Q & A

You can apply by going to the link on my home page.  Once you click the link, the landing page will have two options in the middle of the screen: "Create an Account" and "Log In".  Select "Create an Account" and save your credentials so you can continue to log in throughout the process.  You will be prompted through a series of questions.  Do your best to complete everything, but we can always fix and edit on the back end!  If you are applying for a purchase pre approval you can write "TBD" in the address field. If you haven't spoken to me about what documents you need to upload please send me an email or text for a full list of documents needed. (You can always log back in at a later time to add documents - so don't worry about missing something in the initial submission) Once your application is in the system, my team will get to work on pre approving you and strategizing what products best suite your needs, goals, and financial scenario. If you have any questions while applying do not hesitate to text or call me: 213-880-0434. 

After you complete your mortgage application, we will verify the information you have provided and check your eligibility against loan program guidelines. We will need to do a credit check during this period but you will be given the option for a soft pull (doesn't affect your credit score), a hard pull done by us, or a hard pull done by you in which you would own the report.  If you're pre approved you'll receive a pre approval letter, which is an offer (but not a commitment) to lend you a specific amount, good for 90 days.  This letter gives you more bargaining power with sellers as they feel confident in your financing.  It also lets you shop at ease, knowing your loan will go through once you get an offer accepted. If your 90 days runs out or you have had a change in your income, finances, goals, etc you can simply reach out to us for a quick refresh review so we can issue you a new pre approval and you can get back to house shopping.  If you are not pre approved we can schedule a call to discuss what can be done to change that!

Non-QM loans products are an alternative to Qualified Mortgage Loans (AKA QM). Non-QM loans are not required to meet the federal government and Consumer Financial Protection Bureau's (CFPB) guidelines like qualified mortgages are.  They do not have PMI and are often eligible for vesting in an LLC or entity other than your personal name.  There are Non-QM products available for owner occupied and non owner occupied transactions. It is a great alternative qualifying solution for scenarios that don't fit inside the traditional QM box.  Some products in this category include: DSCR, Bank Statement, P&L, Asset Based, Flipper Income, Rehab, and more.

DSCR stands for Debt Service Coverage Ratio. It is a Non-QM loan utilized for investment purchases and refinances in which the loan is approved based on the ability of the subject property to cover it's own payment rather than being approved based on the borrower's taxes, income, DTI etc. You can calculate your DSCR ratio by taking the monthly income of the subject property and dividing it by the monthly debt of the subject property. 

Example: 

$2,500 long term lease (income)

$1,900 monthly payment (debt)

$100 monthly taxes (debt)

$150 monthly insurance (debt)

$1,900 + $100 + $150 = total monthly debt of $2,150

$2,500 income / $2,150 debt = 1.16 DSCR Ratio.  

You do not calculate repairs, utilities, property management expenses into your debt.  The debt is only principal, interest, insurance, taxes, and HOA if applicable.  The rental income will be calculated by either a long term lease you provide, rental income as calculated by an appraiser, or short term rental look back report.  Generally speaking you want your DSCR ratio to be above 1 to have the most and best DSCR products available to you.  There are also no ratio programs, .75+, and .85+ programs available as well as rate cuts if your DSCR ratio exceed certain thresholds, commonly 1.25%+.   

With most DSCR products you have the choice of adding on a prepayment penalty to lower the rate.  There are many lengths and types of prepayment penalties so be sure to go over this decision carefully with me! DSCR is most commonly used on 1-10 unit properties and you have the option of vesting in an LLC or other approved entity when closing. 

Without a regular paycheck or W2s, it can be harder to prove how much you make and what your projected income and ability to repay your loan will look like.  That's why lenders have different qualifying rules for self-employed borrowers. Just because you work for yourself or you take advantage of the legal tax benefits of being self employed doesn't mean you're guaranteed to have a hard time getting a mortgage...you just need to work with someone who knows how to navigate it!  Depending on the length and details of your self employment history, you can still be eligible for FHA and conventional products.  If those guidelines don't fit your special situation there are plenty of other products created just for self employed such as Bank Statement Loans and P&L loans.  Reach out so we can discuss your situation and find the right fit. 

In most cases you cannot vest your property in an LLC when you close for FHA, USDA, VA, or Conventional loans. You can vest in your LLC with Non-QM products though. You will want to consider who is in your LLC.  For some Non-QM products all members need to be on the application and present at signing.  For other Non-QM products a majority owner of the entity can apply and sign alone. 

Some documents you will want to have handy if you wish to close in your entity are:

-Entity Articles of Organization, Partnership, and Operating Agreements, if any

-Tax Identification Number (Employer Identification Number - EIN)

-Certificate of Good Standing

-Certificate of Authorization for the person executing all documents on behalf of entity 

To learn more about whether an LLC is right for you, you will want to reach out to an attorney for legal advice. 

This will vary scenario by scenario and product by product, but below is a general cheat sheet.  For most loan products you can have some or all of your down payment gifted.  Be sure to mention the use of gift funds up front so we can verify your eligibility with that guidelines. 

Conventional Down Payments 

1 unit primary residence - 5% (There are some 1% down programs available) 

2 unit primary residence - 15%

3-4 unit primary residence - 20%

1 unit non-owner occupied - 15%

2-4 unit non-owner occupied - 25%

FHA Down Payments

1-4 unit primary residence - 3.5%

Bank Statement Down Payments

1 unit primary residence - 10%

2-4 unit primary residence - 20%

1-4 unit non-owner occupied - 20%-25%

DSCR Down Payments

1 unit non-owner occupied - 20%

2-10 unit non-owner occupied - 25%

1-8 unit non-owner occupied (no ratio) - 30%

VA Down Payments

1-4 unit primary residence - 0%

*There is a one-time VA funding fee paid to the Department of Veterans Affairs, and it supports the VA home loan program. Veterans who put down less than 5% on their home purchase will pay 2.15% of the loan amount when buying a home for the first time, and they'll pay a funding fee of 3.3% on subsequent loans.

USDA Down Payments

1 unit primary residence - 0%

*There is an upfront guarantee fee of 1.0% of the loan amount and an annual fee of 0.35% of the loan amount.

A common FHA misconception is that FHA loans are only available for first-time home buyers or low-income borrowers. While flexible guidelines do make it easier to qualify for FHA if you have low credit or income, FHA loans are available to any home buyer who wants to apply. Current homeowners can also use the FHA program to refinance. While you can apply for multiple FHA loans in your lifetime, you can usually only have one at a time. Generally speaking you will need a 580 or higher credit score for FHA and your DTI will need to be under 57%.  It is also important to note that FHA has maximum loan limits per county. You can go here to search your county: https://entp.hud.gov/idapp/html/hicostlook.cfm  If you want to purchase something over the FHA limit in your area, you would need to pay the difference at closing. 

Since an FHA loan comes with the protection of federal insurance, an FHA appraisal will go beyond just the market value of the property. In addition to completing a traditional appraisal, FHA appraisers must also verify that the home meets minimum standards for health and safety. Thus, FHA loans are not ideal for fixer uppers unless you or the seller are willing to get the property up to standards prior to closing. 

An FHA loan is a home loan backed by the Federal Housing Administration (FHA), a government agency created to help home buyers qualify for a mortgage. The FHA provides backing on loans made by FHA-approved lenders, helping protect them from the risk of borrower default.

Conventional loans are the most common in the mortgage industry. They’re funded by private financial lenders and then often sold to government-sponsored enterprises like Fannie Mae and Freddie Mac.  

Below are some stand out differences. 

Minimum Credit Score

FHA - lower credit score requirement

CONVENTIONAL - higher credit score requirement

Maximum Debt-To-Income Ratio

FHA - higher DTI limit

CONVENTIONAL - lower DTI limit

Mortgage Insurance

FHA - Mortgage insurance premiums: upfront and monthly

CONVENTIONAL - Private mortgage insurance when down payment is less than 20%

Qualifying Properties

FHA - can only be used on primary residences (house hacking is still considered primary)

CONVENTIONAL - can be used on primary residences or investment properties 

Loan Amounts

FHA - vary by county and unit count, check your scenario here: https://entp.hud.gov/idapp/html/hicostlook.cfm

CONVENTIONAL - vary by location and unit count, check your scenario here:

https://singlefamily.fanniemae.com/originating-underwriting/loan-limits

FHA Advantages:

• Low down payment with assistance available for qualified homebuyers
• Lower minimum credit score
• Lower DTI requirements
• Non-occupant co-borrower
• Lower rate (in most scenarios in current market)

Conventional Advantages:

• No Upfront mortgage insurance
• No Mortgage insurance required with 20% down payment
• Less strict appraisal standards
• Mortgage insurance can be eliminated at 80% LTV
• Can be used for investment property

DTI stands for "debt-to-income" ratio.  It is calculated by taking your total monthly debt payments and dividing them by your gross monthly income. This number is one major way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.  Different loan products and lenders will have different DTI limits.  And if your DTI is making you unable to qualify for QM products, you may want to consider Non-QM products with alternative qualifying guidelines. 

To calculate your DTI, you add up all your monthly debt payments and divide them by your gross monthly income. For example, if you pay $1500 a month for your mortgage and another $100 a month for an auto loan and $400 a month for the rest of your debts, your monthly debt payments are $2,000. ($1500 + $100 + $400 = $2,000.) If your gross monthly income is $6,000, then your debt-to-income ratio is 33%. [$2,000 divided by $6,000 = .33 (33%)]

For purchases - The projected payment for the property you are applying to purchase is added into this calculation.  

For refis - The projected payment for the property's new mortgage after the refi is added into this calculation. 

A home equity line of credit and a cash-out refinance are both ways to access the value (equity) that has accumulated in your home. 

You gain access to the cash by borrowing against your home equity, which is the difference between the current value of your home (per an appraisal report) and the amount left to pay on your outstanding mortgage.

If you already have a mortgage, a HELOC will be a second payment to make, while a cash-out refinance replaces your current mortgage with a new one: complete with its own term, interest rate and monthly payment.

Below are some stand out differences. 

• Interest rates are generally lower for cash-out refinances than for HELOCs
• Closing costs are generally higher for cash-out refinances than for HELOCs
• A cash-out refi results in one, bigger loan. A rate and term refi, you will not walk away with any cash proceeds, you are just exchanging your current mortgage for one with better terms. HELOCs leave you with a second loan in addition to your first mortgage.
• A HELOC can close and fund as quick as 5 days while a Refi typically takes a couple of weeks, up to 30 days. 

If you'd like to see if you qualify for a HELOC you fill out this 100% online application and get back a list of options to consider: 

https://axenmortgageheloc.com/account/heloc/register?referrer=bd5912ab-d2ac-4f31-8607-23843b6cf8eb

If you'd like to see if you qualify for a refi please complete my application here: https://prod.lendingpad.com/nexa/pos#/?loid=fa0b2034-ae26-4ec4-a869-4a2286d33b8e

Fix and Flip loans are a great tool for investors.  They are also commonly referred to as bridge loans, rehab loans, or ARV loans. They are short-term loans designed to help investors purchase and renovate a property in order to sell it at a profit OR cash out refinance into a long term loan and hold it as a rental property.  The length of these loans are generally 6, 12, 18, or 24 months. The payments are often interest only.  And the rehab proceeds are generally given in multiple draws throughout your rehab.  LTV, terms, and rates vary; but there are a wide variety of programs to select from with terms that are right for your project and exit strategy. 

A seller concession is a portion of the buyer's closing costs and prepaid expenses that the seller agrees to pay for, lowering the overall upfront costs for the buyer. You and your real estate agent will work with the home seller to negotiate seller concessions. You’re more likely to get a concession if it’s a buyers market but a seller does not have to agree to concessions. Max seller concession allotments are different per different loan scenario but below is a general cheat sheet. 

Conventional - If your down payment is less than 10%, the maximum seller contribution is 3% of the sales price. If your down payment is 10-25%, the seller can contribute up to 6% of the purchase price. And for down payments greater than 25%, the maximum seller concession in 9%.

FHA - The maximum seller concession regardless of the down payment is 6% of the purchase price.

VA - The maximum seller concession regardless of the down payment is 4% of the purchase price.

USDA - VA - The maximum seller concession regardless of the down payment is 6% of the purchase price.

NonQM Investment - The maximum seller concession regardless of the down payment is most ofter 2% of the purchase price.  However, this varies product to product in the nonQM sector. 

BRRRR is an acronym used by real estate investors for “Buy, Rehab, Rent, Refinance, Repeat.”  This method is a repeatable cycle for investors to grow their investment portfolios:

1. Buy - finding a distressed or undervalued property that can be purchased at a reduced cost

2. Rehab - rehabbing, adding value to the property

3. Rent - renting out the property

4. Refinance - using a cash out refinance to get your initial invested capital back

5. Repeat - investing in more properties with the initial capital

Many investors believe BRRRR beats the traditional method of real estate investing because it allows you to recover the capital you left behind and build your portfolio at an accelerated speed, using the same capital over and over.

House hacking is a real estate investment strategy in which you earn rental income by renting out your primary residence. Most often, house hacking means renting a portion or one unit of your residence while living in the other. The income received usually goes towards monthly mortgage payments, property taxes, and other housing costs. It’s a way to simultaneously become a real estate investor and improve your monthly cash flow.   For example: Buying a duplex and living in one unit while renting out the other. 

Since your investment property is also your primary residence, you’ll qualify for lower interest rates and better financing terms. As an added bonus, you get to keep your owner-occupied loan even after you move out, if you decide to convert your home into a long-term rental. Just note that when you obtain an owner-occupied loan, you will be required to live in the home for one year.

I've helped many of my investors break into their investing careers using this method.

If you refinance your existing loan to get a lower interest rate or change the terms, it is called a rate-and-term refinance. No actual money changes hands in this case, except for the fees associated with the loan.  If you want to take out some of the equity in your home during the process you can do a cash-out refinance. Along with new loan terms, you’re also advanced money, effectively taking equity out of your home in the form of cash. 

Rate and Term Refinances generally have lower rates and are slightly easier to qualify for than Cash Out Refinances. However, both Cash Out Refinances and Rate And Term Refinances can be qualified for via QM and Non-QM products. Your investment property can qualify on it's own via DSCR if it is cash flowing. 

In real estate, escrow is typically used for two reasons:

• To protect the buyer’s good faith deposit (also known as Earnest Money Deposit or EMD) so the money goes to the right party according to the conditions of the sale. - used during the home buying process. 
• To hold a homeowner’s funds for property taxes and homeowners insurance. - used throughout the life of your loan.

When you’re buying a home, your purchase agreement will often include a good faith deposit (AKA Earnest Money Deposit). This deposit shows that you’re serious about purchasing the home. If the contract falls through due to the fault of the buyer, the seller usually gets to keep the money. If the home purchase is successful, the deposit will be applied to the buyer’s down payment.  To protect both the buyer and the seller, an escrow account will be set up to hold the deposit until the transaction closes at which point it is applied to the down payment.

After you purchase a home, your lender will establish an escrow account to pay for your taxes and insurance for you on time. Your mortgage servicer takes a portion of your monthly mortgage payment and holds it in the escrow account until your tax and insurance payments are due.  To ensure there’s enough cash in escrow, most lenders require a minimum of 2 months’ worth of extra payments to be held in your account. Your lender or servicer will analyze your escrow account annually.

You often get a better rate for having your taxes and insurance escrowed.  And in some cases it will be a mandatory guideline for the loan product you are using.  This is because the escrow account reduces risk in the following ways:

• If your tax bills don’t get paid, the tax authority could put a lien on your home – which could end up costing the lender money if the tax authority chooses to foreclose.
• If your homeowners insurance coverage lapses, significant damage to or loss of the home could lead to extreme loss of value of the home.

If you don't wish to have your taxes and insurance escrowed (also referred to as "impounded" by lenders) be sure to ask about the option of paying your taxes and insurance on your own.

I work under a company called NEXA Mortgage, LLC.  We have over 200 lenders and 1,000s of products.  It allows me to select from a wide variety of products for my clients and have direct access to the underwriters. NEXA is also the largest mortgage broker so the lenders give us preferential pricing and rates that cannot be beat.  If you are interested in joining our team please reach out!  You and your clients will reap the benefits....a win, win!