Types of loans and qualifications
A. Conventional
Conventional loans are best described by what they're not - they're not government insured or guaranteed loans, such as FHA and VA loans. Conventional can be furthered defined by two categories - Conforming and Jumbo. Conforming means that the loan amount does not exceed the Federal National Mortgage Association's (FNMA) / Federal Home Loan Mortgage Corp.'s (FHLMC) limitation of $333,700. Jumbo loans are loans for amounts in excess of this $333,700 threshold. Typically, Jumbo loans carry slightly higher rates of interest than Conforming loans. This is because Conforming loans are typically sold by lenders to FNMA (Fannie Mae), which, because of FNMA's status as a government-backed organization, provides credit-enhancement to the loan, which, in turn, means that investors and lenders are more willing to accept a lower rate of interest in return for this government enhancement. Since Jumbo's are ineligible for sale to FNMA, lenders generally require higher rates as compensation for no government backing.
Rob Hickerson offers conventional financing of all types that fall into three categories: fixed-rates, adjustable rates, and balloons. Fixed rate loans are fairly simple - the rate negotiated is fixed for the entire term of the loan, which can be from 10 to 30 years. The shorter the term, the lower the rate. Adjustables and balloons, on the other hand, are both more complex and more confusing because of the huge variety of choices.
Rob Hickerson offers adjustables with the initial interest rate fixed for 6-months, 1-year, 3-years, 5-years, 7-years, and 10-years. After this initial term, the rate can be adjusted to market rates, usually subject to some kind of cap, or limitation, on much the rate can change both per adjustment period and over the entire term of the loan. Balloons have a fixed rate for either 5 or 7 years with a rate that is typically lower than both fixed loans or ARMs of comparable terms; however, balloons also could have more exposure to rate risk at the end of the initial fixed term than arms. Most customers of
Rob Hickerson are advised to take ARMs or balloons only if:
- They completely understand the ramifications of potential rate changes;
- They feel that they will sell the property prior to potential rate increases becoming effective;
- They expect to be able to refinance within the initial term of the loan.
Underwriting the loan - Conventional
Conventional loans have specific guidelines regarding property, credit, income, and cash-to-close. Since these guidelines are numerous and lengthy, it is wise to consider pre-qualification with
Rob Hickerson before you begin shopping for a home.
To simplify the process, you can complete an
On-Line Application and find out exactly what terms you can get.
Loan to value - Conventional
Conventional loans are available on 1-4 family properties for both owner-occupants and investors. Owner occupants may borrow as much as 95-97% of the purchase price, and investors may borrow 70-90%. Rates and terms will differ depending on the downpayment. Typically, if the downpayment is less than 20%,
Rob Hickerson will require private mortgage insurance (PMI), which is an additional cost that is added to the monthly payment.
Credit - Conventional
Rob Hickerson also requires a good to excellent credit history to qualify for conventional loans, with the most emphasis placed on the last two years. Credit analysis is both objective and subjective in nature, so if you have had some previous difficulties meeting your obligations in a timely manner, completing the
On-Line Application is highly recommended.
Income guidelines - Conventional
A very important consideration in qualifying for a loan is the amount and source of income, as well as the relationship of your debt-to-income ratios.
Rob Hickerson will examine your employment history to determine the stability of your income. Contrary to popular belief, two years with the same employer is not a mandatory requirement. If you are just starting a new job, we will look at your past record of employment and education. If you have been on a job less than two years, we will consider your income effective to the degree that it is guaranteed. However, if your income is subject to fluctuations, we will average the previous two years income, minus business expenses,if any. This averaging applies to self-employment, commissions, overtime, bonuses, rental and investment income.
To eliminate the guesswork about how we will view your income for qualifying purposes, completing the
On-Line Application is highly recommended.
Relocation income - Conventional
Relocating couples may be able to use the "trailing spouse's" income for qualification purposes. Depending on the size of your downpayment,
Rob Hickerson may be able to use 25-75% of a spouse's income. Under this program the relocation must involve a corporate relocation program that provides extensive financial benefits to the relocating employee, and there must exist a likelihood of employment for the spouse.
If you are relocating, you can
Request Information on this or call
Rob Hickerson at
(502) 553-3212 or (877) 993-2328 for details.
Income ratios - Conventional
Rob Hickerson analyzes the ratio of both the proposed housing payment (principal,interest, taxes, insurance, PMI) and total debt obligation payments to your calculated qualifying income. Depending on the anticipated equity or downpayment, the housing expense ratio should fall between 28-33% of income, and the total debt payments and house payment should fall in the 36-44% range. 5% down loans would be at 28/36%, and 20%+ down loans could be at 33/44%. To find out how you will qualify, please complete the
On-Line Application, and
Rob Hickerson will respond to you within one business day.
NOTE: If you have an excellent credit history, the debt-to-income ratios may not be applicable.
Debt obligation payments consist of all payments expected to be of more than 10 months in duration.
Cash-to-Close- Conventional
You will be required to show proof that you have enough money to close, plus have an amount equal to 2 additional house payments remaining in your accounts. This cash can be from money in checking/savings, sale of securities, relocation benefits, sale of another property, withdrawals from retirement accounts, and gifts. Some restrictions apply to the use of gift funds. You will also be asked to explain large, recent deposits to your accounts.
In addition to cash from you, the seller may contribute amounts toward your closing costs, or
Rob Hickerson may be willing to finance the closing costs.
Obtaining a
Pre-Purchase Approval Commitment and a
Good Faith Estimate itemizing cash-to-close eliminates any concern about your source of funds.
B. FHA
FHA loans are privately funded loans that are insured by the US Department of Housing and Urban Development's Federal Housing Administration (HUD-FHA). This insurance acts as a credit enhancement that induces lenders, such as
Rob Hickerson, to make loans to borrower's who might not otherwise qualify for conventional financing.
FHA is not a restricted-income program; it is available to anyone who qualifies under the FHA underwriting guidelines. FHA is, however, restricted to maximum mortgage amounts that are considerably less than the amount available with conventional financing. Conversely, FHA loans require a much smaller cash investment for downpayment and closing costs and allow for more liberal consideration of income and credit history.
The FHA maximum mortgage limits vary by city. In the metropolitan Louisville MSA, the maximum loan for a single-family residence ranges from $115,200 to $152,000 (plus up-front MIP). Higher loan amounts are available for 2-4 unit properties
Standard FHA loans are available to owner-occupants at competitive market interest rates for both fixed and adjustable rates. The FHA adjustable is especially attractive since the loan has interest rate caps of only 1% per year and 5% over the life of the loan.
Underwriting the loan-FHA
FHA loans have specific guidelines regarding property, credit, income, and cash-to-close. Since these guidelines are numerous and lengthy, it is wise to consider pre-qualification with
Rob Hickerson before you begin shopping for a home. Before you buy a home, you can complete an
On-Line Application and find out exactly what terms you can get.
Loan to value - FHA
FHA loans are available on 1-4 family properties for owner-occupants. A prime benefit of FHA financing is the very low cash investment required. A typical FHA loan requires a downpayment of only about 2.25%, with total out of pocket costs of downpayment and closing costs of about 5%.
FHA loans require the payment of a monthly mortgage insurance premium which is added to the monthly payment, and in most cases an additional up-front mortgage insurance premium is financed to the principal balance of the loan.
This chart gives you an idea of total cash needed for an FHA loan:
| Purchase Price |
|
Downpayment |
+ |
Closing Costs |
+ |
Pre-paid Escrow |
= |
Total Cash needed |
| $50,000 |
|
$650 |
+ |
$1,400 |
+ |
$600 |
= |
$2,650 |
| $60,000 |
|
$1,350 |
+ |
$1,600 |
+ |
$700 |
= |
$3,650 |
| $70,000 |
|
$1,600 |
+ |
$1,750 |
+ |
$800 |
= |
$4,150 |
| $80,000 |
|
$1,900 |
+ |
$1,800 |
+ |
$900 |
= |
$4,600 |
| $90,000 |
|
$2,100 |
+ |
$2,000 |
+ |
$1,000 |
= |
$5,100 |
| $100,000 |
|
$2,500 |
+ |
$2,150 |
+ |
$1,100 |
= |
$5,750 |
| $120,000 |
|
$3,250 |
+ |
$2,400 |
+ |
$1,300 |
= |
$6,950 |
This chart assumes a 1% origination fee and lender financed pre-paid escrows up to 1% of purchase price.
Credit guidelines - FHA
Rob Hickerson requires a fair to good credit history to qualify for an FHA loan, with most emphasis placed on the last 12 months. Prior instances of slow credit does not automatically disqualify you, if there are extenuating circumstances and good credit has been re-established for 12 months. FHA also is liberal in the review of previous bankruptcies (both chapter 7 and 13). Since credit analysis is both objective and subjective in scope, a
Pre-Purchase Approval Commitment is highly recommended.
Income guidelines - FHA
A very important consideration in qualifying for an FHA loan is the amount and source of income, as well as the relationship of your debt-to-income ratios.
Rob Hickerson will examine your employment history to determine the stability of your income. Contrary to popular belief, two years with the same employer is not a mandatory requirement. If you are just starting a new job, we will look at your past record of employment,education and training, and we will consider your income effective to the degree that is guaranteed. If your income is subject to fluctuations, we will average the previous two years income, minus business expenses, if any. This averaging applies to self-employment, commissions, overtime, bonuses, rental and investment income.
Important: FHA also allows us, in some circumstances, to average fluctuating income for only one year, if your track record justifies it.
Getting a
Pre-Purchase Approval Commitment eliminates the guesswork surrounding how we will view your income for qualifying purposes.
Income ratios - FHA
Rob Hickerson analyzes the ratio of both the proposed housing payment (principal, interest, taxes, insurance, MIP) and total debt obligation payments to your calculated qualifying income. For FHA loans, the housing expense ratio should not exceed 29% of income, and the total dedt payments plus house payment should not exceed 41%. With strong compensating factors these ratios could possibly be increased to 31/43% of income. To find out how you will qualify, please complete the
On-Line Application, and
Rob Hickerson will respond to you within one business day.
Debt obligation payments consist of all payments expected to be of more than 10 months in duration.
Cash-to-Close - FHA
You will be required to show that you have enough money to pay the downpayment, closing costs, and pre-paid escrows. There is no additional cash reserve requirement for fha loans. This cash can be from money in checking/savings, sale of securities, relocation benefits, sale of another property, withdrawals from retirement accounts, and gifts. FHA allows the use of gifts for 100% of the total cash needed. You will also be asked to explain any large, recent deposits to your accounts. It is now possible for either the seller or Broad Street Mortgage Co. to pay your pre-paid escrows, which could reduce the amount you need to close by $500 to $1000. If the seller or
Rob Hickerson pays the closing costs, FHA will require a larger downpayment to meet the minimum cash investment rule.
Obtaining a
Pre-Purchase Approval Commitment and a
Good Faith Estimate itemizing cash-to-close eliminates any concern about your source of funds.
C. VA
VA loans are privately funded loans that are guaranteed by the US Department of Veteran's Affairs (VA). This guaranty acts as a credit enhancement that induces lenders, such as
Rob Hickerson , to make 100% loan-to-value loans to qualified veterans. That is correct - fully entitled veterans may be able to borrow up to 100% of the purchase price!!!
VA loans are available up to $240,000 with no money down. The actual amount that a veteran can borrow is based upon the amount of entitlement available and, of course, the veteran's financial qualifications. It is also possible for the seller or
Rob Hickerson to pay the closing costs and pre-paid escrows; consequently, a veteran may need absolutely zero cash to buy a home.
VA loans are for owner-occupied, 1-4 unit properties.
VA generally has very liberal requirements for income and credit history because the VA wants veterans to use the loan programs.
VA loans are available at very competitive interest rates for both fixed and adjustable mortgages ( the adjustable is currently suspended).
To find out if you qualify for a VA loan, please complete the
On-Line Application.
Underwriting the loan - VA
VA loans have specific guidelines regarding property, credit, income, and cash-to-close. Since these guidelines are numerous and lengthy, it is wise to consider pre-qualification with
Rob Hickerson before you begin shopping for a home. Before you buy a home, you can complete an
On-Line Application and find out exactly what terms you can get.
Loan to value-VA
VA loans can be for up to 100% of the purchase price of the home. In addition, the VA funding fee of 2-3% can be financed, and either the seller or
Rob Hickerson can pay the closing costs and pre-paid escrows; the veteran can get in for literally zero cash investment!!!
Credit guidelines - VA
Rob Hickerson requires a fair to good credit history to qualify for a VA loan, with the most emphasis placed on the last 12 months. Prior instances of slow credit does not automatically disqualify you, if there are extenuating circumstances and good credit has been re-established for 12 months. Also, VA is liberal in the review of previous bankruptcies (both chapter 7 and 13). Since credit analysis is both objective and subjective in scope, a
On-Line Application is highly recommended.
Income guidelines - VA
A very important consideration in qualifying for a VA loan is the amount and source of income, as well as the relationship of your debt-to-income ratios.
Rob Hickerson will examine your employment history to determine the stability of your income. Veterans just leaving the service and entering the job market will be given favorable consideration when at all possible. And, contrary to popular belief, two years with the same employer is not a mandatory requirement. If you are just starting a new job, we will look at your past record of employment, education and training, and we will consider your income effective to the degree that itis guaranteed. If your income is subject to fluctuations, we will average the previous two years income, minus business expenses, if any. This averaging applies to self-employment, commissions, bonuses, overtime, rental, and investment income.
Important: VA may allow us, in some circumstances, to average fluctuating income for only one year, if your track record justifies it.
Getting a
Pre-Purchase Approval Commitment eliminates the guesswork surrounding how we will view your income for qualifying purposes.
Income ratios - VA
For a VA loan,
Rob Hickerson analyzes the combined total of the proposed housing payment (principal, interest, taxes, insurance) plus monthly payments on all total debt obligations. The VA suggests that the total of these payments not exceed 41% of gross monthly income.
For example, a proposed house payment of $900 per month, plus a car loan of $350 and credit cards of $150 per month would require an income of $3414 per month to qualify.
The VA also requires an additional calculation that results in a residual income requirement based upon the number of people in the family.
To find out how you will qualify, please complete the
On-Line Application, and
Rob Hickerson will respond to you within one business day with the results.
Debt Obligation Payments consist of all payments expected to be of more than 6 months in duration.
Cash-to-Close - VA
You will be required to show that you have enough money to pay the downpayment, if any, closing costs, and pre-paid escrows. There is no additional cash reserve requirements for VA loans. This cash can be from money in checking/savings, sale of securities, relocation benefits, sale of another property, withdrawals from retirement accounts, and gifts. VA allows the use of gifts for 100% of the total cash needed. You will also be asked to explain any large, recent deposits to your accounts. VA also allows the seller or the lender to pay all closing costs and pre-paid escrows for the veteran, resulting in possibly zero cash investment.
Obtaining a
Pre-Purchase Approval Commitment and a
Good Faith Estimate itemizing cash-to-close eliminates any concern about your source of funds.
E. Proposed construction Rob Hickerson can provide construction financing if you also obtain permanent financing at
Rob Hickerson. Usually the cost of construction financing is an additional 1 point (1%) of the loan amount. The rate on contruction loans is usually 1 point over the prime rate, plus the 1 point upfront. The appraisal, survey, and legal and title fees are paid only one time and we use these for both the permanent and construction loans. You can also lock-in to your permanent rate for up to 6 months while the home is being built. To see how our construction/permanent financing works, complete an
On-Line Application and request a
Good Faith Estimate of costs.
F. Interim / Bridge notes Interim or Bridge financing is a short term note that is used to facilitate a closing when ceretain approval conditions of the permanent financing cannot be satisfied in a timely manner. For example, you want to purchase a new home, but you must sell your existing home to come up with your downpayment money. However, the new home is a "hot" property and the seller/builder will not accept an offer contingent on the sale of another property. And, your permanent financing commitment is contingent on the sale of your current home. What do you do?
Rob Hickerson may be able to provide a "bridge" loan for your equity from the old home, and provide interim financing on the new home until you can sell the old home!
Qualifying for these types of notes is very limited, so if you think you may need this type of financing arrangement, please complete an
On-Line Application and
Rob Hickerson will call you to review your qualifications.
G. Credit Problem and Income-Verification Problem Loans
Rob Hickerson has available loan programs for certain borrowers that have had previous credit problems or that cannot properly document income. These loans typically have a higher interest rate and closing costs than normal. If you need some special considerations, please complete the
On-Line Application.
H. Commercial / Multifamily Loans
Rob Hickerson, also originates loans for commercial and multifamily properties. Loan rates and terms are quoted on a case by case basis. If you would like to talk to
Rob Hickerson about such a property, please ask for a
Commercial / Multifamily Quote.
