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6 turbo-charged ideas for boosting your home purchasing power

By Jeff Lazerson

4/18/19

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

Rate news summary 

From Freddie Mac’s weekly survey: The 30-year fixed rate rose for the third consecutive week, averaging 4.17%, up 5 basis points from last week. The 15-year fixed rate averaged 3.62%, up 2 basis points from last week.

The Mortgage Bankers Association reported a 3.5% decrease in loan application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $484,350 loan, last year’s payment was $85 higher than this week’s payment of $2,360.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at zero points: A 15-year FHA (up to $431,250 in the Inland Empire, up to $484,350 in Los Angeles and Orange counties) at 3.375%, a 30-year FHA at 3.50%, a 15-year conventional at 3.625%, a 30-year conventional at 4.0%, a 30-year FHA high-balance (from $484,351 to $726,525 in L.A. and Orange counties) at 3.875%, a 15-year  conventional high-balance (also $484,351 to $726,525) at 3.75%, a 30-year conventional high-balance at 4.25%, a 15-year jumbo (over $726,525) at 4.125% and a 30-year jumbo at 4.625%.

What I think: Earlier this week, the California Association of Realtors reported Los Angeles, Orange and San Diego counties are included in half of all California counties that experienced March home price drops.

Now, just hold on to your hat before you overreact.

The March data was likely the result of sales that occurred in January and February — before mortgage rates dropped like a rock.

I’ve experienced a crushing increase in new escrow openings for both purchases and refinances since March 1. Moreover, six separate clients have been involved in multiple-offer bidding wars in that same period.

Water-cooler Realtor conversation about bidding wars and sellers receiving well over list prices seemed like a distant memory — until March.

Sellers may have the upper hand again. With pressure shifting back to the buyers, it’s time to turbo-charge your qualifying ability with six little-known ideas:

1. Fannie Mae allows for employment-related assets (401(k)’s, IRA’s, etc.) to be used as income under the chapter of asset depletion income. And you don’t have to pull funds from those accounts to use this feature. Calculate 60% of the account assets (70% if you’re 59 ½ or older) and divide that amount by the term of the loan. For example, 60% of a $750,000 401(k) is $450,000. Divide that by 360 months (a 30-year mortgage), and you have an extra $1,250 of qualifying income without having to pull it out.
2. You may benefit from one program that allows mortgage pricing based on the middle FICO score of the highest wage earner (instead of the common underwriting approach of using the lowest middle score of all applicants).
3. Let’s say you receive 1099’s and don’t deposit all your checks into your bank account. Or you have bounced a bunch of checks (which gives lenders major anxiety). Instead of using tax returns or bank statements to qualify, use 90% of your 1099 totals as your income.
4. Let’s say you receive several K-1’s (used to report income, losses and dividends from partnerships and S corporation’s)  and some show losses. Use 90% of the income from just the profitable K-1’s as income to qualify.
5. Non-taxable income such as disability payments, Social Security benefits and VA disability benefits can be grossed up to 125% to show more income. For example, a $1,000 monthly check can be calculated as $1,250 in additional income.
6. If you are putting 20% down on a home purchase, buy your mortgage rate down 1% by increasing the loan amount by 2%. For example, let’s say the home’s sale price is $750,000, and you are putting $150,000 down, or 20%. You can lower your interest rate to 4.5% from 5.5% by increasing your loan amount to $612,000 from $600,000. Points are tax deductible and there is no PMI even though you are over 80% loan-to-value.