Guest Post by Mark Anderson of Cornerstone Mortgage

As mortgage guidelines have tightened over the last several years, income verification in particular has become more difficult.  The rules of mortgage approval, effectively set by the quasi-government agencies Fannie Mae, Freddie Mac and FHA, are quite particular when it comes to what income can and cannot be considered as a part of your mortgage application.

If you are an average W2 employee with a base salary, the income calculation procedures are logical.  You take your base yearly salary and determine the monthly gross – simple, right?  However, if your income fits into any of the following categories, the rules could make your head spin:

• Tips
• Seasonal work
• Multiple jobs
• Contract work
• Self-employment
• Dividends/capital gains
• Rental property
• New employment

For each of these categories, there could be a big difference between what you make in reality and what we can consider for your loan application.  Without going into detail about each category, I’d like to point out a few common areas where the way the industry calculates your income could dramatically affect your loan options.  Guidelines can vary between loan programs, so keep in mind that the details of your exact situation matter in a big way.

Tips
If you work in the service industry it is quite common to receive some or most of your income in tips.  The problem with this for loan purposes is that often large chunks of your actual income are unreported to the IRS.  Also, mortgage approval guidelines are geared toward stability.  This is why in order to count even fully IRS reported tips, we must show at least 1 year of job history at the same employer.  One other issue with tips and service industry work is that often the number of hours worked per week can fluctuate.  For this reason, your gross year-to-date earnings are going to be used to come up with your monthly gross income for the purpose of your loan application.

Multiple Jobs
As stability is a major concern built into mortgage approval guidelines, people that work multiple jobs must show that they have consistently worked more than one job for at least two years.  You also need to show that the individual jobs themselves are consistent.  This means that if you work 20 hours a week at the library and 20 hours a week at the pet store, in order to count both incomes we need to show a history of holding both of those jobs at the same time for the past two years.  If you worked at the library for 3 years, but the pet store only 1 year, this could cause the underwriter not to be able to consider the pet store income.

Self-Employment
I could write more on this subject than any other, but I’ll just point out the highlights.  The primary challenge I run into with self-employed clients is that their tax strategy shows very little income after all deductions are accounted for.  Some businesses, especially new ones, show significant losses.  In order for business income to count, it must be relatively stable…not to mention positive.  We are also limited to going off of what is actually reported to the IRS.  In the case of a new business, it may take years for it to show income that can be used for qualification purposes.  For older, more established businesses, owners must consider the impact of their tax strategy on their ability to qualify for financing.

In general, your self-employed income will be calculated based on the average of your previous 2 years of tax returns.  However, if the most recent year shows less income than the year before, we will have to use the lower number only.  Remember here that the rules, unfortunately, are not designed to be fair!  They are designed to protect against risk, which has definitely affected self-employed people in a big way.  More than in any other category we’re talking about today, before you assume you’ll be approved for a mortgage, contact your loan officer to make double sure.

Rental Property
Much like business income, the challenge for landlords comes down to the tax return.  Tax strategy again can conflict with your ability to qualify for new mortgage loans.  One area that can cause frustration is with large repairs.  If your most recent year of tax returns shows a big cost for repairs, this could impact your overall income negatively.  Even if you have a primary W2 job, rental property losses are counted AGAINST this income to qualifying purposes.  Also, do not assume that your leases will be used in the income calculation – tax returns will be the primary basis for this.

New Employment
More than any other category, the devil is in the details here.  If you have started a new W2 position, in most cases we can consider your base income for qualifying purposes like normal.  Bonus income for a new job will almost never be used, however.  Things get much trickier if this new position doesn’t begin until after closing.  This is common for relocating executives, physicians, etc.  In this case, you can only be approved for a loan based on the new income if:

- You have a fully executed employment contract.  An offer letter is typically not workable without additional documentation from your new employer.  The contract must explicitly state your base compensation.  Projected bonus income will not be considered.

- You start the new job BEFORE your first payment is due.  In most cases, you must also receive a paystub before the first payment comes due.  For example, if you close at the end of May, your first payment will come due on July 1.  If you do not receive a pay stub before July 1, you will likely NOT be approved for the loan.  In this case, you would want to re-schedule your closing accordingly.

Do not assume anything - you will want to talk with your loan officer about all aspects of the new position as part of your formal loan application.

Last Thoughts
Keep in mind that the ‘bad’ loan programs you’ve heard about - like stated-income and no income verification loans - were originally designed for people that fit into the income categories described above.  The reality of what you make can be very different than what we use for your approval.  Before making assumptions about what you can qualify for, talk to your trusted loan officer…and be prepared to provide documentation as needed.

]]> http://blog.dawngriffin.com/2012/02/05/income-guidelines-for-mortgage-approval-not-as-simple-as-you-might-think/feed/ http://blog.dawngriffin.com/2012/02/02/how-to-marry-a-billionaire-revisited-from-2007/ http://blog.dawngriffin.com/2012/02/02/how-to-marry-a-billionaire-revisited-from-2007/#comments Thu, 02 Feb 2012 02:19:54 +0000 Dawn http://blog.dawngriffin.com/?p=2237 I just ran across an old post from 2007. While it may not be the most politically correct topic, it is definitely one worth revisiting.

How to Marry a Billionaire: Sums up an article from Money Magazine in 2007.

Briefly:

Lower your sites…Shoot for Millionaire.

Marry the child of a billionaire.

Get an M.B.A. (most billionaires meet their spouses at work)

Make Consumption Your Career (Sell that Billionaire a Boat)

Move Closer to Where the $$$ lives.

On that note, here is a quick spotlight on homes where your whale might live.

Lafayette Square
2015 Park 63104: List Price $750,000.  Replicated 19th century mansion. Overlooking historic Lafayette Park. All brick home, solid limestone on the front. 4200 square feet on three floors.

2150 Lafayette 63104: List Price $949,000. 3 Story Lafayette Mansion with 5 bedroom, 3.5 baths is striking with gorgeous finished hardwood floors, completely restored 8 functional fireplaces  beauty, custom walnut pillars with walnut burl inlays frame the outstanding staircase, breath-taking custom mahogany library with 10 piece crown molding & elaborate kitchen offering limestone fireplace, double 42 cabinets & octagon bay breakfast room all overlooking the park!

Pershing Place
4976 Pershing 63108: List Price $999,000. The Tudor Revival w/ Arts & Crafts” was designed by Laurence Garden as a special favor to the original owners.

Portland Place
17 Portland 63108: List Price $ 1,639,900. This home was designed by the premier architect of St. Louis’ Golden Age, James P. Jamison. In addition to its original grandeur this home includes private walled garden w/ in-ground swimming pool & hot tub.

Clayton
7426 Wydown, Clayton 63105: List Price $ 1,595,000. 11 year old home with  4+ bedroom, 5.5 bath home has an exquisite 2 story entry w/ marble flooring & dramatic staircase. The gourmet kitchen includes  stainless steel appliances (Wolf, Sub Zero, Miele), custom cabinets w/ new back splash, and granite counter tops.

Looking at some of the more affordable options that might put you in the path of your Billionaire:

Lafayette Square
2343 Hickory St 63104: List Price $199,900 This 2400 square foot home might need a little work but it has an oversized lot and THREE CAR GARAGE. (You will need this for all the automotive gifts from your billionaire)

Skinker-DeBaliviere (Near Pershing Place and Portland Place)
5621 Waterman Blvd #2, 63112 : List Price $199,999 Here is the splendor of the past and the living style of today. Graced with Hardwood Flooring, Wood-Burning Fireplace, Laundry, Sunroom, Separate Dining and an Eat-in-Kitchen.

Clayton
7532 Cromwell Dr #2n, Clayton 63105: List Price $150,000. This condo is being offered at $47,000 below what the owner paid in 2006. Evidently, they found their billionaire

Interested in viewing any of these properties? You can contact me through my website or call at 314-413-7086

Who: Volunteer Groups from St Louis
What: Live presentations tackling urban problems
When: March 8th 2012
Where: Contemporary Art Museum
Why: Share ideas about improving the urban fabric

Learn more about this event/contest from this Article in the St. Louis Beacon and here on this Post from GOOD

Got a new book for Christmas. The Great Heart of the Republic: St. Louis and the Cultural Civil War. I really enjoyed the perspective offered by this poem noted in the introduction.

I was a Metropolis when Chicago was a trading post;
I was a cosmopolitan on the bank of  moody river when Philadelphia and
Boston were pulsated only by town-criers;
Along my levee French and Spaniard and Aborigine and African met and
understood each other.
I was hardy and founded upon a hardy brotherhood.
I became asylum to a horde of freedom-bent Germans from an oppressive Fatherland;
I was bosom to the shorn lambs of Ireland.
When gold polarized the West, through my bounden limbs converged the Argonauts of ‘forty-nine.
Frugal Yankees and touchy Southrons came and fetched their feud over slavery;
Slave pens and a public mart are among my relics in limbo, but I supplied
History with the cause celebre named for black Dred Scott.
I was a Union City in 1861, yet I gave succor and occasion to Confederate
sympathizers–(I should be the most liberal city in the U.S.A)
…
I am the center of the Continent. I am the centripetal of these United
States, for I am a parcel of all sections;…
I am the American City of manifest destiny–I am St. Louis
–Nathan Benjamin Young, Jr. “Your St. Louis’ Speaks,” 1937

This post focuses on the Skinker-DeBaliviere neighborhood. Again, I’m only looking for habitable homes (not homes that will need substantial rehab work) and for that reason I set the lower limit of every search at $100,000. In this case, the lowest price habitable home was listed at $145,000. There are four houses on the CMA below priced about $100,000 and below $145,000 but all needed significant amounts of work. I’ll highlight the least and most expensive homes/condos in each neighborhood and pull out some basic stats: Number of units sold, high-median-low price points, average size, price/square foot and average days on market

5740 Waterman: This was a 4 bed 2 bath home. It originally listed for $149,900 and sold for $145,000 after 24 days on market.

6161 Kingsbury: This home was listed for $449,900 and sold for $437,500 after 47 days.

Stats for Residential
21 Total Sold Units
$101,000-$437,500 with a Median Sale Price of $220,000
Avg. Square Feet: 2151
Avg. $/SqFt: $104.13
Avg. Days on Market: 147

5858 Nina Plc 2W: Was listed for $115,000 and sold for $105,990. However it took 149 days.

6109 Washington Blvd #101: This 2 bed, 2 bath condo was originally listed for $219,00 and sold for $187,000 after 202 days on market

Stats for Condos
9Total Sold Units
$100,000-$187,000 with a Median Sale Price of $112,500
Avg. Square Feet: 1284
Avg. $/SqFt: $102.80
Avg. Days on Market: 128

This post focuses on Lafayette Square. Again, I’m only looking for habitable homes (not homes that will need substantial rehab work) and for that reason I set the lower limit of every search at $100,000. I’ll highlight the least and most expensive homes/condos in each neighborhood and pull out some basic stats: Number of units sold, high-median-low price points, average size, price/square foot and average days on market.

Stats for Residential
23 Total Sold Units
$120,000-$705,000 with a Median Sale Price of $280,000
Avg. Square Feet: 2624
Avg. $/SqFt: $121.15
Avg. Days on Market: 188

2230 Hickory: This 2 bedroom, 1.5 bath townhome was listed for $145,000 and ultimately sold for $120,000 after 315 days on market.

1515 Missouri: 5 bedrooms 3.5 baths sold for $705,000 after beginning at $1,200,000 in July of 2008.

Stats for Condos
12 Total Sold Units
$119,500-$405,000 with a Median Sale Price of $228,000
Avg. Square Feet: 1589
Avg. $/SqFt: $135.60
Avg. Days on Market: 156

1720 Chouteau #104: Was a 2 bedroom 1 bath condo in the Eden Lofts. It was listed for $127,500 and sold for $119,500 after 72 days.

1610 Mississippi Ave #M3: Had 2 bedrooms and 2 full and 2 half baths. It originally listed for $440,000 in April of 2010 and sold 231 days for $405,000.

Stats for Residential
37 Total Sold Units
$110,000-$997,000 with a Median Sale Price of $333,000
Avg. Square Feet: 3297
Avg. $/SqFt: $118
Avg. Days on Market: 190

4600 Washington: Was the lowest priced move-in-ready home in the CWE neighborhood. It originally listed for $196,746 and ultimately for sold for $110,000–55% of the asking price–after 550 days on market.

15 Lenox Place: This classic Federlist style home took 302 days to close. Initial list price was $1,499,000. It ultimately sold for $997,000-66.51% of list price. The home had been completely renovated in 2009 with high quality materials and energy-efficient systems.

Stats for Condos
102 Total Sold Units
$100,000-$804,375 with a Median Sale Price of $195,000
Avg. Square Feet: 1534
Avg. $/SqFt: $148
Avg. Days on Market: 163

4440 Lindell #701: This condo was initially listed at $125,00 and finally sold for $100,000 after 148 days on market.

4545 Lindell #9: Was located on the 4th floor of the 4545 Lindell new construction building. This condo was originally listed for $874,000 and ultimately sold for $804,375. It took 336 to close.

Kennard Classical Junior Academy is located on Potomac in South City behind Uncle Bill’s Pancake House. According to many a city resident it is the Creme de la Creme of St. Louis City’s public magnet schools. (A Magnet School is a St Louis Public School without a neighborhood boundary–meaning it is free and a student does not have to live near the school in order to attend. In total there are 23 specialty schools under the Magnet umbrella. Each Magnet school has a different focus: technology, law, international, arts or gifted). Kennard’s mission is to “meet the unique academic and affective needs of the gifted and talented student….In 2009, Kennard CJA was recognized as one of the fifteen high-performing elementary schools in the state of Missouri and was granted Missouri’s Gold Star School distinction.” From Kennard elementary students move on to McKinley Classical Leadership Academy and then to Metro Academic and Classical High School.

Kennard has pre-school classes through 5th grade. There is one pre-school class, two kindergarten classes, two first grade classes, three second grade classes, three  fourth grade classes and three fifth grade classes. To be accepted into Kennard the students must pass a test that measures IQ and aptitude. In addition to the test there is also a lottery because the number of applicants exceeds the number of available spaces. For details on the testing and application process visit www.slps.org or call the Recruitment and Counseling Center at 314.633.5200.

Tours of the school are given monthly on Mondays and Fridays at 930 and 1030. Appointments need to made at least 48 hours in advance. KennardTours@gmail.com

In talking with some of the Kennard parents I learned that there is a very structured approach to learning and that students are usually performing one grade level ahead of their actual grade. I asked the mom of one 2nd Grader what the weekly schedule was like. In addition to the regular subject her son had Spanish twice a week, Music once a week, Art once a week, Gym twice a week, Library and Science Lab–for these the child would change classrooms. In 2nd grade the students are also encouraged to take extracurricular activities. This could be Scouts, musical instruments, or chess club.

Kennard does have a loose uniform policy. I visited during the World Series (2011) so I saw a lot of red. But I was told that bottoms should be navy or khaki and tops could be white, navy or gold.

Textbooks are all online. There’s a buzzbook for parents to keep in contact with each other. I was told that most teachers are available daily via email regarding homework.The culmination of the Kennard experience for the student ends with a week at Camp Wyman in the Spring.

While a child does not have to live close to the school, children who live in the neighborhood are given priority as are children who already have siblings at the school.

Homes Near Kennard

5638 Oleatha: $215,000. 4 bed, 2 full baths. Over 2400+ square foot of living area that includes a partially finished walk-out lower level with a nice custom bar, great for entertaining! Updated kitchen that leads to a composite deck that overlooks the yard and garage. Extra concrete parking pad next to garage.  Gas fireplace. Nice sized bedrooms upstairs with plenty of closet space. 200 amp electrical service. Newer A/C in ‘06. MAKE THIS YOUR HOME TODAY!

3801 January: $239,900. 3 bed, 3 full bath.  bBuilt in bookcases in the Living Rm and the beautiful hardwood floors thru-out the entire main level. The kitchen has been updated. The dinning room/Breakfast room is very spacious and is open to the kitchen. The main full bath offers a shower/tub combo. The 3 bedrooms are nice size with plenty of closet space. The master bedroom has a completely updated bath w/a luxury feel & look. Finished lower level with ceramic tile floors, office space, play/hobby area, plenty of closet & storage space and a full luxury bath w/beautiful tile walls, floor & shower.

3125 Parc Ridge Lane: $445,000. 5 bedrooms and 3.5 baths.  2.5 story home has a  foyer that opens to a stunning great room with a custom stone fireplace. Updated kitchen with stone-wrapped center island, walk-in pantry, glass back splash and custom cabinets. Hardwood floors, paint, custom window treatments, ceiling fans and much more. The second floor offers a family room, 2 large bedrooms, full bath, and laundry room. The master suite has dual walk-in closets, coffee bar, and bath. The next level offers even more living space with two additional bedrooms, full bath and another family area. The lower level is partially finished with a custom bar and bar stools. The level yard with deck, patio, newer fencing, beautiful landscaping will be the highlight of outdoor entertaining. An attached 2 car garage complete this picturesque home.

5734 Vera Ct: $899,900. 3 bedrooms and 2.5 baths. Luxury living and grandiose entertaining with large living room, dining room, and billiard room. One of a kind picturesque setting in the heart of the city. Quality details and custom craftsmanship. Gourmet kitchen with granite, marble and high end appliances. Exceptional master suite with spa-like bath and large dressing room (21 x 8 feet). The entire home is filled with light and there are hardwood floors throughout. Additional amenities include a sound system inside and outside of the home, alarm system, 2 laundry areas, 2 fireplaces, a butler’s pantry, walkout basement and a 3 car oversize garage. The garage and patio were designed together to accommodate full service catering, music, entertaining.

Eventually we came to believe it was the quality of the air. It didn’t smell. It wasn’t scented, it was just fresh. Upon further investigation we could tell that the owners were actually very concerned about the air quality and had gone so far as to install a  purification system. When we read their seller’s disclosure, we noticed that they had installed a UV air cleaner.

I’ve been doing a little research for myself this week about improving the air quality in a home. With the crazy weather we have had this year I feel like I haven’t had my windows open enough. (The wet, wet Spring turned into a super hot Summer and it seems like I went from heat to air condition and right back to heat). I am still in the very early stages of researching air purification systems. Is a whole house system better than a portable one? Then there’s the choice between the different technologies: HEPA filters, Ion and Ozone Generators, Charged Media filters or Activated Carbon filters. Yikes, way too overwhelming.

While I can say that there was something very special about the house I mentioned earlier, I am still not convinced that installing an air purification system would have that same effect for every house.  (If anyone wants to chime in here regarding their experience or research on the topic that would be much appreciated.)

I’ll just move on to make the point, that a clean, fresh smelling house makes a real impression on a buyer. All of the intangibles add up to a real psychological experience for a buyer. When getting your house ready for sale considering how it smells needs to be as important as the deep clean and the staging.

Here are a few basics:

1. Most importantly DO NOT SMOKE inside

2. Change the air filters in your furnace every 4-6 months

3. Vacuum the floor registers and air returns

4. Vacuum carpets and mop floors regularly

5. Use a dehumidifier in the basement and make sure to sweep out the basement and vacuum rafters

6. Deep clean kitchen and baths weekly

7. Use natural cleaning products with a citrus base

8. Keep your home well ventilated

9. If painting is part of your strategy for getting your house on the market, make sure to use low or no-VOC brand

10. Pay attention to the smells coming from the garbage disposal the dishwasher. Lemons in the garbage disposal and cinnamon in the dishwasher works wonders.

Looking at 45 homes is a possibility but really isn’t reasonable. Ten is a much more manageable number to view. Viewing 10 homes will take about 3.5 hours so could be accomplished in the morning or afternoon. But to get from 45-10 will take a some strategic “eliminating”

My goal is to eliminate 35 of these options and bring the ten best options to the forefront. Part of my job as a buyer’s agent to keep my clients focused and help them save time. Who wants to spend an entire Saturday looking at houses that just won’t be a fit.

This particular client wants a brick home, so we can eliminate all house with siding. She would prefer a pitched roof to a flat roof and hardwood floors are a must. By using this simple criteria we can reduce the 45 original options to 21

21 is still too many. A garage was not a “must have” but it was a preference. By eliminating homes that did not have at least one covered garage space, I was able to reduce the number of possibilities to 15.

That is still too many to look at in one afternoon. One suggestion would be to consider square footage. But I really don’t trust the tax records. It is often just wrong but even if it is technically correct it might not accurately the true sense of the space. This is why you will often see “0″ as the recorded square footage in the MLS. The incorrect number has been deleted. House with “0″ or smaller square footage need to be viewed. Space is tricky and places that measure “small” can feel plenty big. Space is something that needs to experienced.

CDOM stands for Continuous Days On Market. In my opinion this is an indication of price or condition. Average days on market for this batch of homes is 173. The highest is 599. The least is 31. If time is of the essence, we really want to see the newer properties first. If a house has been on the market for almost two years, what are the chances it is going to fly off the shelves before my client and I get a chance to schedule a second tour. For our first tour, I really want to choose the best possible house or at least those that I think will actually be fit. A property that is priced well and in good condition is likely to sell quickly. So we want to make sure to get into those first. Choosing all the properties that have been on for less 150 days brings that total down to 9.

Of those 9 here are the three highlights

4159 Quincy: $77,500. CDOM 68.

4031 Bamberger: $81,900. CDOM 31

4259 Gertrude: $99,900. CDOM 149