George Halsell introduced Nicole Walker, former mortgage broker, banker and now senior loan officer at Evergreen Home Loans. So, she is part of a company that assists folks in obtaining financing for their homes. Not a bank, not a brokerage, sort of a combo of the two. As such they can offer the public unique ways to get financed.
Nicole started her talk recalling the mortgage fiasco of the aughts. People barely had to show a heartbeat to get a loan for a property. A person could theoretically have no assets, no income and still get a loan. Folks were flipping properties at a phenomenal rate, with no financial exposure. Well, we paid for that excess with higher interest rates and a slow economy. Now, lenders look for assets, credit and income to establish loan worthiness.
Unique lending developed – 3.5% down, 30-year mortgage. The state of Washington developed a down payment assistance program to help first-time homebuyers get into the market.
Ms. Walker noted that often people have to sell their present house to capture the equity and apply that to the new purchase. And this shows the problem. For you have to have a purchase contingent on the sale of another property. Evergreen offers a StepUp program which allows the purchase before selling the existing home. This gives you time, flexibility and confidence in the next step. It replaces the former bridge loan format. You get a four-month window to sell the previous home. And the loan is restructured with the equity of the previous home applied.
Income based shifts are occurring. Self-employed people face barriers. Two years of tax returns and bank statements are used to qualify the income. Self employed cases are often more complex. Averaging income may not show the entire picture. Now the last 12 months business bank statements (profit & loss) instead of tax returns may be used to qualify the income. A debt-to-income ratio acceptance of 50% may qualify.
Financing comes in three flavors, government, private and portfolio. Guardrails are in place to make the debacle of the 2000s less likely to occur. Portfolios now have to ensure that the loans are realistic. And finally, lenders are finding ways to use assets (stocks, bonds, IRAs etc.) to contribute to loan qualification. This is aimed more at high net-worth people and retirees. Can take averaging over 20- or 30-year income or systematic withdrawal schedule to qualify. But what if you deplete the asset at a faster rate? Ms. Walker wants the client to buy into taking responsibility for preservation of the asset.
And if one wanted to buy an income property, you had to take out a commercial loan. Now it may be possible to see if the cash flow from the property covers the loan expense and qualify for a mortgage (on say a four-plex).
There were a number of questions, which Ms. Walker undertook to answer. These new loans now account for at least 20% of mortgages. Mortgages are now undergoing changes.
