Subscribe
Share
Share
Embed
Every fourth Sunday, Regana Kooman-Henry discusses various aspects of the home buying process and home ownership experience.
Announcer 0:00
This is a KUNV Studios original program.
Wesley Knight 0:04
You're listening to special programming brought to you by Regana Kuman Henry of Coldwell Banker Premier Realty. The content of this program does not reflect the views or opinions of 91.5 Jazz and more, the University of Nevada, Las Vegas, or the Board of Regents of the Nevada System of Higher Education.
Regana Kooman Henry 0:36
Good morning, good morning, everyone. Welcome back to the Southern Nevada Real Estate Show that airs every third Sunday of the month at 8:30 a.m. right here on 91.5 FM, KUNV, the Jazz and Moore Station, and I'm Regana, your host of the Southern Nevada Real Estate Show, and I'm a real estate agent, as you all know, and broker associate with Coldwell Banker Premier Realty, I'm also a Quality Service Award winner, and also a member of the Veterans Association of Real Estate Professionals, with over 30 years-not trying to say how old I am-but over 30 years of full-time experience here in Southern Nevada, and today I have a special repeat guest. You all know her. You all love her. You love her valuable information. Kiersey Embaki with the Loan Depot Mortgage Company is going to explain ways of how you can qualify for a loan, even if you have hardly any money for a down payment, even though you may work at a job where most of your income is from tips, even if you're self-employed, even if you haven't been on the job for you know two whole years. That a lot of times people are under the impression that always has to be for two years on the job employment. So welcome back once again to the show, Kiersey.
Kirsi Mbacke 2:09
Thank you, Regana. One of my favorite things to do on a Sunday morning.
Regana Kooman Henry 2:12
Yes, mine too. And let's get started. So, for the listeners who are thinking about buying a home, but feel like they don't have enough money saved up in their account. What should they know about down payment assistance programs available today, Kiersey?
Kirsi Mbacke 2:31
Well, if you want to buy a home and you're feeling kind of you know held back by your savings, you just can't seem to get that account where you want it to be. The first thing that you should know is that you don't need 20% down to buy a house, and you know you can cut your upfront costs by using some down payment assistance like Nevada's down payment assistance programs.
Regana Kooman Henry 2:55
Sure, sure. And Kiersey, what exactly is down payment assistance, and how, let's say, is it different from simply getting a traditional mortgage?
Kirsi Mbacke 3:05
So, down payment assistance, we call it DPA, is really actually a secondary financial incentive, right? It's usually in the form of a grant or a second loan, and it is designed explicitly to cover your upfront cash requirements, so it's not necessarily an alternative to a traditional mortgage. Rather, it's just a tool that kind of sits right there on top of your traditional mortgage to eliminate the need for you know the gigantic significant personal savings account. Right.
Regana Kooman Henry 3:40
Sure.
Kirsi Mbacke 3:41
So there's there's two fundamental differences. You know, a traditional mortgage. This is going to be your primary loan. It covers the bulk of the home purchase. You know, usually 80, 96.5, 97% of the purchase, and you borrow this money typically from a bank or a lender, and then it's paid back monthly over you know 30 years with interest, and then your down payment assistance. This is a separate but much smaller pool of money, so you know typically anywhere from you know one to 5% of the purchase price, or it can even be a flat amount. But its sole purpose is to pay, let's call it the entry fee. You know, the down payment and closing costs required by that primary mortgage.
Regana Kooman Henry 4:30
Okay.
Kirsi Mbacke 4:31
So who provides this money, right? So on a traditional mortgage, you know, you have your private financial institutions, your banks, your credit unions, your independent mortgage companies, and for the down payment assistance, that usually comes from either state housing authorities, local county governments, nonprofit organizations, or or housing trusts.
Regana Kooman Henry 4:54
Okay, good to know you guys listening. She is so knowledgeable. We are very lucky. Dave Kiersey today. Thank you. You're welcome, Kiersey. And now, Kiersey, are these programs only for first-time homebuyers, or can someone who, let's say, has owned a home before-I mean, I know the question. I mean, the answer, but I want to make sure the audience gets that. So, or can someone who has owned a home before potentially qualify for a first-time homebuyer program,
Kirsi Mbacke 5:23
well, there are some programs that don't require you to be a first-time homebuyer, and then there's some that do. But I think what you need to, what we need to do, is clarify what they consider a first-time homebuyer. So a first-time homebuyer is somebody that has not owned or had interest in a property in the past three years. So, if you co-signed with somebody, you have interest in the property. But so, if you haven't had that, you haven't owned one in three years, then you're considered a first-time homebuyer.
Regana Kooman Henry 5:56
Okay, good to know. And you know, Kiersey, what are some of the basic requirements a buyer should expect when applying for, let's say, a down payment assistance program, things like credit score, income, debt to income ratios, or purchase price.
Kirsi Mbacke 6:14
So when you're applying for a down payment assistance program through, you know, here in Southern Nevada and Northern Nevada, it's through the Nevada Housing Division does a lot of the the programs. You have to meet pretty specific financial benchmarks across four main areas. So one of those is going to be credit score, and that you know 640 credit score for that. There's a strict debt-to-income ratio cap, meaning your debts, you know, compared to your income, the percentage of that. If you have a higher credit score, you can go to 50. If you are under that higher credit score, then you can go to 45 on that back end. And then they do have income ceiling cap of 165, but because an FHA loan requires the minimum down payment, that you know then there's purchase price ceilings as well, right? So FHA is going to be you know for this year, and it changes every year. It goes up every year usually. 560,009 19 is your cap for FHA, and then you know if you want to go over that, you either have to bring in some more money to pay it down to that, or you need to switch to a conventional loan, which has a much higher loan limit of 832,007 50 for Clark County.
Regana Kooman Henry 7:40
Good to know. Now, Kiersey, are there income limits for these programs, and do those limits vary depending on the household size or where the property is located in Southern Nevada?
Kirsi Mbacke 7:53
Yes, absolutely. So, the income limits for Nevada Housing Division down payment assistance-they they're going to depend heavily on the specific program that you choose, and it does go by household size. So it's going to range anywhere from 78 560, and then like I said, it's going to go up to 165, and that's also determined by the county you live in as well, so you know it could be higher for a different county.
Regana Kooman Henry 8:25
My number is 702-596-1267. That's 702-596-1267. Now, Kiersey, can down payment assistance sometimes count with closing costs as well as the actual down payment.
Kirsi Mbacke 8:43
Yes, that's a great question, Ragana. So you know the down payment assistance can cover your down payment and or closing costs. You know just depending on what your specific needs are, and you know they they have different amounts that you can choose from if you need a little bit more safer closing costs. Okay. Then you know the rates just slightly higher for that, but you do get more you know to cover your down payment and closing costs, and you know it just depends on whatever your specific scenario is is how we're going to determine which which one to use.
Regana Kooman Henry 9:16
Okay, and let's talk about someone who let's say has a good job, good credit, and can afford the monthly payment, but simply hasn't been able to save 10s of 1000s of dollars for a down payment. What options might that buyer have, Kirsi?
Kirsi Mbacke 9:35
That's a great question too, Regana, because I think a lot of people, you know, tend to just say it has to be in my checking or savings account, and they don't really know what their options are. And I always say that your biggest asset that you have is education. You know, knowing what your options are and how to access them is just-it's gold. So let's say since you have a good job. And you maybe you know you might be building wealth in other places than your standard checking account. Sure. So you know you ask what are those. So the first one would be if you have a 401k, you know most of your employer plans are going to allow you to borrow up to 50% of your vested balance for the purchase of a primary a primary residence,
Regana Kooman Henry 10:21
yeah,
Kirsi Mbacke 10:22
and you know why? Why is that smart to do? You say, "Well, that's my that's my retirement. I don't want to touch that, right? Right, because you know when you pull it out of your 401k, you know you're not paying taxes or penalties, and the funds are available to you within days, and the interest that you pay on the loan goes directly back into your own retirement account, and not in not to the bank, right? So that that's one option. And then a second option is you know you you have the option to get a gift from a family member, and this is probably one of the fastest and cleanest ways to to solve your quote unquote low savings problem, or you know maybe it's not if you don't have people that want to lend you or not lend you money, but give you money.
Regana Kooman Henry 11:10
Sure,
Kirsi Mbacke 11:10
but you know when you have a good job and strong credit, just not the money. That's that's a viable option. We have to kind of watch this because when you do the gift funds, because you know of federal banking laws and and such, you can't just take a suitcase of cash and drop it in the bank. No, really, darn. Well, I mean, you'd be so you'd be surprised, you know. I say, well, where did this $30,000 deposit come from? So you know there is very strict rules that we have to ensure that the gift is documented properly, so that it doesn't you know delay delay your loan or or kill your loan. Sure, you know, and at lenders we just want to ensure that the money is a true gift and not an under the table loan that you have to pay back that might you know might hinder you in your monthly dealings. So because of this, the the donor has to have a specific relationship ties, such as like a fiance, a relative by blood, marriage, or even adoption. And in some cases, it can even be your employer. That'd be nice, right? Right. I'd like a down payment from my employer. Yeah,
Regana Kooman Henry 12:26
really. So, Kiersey, what is one of the biggest misconceptions you hear from buyers about how much money they actually need to buy a home?
Kirsi Mbacke 12:39
Well, first, the single's biggest misconception buyers have is that you know you need to put 20% down to buy a home.
Regana Kooman Henry 12:48
Right.
Kirsi Mbacke 12:48
You know there's programs out there that require as little as zero down.
Regana Kooman Henry 12:52
Sure.
Kirsi Mbacke 12:53
You know, but and then we also have to take into account there's other considerations that are you know closing costs, which you know most buyers are either unaware of, or you know, they just haven't been educated, and they're not sure what to expect when they're purchasing.
Regana Kooman Henry 13:09
Sure.
Kirsi Mbacke 13:09
So you know, the reason that this that misconception is really really dangerous is that you know it hides the real solution. As we look earlier, you know, you don't need to save that 20% for a down payment, and you don't necessarily even need to save that, you know, two to 3% for closing costs. If you pair low down payment loan with the seller credit to cover your closing costs, or by using a gift, you know, you can actually come out of pocket requirement can be legitimately brought down to almost nothing.
Regana Kooman Henry 13:47
Kiersey, let's talk about some self-employed borrowers out there contemplating this. Now, there are a lot of entrepreneurs and small business owners here in Southern Nevada, which we all know. Why can qualifying for a mortgage sometime be more complicated for someone who is self-employed? And if someone owns a business and has a strong gross income but takes a lot of legitimate business deductions, how can those deductions affect, let's say, their ability to qualify for a mortgage,
Kirsi Mbacke 14:22
well, that's a that's a big long question, Magana. So let's kind of break break it down a little bit. What is your answer to that? So you know, when you take the legitimate business deductions, you know it's a smart way to lower your tax bill. We you know we all know that, but when you're trying to purchase a home, it can severely damage your ability to qualify for a traditional mortgage.
Regana Kooman Henry 14:45
Sure.
Kirsi Mbacke 14:46
So you know this happens because traditional lenders, the way that they calculate your your borrowing power,
Regana Kooman Henry 14:54
yes,
Kirsi Mbacke 14:55
for self-employed is based off of your net taxable income. So net taxable income-that's just whatever is left over after your deductions. Now this differs from like a traditional mortgage because we use gross. Okay. So you know it's kind of flip flopped there.
Regana Kooman Henry 15:12
Sure.
Kirsi Mbacke 15:12
You know, and so people think, hey, you know, my business brings in 200 grand a year in in gross revenue, but then you know you have a really great accountant, and they whittle that down to about $130,000 in write-offs. Right. So underwriters are like, well, you make 70,000, right? And that that that drastically reduces the amount that you're going to qualify for. So you know, fortunately, we have some workarounds that allow you to qualify based off of your actual cash flow, and one of these is underwriters will recognize that some of the deductions that you take are are purely what we call paper losses, right? Not a physical tangible loss, but you know the these things we can add back into your qualifying income, and there are going to be depreciations, which is writing off your aging equipment, technology, etc. Your amortization, which is a gradual write off of those things, and then you know if you use a portion of your home to run your business, and you write that off on your taxes, we can add that back in as well for income. And then of course you know most people know vehicle depreciation, so you know the vehicle that you use for your business, you can write off the miles and stuff like that. So those are a couple ways to add back in on tax return income, you know. Traditional lenders, we they average your net self-employed income over the last two consecutive tax years. So you might be looking at your taxes and thinking, well, you know, last year I didn't make too much, but this year I made a whole lot, and you know you're probably wanting to use that most recent one, but just know that they're going to average that over over two years. So you know if you have all those write-offs and you keep applying for traditional mortgages and getting declined, what should you do? Stop stop applying for traditional mortgages, right? Right, and then utilize a program out there that we call we call them non-QM, which is just means non-qualified mortgage products, right? So they're just kind of a little bit tweaked, you know, not straight down the line. So some of these programs, and I'm sure they're getting a lot more hype, but you've probably heard of a few of them. We can do what's called a bank statement loan.
Regana Kooman Henry 17:46
Sure.
Kirsi Mbacke 17:46
So, you know, we just take your last 12 to 24 months of business bank statements, and then we are going to look at the total gross monthly deposits, and then we apply a little expense factor to that, and then we can use that final number as income, and we don't have to look at your tax returns. And then another one would be a profit and loss. So the way that we do a profit and loss loan is your income is going to be verified strictly using year to date, or 12 month, or 12 month plus year to date profit and loss statement. The catch is that has to be prepared and signed by a licensed CPA or certified tax preparer. You know, but then we can again, you know, pass the tax or bypass the tax returns. And then a third option would be, you know, if you're an independent contractor and you get you know 1090 nines for your income.
Regana Kooman Henry 18:45
Sure,
Kirsi Mbacke 18:45
we can use those 1090 nines, and then we just take a percentage of the gross amounts listed on there, and then we completely ignore all of your beautiful deductions that you've taken on there. The only thing that I would note on that, Regana, is you know while while they solve a problem that we might have with self-employed income, they typically do require a little bit higher credit score. You want to have like a 660 plus and a little bit larger down payment, usually 10 to 20% compared to right yeah, and you know, no down payment assistance on those, unfortunately. I
Regana Kooman Henry 19:23
see, I see. Yeah. So here's a large question for you, Kiersey. Oh, I
Kirsi Mbacke 19:28
love the large twofold
Regana Kooman Henry 19:29
or threefold question here. So another group that sometimes thinks that they can't qualify is people who earn a substantial amount of their income from tips, you you Uber drivers and many people out there, servers, bartenders, casino employees, hospitality workers, and others. Can tip income be used to qualify for a mortgage? And also, Kiersey, what does a lender typically? Need to see to document tip income, and for example, if someone has been receiving tips consistently, but their income varies like month to month, January is lower than February, February is higher than March. How does a lender look at that income when determining how much house they can afford Kirsty.
Kirsi Mbacke 20:21
Well, that was a mouthful of a question. I know. I need to breathe in between that. So yes, you can. Tip income can absolutely be used to qualify for a mortgage, provided that it's fully documented and and reported, either you know on your tax returns or with your employer, so the way that lenders view tips as a viable source of qualifying income, you know, they they will do that, but they require a consistent history to prove the stability of these earnings, right? Because, you know, it might be summer months and you're working at the pool, making lots of money, but come December, you know, there's nobody at the pool, right? At least here. So, so you know, we require a clear paper trail to verify that your tip, your tip income is legal, regular, and likely to continue.
Regana Kooman Henry 21:18
Sure.
Kirsi Mbacke 21:19
So the ways that we document that tip income, we would typically-I mean, there's a couple ways that we could do
Regana Kooman Henry 21:27
it. Sure.
Kirsi Mbacke 21:28
You can provide your w2 forms for the past two consecutive years, because they have a section where tips are broken out on those W 2s.
Regana Kooman Henry 21:37
Okay.
Kirsi Mbacke 21:38
If you claim extra tips at the end of the year that you hadn't claimed IRS Form 4137. That's another way. So your employer may not be reporting all of these tips, but you know you reported some extra on that. Then we're going to use what your employer gives us plus that 4137, and then of course, you know we can get your most recent pay stubs, do the year to date, and then we would get your last pay stub from last year, and then we're going to do the average, obviously.
Regana Kooman Henry 22:12
Sure.
Kirsi Mbacke 22:13
And then the last way that we could do it is called we call it a VOE, a verification of employment, and we just ask them to break out your tip income from from your other regular income on there, and then we do an average of that.
Regana Kooman Henry 22:26
I see. Well, that was a very long and very detailed explanation. Thank you so much for that, Kiersey. And you know, if anyone is just now listening, we've been going over several things: tip earners, people that don't have a lot of cash, and still still going strong on on questioning loan officer Kiersey. And again, if you want more information, my number is 702-596-1267. That 70267. If you have any questions, or even would like to get in touch with Kiersey, now Kiersey, let's talk about the two-year history of employment, or someone that doesn't have two years history. What if someone recently, let's say, graduated from college, trade school, and is now working in the field that they studied for. Can their education help satisfy employment history history requirements? And how important are school transcripts, diplomas, degrees, or professional certifications when you're trying to document that type of employment history to make up for the the time,
Kirsi Mbacke 23:48
well, yes, and I you know I get this a lot. You know, people think I think it's a misnomer that they think that because they haven't been at their job for two years that they're not going to qualify, or you know they just graduated and just started working. They're not going to qualify for it. Or you know maybe they have job jumped a little bit. You know, but but don't have any gaps of employment. Sure. You know you don't necessarily need that two year history. You know as far as the traditional way, we can use that higher education or even high school. We can use high school transcripts, so and it'll fully satisfy that two-year employment history. You know, if your new jobs in the same field of study, right?
Regana Kooman Henry 24:38
Right.
Kirsi Mbacke 24:39
So if you graduate as a doctor, but then you're going to pick strawberries. Maybe not that, but you know. So you know, lenders viewed time spent in college, graduate school, or trade school as equivalent of of work history, right? Sure. And I that's a that's a lot of work. That's like I think I would I would rather work than go to school, but yes, exactly. So you know this will allow your recent grads to qualify for a mortgage pretty much immediately after starting a job, right?
Regana Kooman Henry 25:15
Sure.
Kirsi Mbacke 25:16
So for immediate qualification, we can often qualify as soon as you receive your first full month of pay stubs, or even a signed employment contract if your start date is 16 to 90 days of closing. So there is an exception to this, though, and it applies to your salaried or full-time hourly base. If your new job relies heavily on commission bonus tips, then you know we're probably not going to be able to use those things, and we're going to require the 12 to 24 month tracking period, and to average those.
Regana Kooman Henry 25:50
Okay, and question, Kiersey, how important is it for a buyer to speak with a lender early before they start looking at homes with a realtor like myself.
Kirsi Mbacke 26:02
Oh, you like them to you like them to be pre-qualified, Regana? You're so think so. You're so picky. So you know it's highly critical to speak with a lender before looking at homes with a realtor. And in fact, most realtors aren't even going to show you homes. You know if you haven't completed this step first, so you you know you ask why you want to see a lender first prevents heartbreak. Don't fall in love with a house you can't afford. You know it prevents setbacks with with your budgets. You know maybe you didn't know that you needed this exit amount of dollars, right?
Regana Kooman Henry 26:38
Right.
Kirsi Mbacke 26:38
Validates your offer with a seller saves wasted time, and you know it could reveal some credit issues. Then we might have time to to fix credit errors before buying, right? And then also, you know, it's going to give you that that needed time to estimate the cash to close that you're going to need for down payment and closing.
Regana Kooman Henry 26:56
Sure, sure. So Kiersey, you've been such a wealth of information this morning. Thank you so much for being here, and as always, the audience has walked away with some valuable information. So, Kiersey, please say your name, your company name, trice for the listeners so they can write it down.
Kirsi Mbacke 27:16
Yeah, as always, it was a pleasure, Regana. Thank you for having me. So, I'm Kiersey and Bakke from the Loan Depot, and my number is 702-381-1975. My NMLS number is 1398336. Again, Kiersey and Bakke Loan Depot 702-381-1975.
Regana Kooman Henry 27:38
Thank you so much, Kiersey, as always. Till next time of having you on our show again, and I am Ragana Kuman Henry with Colville Banker Premier Realty, your host for the Southern Nevada Real Estate Show that airs every third Sunday of the month at 8:30 a.m. My number is 702-596-1267. That's 702-596-1267, and my license number is BS 27880. Thank you so much, everybody, as always, for listening to my show this morning, and I wish everyone listening a great no a fabulous Sunday, not just great, fabulous Sunday, and a great week.
Transcribed by https://otter.ai