowed
• Cash-out options for investment/vacation/2nd home up to 70% LTV

Allowances

• Allows for daily, nightly, weekend, or longer rentals
• High investor concentration
• Loan can qualify for the 1st unit in the complex
• Will finance for individuals/entities owning more than 10% of units

What is a non-warrantable condominium?

A non-warrantable condominium is any condo that does not meet the traditional Fannie Mae or Freddie Mac lending requirements. A condominium is non-warrantable if it features one of the following requirements:

• Requires a membership, such as a golf or country club
• Is part of a continuing care facility
• Is currently party to a lawsuit
• Allows individuals/entities to own more than two units/20% of the property
• The property features commercial space exceeding 35% of total property space
• Has 15% or more of the units that are delinquent on HOA dues
• Operates as a hotel or motel, such as a condotel

Financing for a non-warrantable condominium has the same basic loan standards and allowances as you see with a condotel.

How do condotel loans work?

Condotel loans are considered non-traditional loans as they do not meet the traditional mortgage requirements. However, they still require you to meet certain income, asset, and credit score requirements. In many cases, the loan requirements focus more on the property and the buyer. For example, many lenders will require the condotel to be at least 600 sq. ft. and have basic kitchen facilities and separate bedroom space. Once the requirements are met, the loan process follows the same steps as a traditional loan.

Challenges of getting condotel loans

Condotel or non-warrantable condominium financing is slightly different from a traditional loan. Because a condotel or non-warrantable condo does not meet the requirements of a conventional Fannie Mae or Fannie Mac mortgage, many big bank lenders will not take the risk of underwriting these loans. This means that you will need to find an approved lender specializing in non-standard mortgages. Once you do this, the mortgage process is very similar to a conventional mortgage.

How to get condotel and non-warrantable condo loans?

Once you find a lender specializing in non-traditional mortgages, applying for your loan is not much different. The lender will evaluate the property, ensuring it meets their property qualifications, such as the minimum square footage and property layout. In addition, you must meet their borrower qualifications, including a minimum credit score which is often 680. They will require income and asset information similar to a traditional loan. You must also meet the LTV requirements and have the minimum down payment required. In some instances, lenders will also look at the financial health of the condotel property in general when determining your loan.

When you apply for a condotel or non-warrantable loan, you can expect rates that are at least a half-percent higher than thof or conventional loans. However, because smaller lenders underwrite these loans, mortgage approval times are often shorter than those with big banks.

Let Hero Home Programs help you through the loan process.

Because condotel and non-warrantable loans are considered non-traditional, many borrowers expect them to be difficult. The truth is the hardest part of getting a loan for these properties is finding a lender that underwrites non-traditional mortgages. Once you find one of these lenders, the process is usually very straightforward.

However, at Hero Home Programs, we understand that these unique financing options can be intimidating or confusing. Our goal is to help borrowers achieve their homeownership and our experts can help.

Speak to us today to see how Hero Home Programs can help you achieve the financing you need.

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