Ingrid B. Quinn

NMLS ID #211652 Arizona, Loan Consultant


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Short Sale/Deed in Lieu Seasoning per Fannie Mae

MortgageTroubles
New Fannie Mae loan changes on the horizon could affect you! If you’ve recently had a short sale or deed-in-lieu of foreclosure (DIL) and are looking to purchase a home again, here’s what you need to know:
Fannie Mae announced that on August 16th of this year there will be changes to regulations. For several years now, Fannie Mae has allowed buyers that previously were involved in a pre-foreclosure hardship (short sale, or deed in lieu), to buy again using Conventional financing in as little as 24 months with a 20% down payment and a minimum 680 credit score.
After August 16th, this early purchase programs is being retired, and replaced with longer waiting period, but with much less strict down payment and credit score requirements. Buyers that experience a short sale or deed in lieu of foreclosure are able to buy again using Conventional financing after a four (4) year waiting period.
From what we understand, it appears that after the four (4) years from a short sale or deed in lieu, that you can qualify using the standard Conventional qualifying requirements of a minimum 620 credit score, and 5% down payment.
Exceptions: If a homeowner can prove that the short sale was due to an extenuating circumstance such as job loss and can provide strong documentation, then the waiting period may still be reduced to two years.
There are still options other than conventional conforming programs to assist buyers purchasing a home prior to 4 years. FHA & VA financing have shorter waiting periods; 3 years for FHA financing and 2 years for VA. Also, there are portfolio products available where a time limit does not exist but terms of that type of a loan are significantly less favorable than previously described programs.
If you have questions or comments, please feel free to contact me. Visit http://www.cobaltmortgage.com/ingridquinn or email me at Ingrid.quinn@cobaltmortgage.com.


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The Mortgage Business-Not How It Was

MortgageApproved
It’s been a 30 year ride for me in this business. I thought it was time to reflect where the industry has been and where it may go. It certainly is not a boring job. I find it an exciting challenge to daily talk to people and work with them towards their goal of buying a home.

The industry has been in the news a lot in the last 7-8 years and there has not been a dull moment. There have been a lot of changes in the rules and just keeping up with those has been a huge undertaking, but it just takes me back to when I first started out. We verify everything. It’s the way it should be.

I have been through real estate booms and busts, trends come and go and so do people I have worked with. The industry has done some weeding out and hopefully most of the bad apples are gone and hopefully industry standards are where they should be.

What remains the same is that Americans still want to own their homes. I find that people place an enormous amount of trust in my hands and I do everything I can to make their homeownership goal a reality. What has changed, though, is the difference about how a mortgage is originated. The online channel has grown and the mortgage industry has finally automated the process to an almost paperless process. Yea!! Gone are the file folders of 3-8 inch thick loan files and pdf versions of documents loaded into our processing system has make copying and faxing a near thing of the past.

What I still feel is important is the relationship of the quality referral to an experienced and trusted lender. Though online access is readily available, the referral to your mortgage lender is important because they are handling all of your personal information and the trust factor is imperative as to who has your information.

A home purchase is close to if not the largest personal purchase you will make. Take the time to find your trusted advisor in this process. It will make the experience a smoother one. For questions or suggestions please feel free to contact me at Ingrid.quinn@cobaltmortgage.com or visit my websites http://www.scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.


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Self Employed Types of Earnings

Self-Employed1

I have recently run into a client’s situation that I thought bared discussion. Owners of a C Corp left profits in the corporation and did not distribute to themselves personally and it was a challenge qualifying them for a mortgage. There are different types of self-employed entities that someone may set up and in the mortgage lender’s eyes they are analyzed differently though a single theme is present throughout. If you don’t report the income to the IRS, we cannot use it.

Any individual who has a 25% or greater ownership interest in a business is considered to be self-employed. Lenders will require personal and business tax returns (if ownership is greater than 25%) to qualify a borrower in any of these types of entities.
Sole Proprietorships

A sole proprietorship is an unincorporated business that is individually owned and managed. The individual owner has unlimited personal liability for all debts of the business.

The income, expenses, and taxable profits of a sole proprietorship are reported on the owner’s IRS Form 1040, Schedule C, and are taxed at the tax rates that apply to individuals.

Partnerships
A partnership is an arrangement between two or more individuals who have pooled their assets and skills to form a business and who will share profits and losses according to predetermined proportions that are set out in the partnership agreement. A partnership may be either a general partnership or a limited partnership:

• General Partnership – Under a general partnership, each partner has responsibility for running the business, is personally liable for the debts of the entire business, and is responsible for the actions of every other partner (unless otherwise specified in the partnership agreement).

• Limited Partnership – Under a limited partnership, a limited partner has limited liability based on the amount he or she invested in the partnership, does not typically participate in the management and operation of the business, and has limited decision-making ability. Because limited partnerships often are formed as tax shelters, it is more likely that IRS Form 1065, Schedule K-1, will reflect a loss instead of income.
The partnership must report its profit or loss on IRS Form 1065 and each partner’s share of the profit or loss on IRS Form 1065, Schedule K-1; however, the partnership pays no tax on the partnership income.

Limited Liability Companies
A limited liability company (LLC) is a hybrid business structure that is designed to offer its member-owners the tax efficiencies of a partnership and the limited liability advantages of a corporation. The member-owners of the LLC (or their assigned managers) can sign contracts, sell assets, and make other important business decisions. The LLC operating agreement may set out specific divisions of power among the member-owners (or managers). Although the member-owners generally have limited liability, there may be some instances in which they are required to personally guarantee some of the loans that the LLC obtains. Profits from the operation of the LLC may be distributed beyond the pool of member-owners, such as by offering profit distributions to managers.

The LLC must report its profit or loss on IRS Form 1065 and each member-owner’s share of the profit or loss on IRS Form 1065, Schedule K-1; however, the LLC pays no tax on its income. Each member-owner uses the information from Schedule K-1 to report his or her share of the LLC’s net profit or loss (and special deductions and credits) on his or her individual IRS Form 1040, whether or not the member-owner receives a cash distribution from the LLC. Individual member-owners pay taxes on their proportionate share of the LLC’s net income at their individual tax rates.

S Corporations
An S corporation is a legal entity that has a limited number of stockholders and elects not to be taxed as a regular corporation. Business gains and losses are passed on to the stockholders. An S corporation has many of the characteristics of a partnership. Stockholders are taxed at their individual tax rates for their proportionate share of ordinary income, capital gains, and other taxable items.
The ordinary income for an S corporation is reported on IRS Form 1120S, with each shareholder’s share of the income reported on IRS Form 1120S, Schedule K-1.

Because this income from the distribution of corporate earnings may or may not be distributed to the individual shareholders, the lender should determine if the borrower received a cash distribution from the S corporation.
Corporations

A corporation is a state-chartered legal entity that exists separately and distinctly from its owners (who are called stockholders or shareholders).
The distribution of profits earned by the business is determined by the owners of the corporation. However, the profits usually are filtered down to the owners in the form of dividends. Since a stockholder is not personally liable for the debts of the corporation, losses are limited to his or her individual investment in the corporation’s stock.

Corporations must report income and losses on IRS Form 1120 and pay taxes on the net income. The corporation distributes profits to its shareholders in the form of dividends, which it reports on IRS Form 1099-DIV. The shareholders must then report the dividends as income on their individual IRS Form 1040.
For questions or comments, please contact me at Ingrid.quinn@cobaltmortgage.com or visit me at http://www.cobaltmortgage.com/ingridquinn.


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How Much Do You Really Make?

MortgageApproved

Recently, I have had clients who are hourly wage earners and new to their current job. I decided that maybe touching on the subject of regular wage earning income documentation might be appropriate to discuss. Underwriting guidelines require a two year job history. If you have a set salary then we simply divide that number by 12 to determine your monthly income. If you get paid an hourly wage, we ask for verification of hours worked. This is so that we may determine your monthly income based on current pay and average hours worked.
If the hours you work in a week can be verified via pay stubs and those hours are constant week after week, then we will take your current hourly pay and your set number of hours to determine your monthly income. On the other hand, if your hours fluctuate from week to week, then we will need to collect information from your employer to determine your average hours worked in a week. From there we can once again determine and verify your average monthly income for the past two years.
If there have been job changes during the past two years, we will verify a few things, such as, if you are making a lateral move or if you are moving to improve your position. It is important for you to stay in the same/similar line of work or that you at least have experience/education in that job line and the experience/education must be documented. Some people have obtained the training/education for a specific job, but work a job that doesn’t correlate until a position is open. If you change employers we are required to show 30 days of income on your new pay stubs.
There are different stipulations for commission, bonus and overtime income. These types of income will be averaged over the past two year because it is income that is based on performance. This will be verified with your current employer that it is likely to continue.
Above all else you should speak to your lender and be forthcoming with them. They will ask you for all of this documentation. We want to get you the best loan possible. If you have any questions or comments please feel to email me at Ingrid.quinn@cobaltmortgage.com or visit me at http://www.Scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.