Many Self-Employed Missing Out on Low Refinance Mortgage Rates
The subprime mortgage meltdown along with its banking crisis aftershock has hurt the chances of many self-employed individuals looking to take advantage of today’s historic low refinance mortgage rates. After banking balance sheets and liquidity took a severe downturn, mortgage lenders began to tighten up their underwriting guidelines for offer refinance programs.
No-Doc and Reduced-Doc loans were among the first casualties of the tightened lending standards. The option for a homeowner to refinance with anything but a fully-documented income loan is pretty much non-existent in today’s refinance lending environment.
Why you might ask? Well, mortgage lenders do not want to take on any risk after the meltdown. A Full-Doc loan gives them the most assurance of the ability of the refinancing homeowner to repay their loan.
Self-employed individuals have been impacted greatly by mortgage lender restrictions on loan program options. During the great housing boom earlier this decade, most self-employed people simply used a “Stated Income” loan to either refinance or purchase a home. This option was used because mortgage lenders use the bottom-line income for self-employed individuals, after tax write-offs for fully documented loans. Since most self-employed people will not qualify Full Doc after income tax write-offs, the stated income loan option was a very nice deal.
Now that stated income refinance loans have fallen by the wayside, there is little option for the self-employed if their bottom-line numbers do not meet refinance program debt-to-income (DTI) ratio guidelines.
One option for a self-employed person that misses the DTI ratio is to add a working spouse, domestic partner, or other adult individual the permanently resides in the home to the refinance mortgage application. The added income could be enough to meet the DTI guidelines and allow the homeowner to refinance.
Unfortunately, adding another person to the mortgage may not be an option, or may not be something that a homeowner wishes to do. Yes, many self-employed people have been painted into the corner with the current refinancing loan restrictions.
You might also ask why mortgage lenders are not doing more to help out homeowners, self-employed or otherwise, after taxpayer dollars came in to save their behinds? At the moment, the mortgage lenders are fending for themselves and are not required to make loans if they do not wish. It’s unfortunate that the TARP bailout money given to them did not have any strings attached in this vain.
In fact, bank balance sheets are getting stronger and stronger with many of the fat cats actually paying back TARP funds to the government. Still, no relenting on mortgage underwriting guidelines and little help for those trying to get a loan modification.
President Obama has recently put some political pressure on the banks to begin lending once again, but it’s a tough industry to lobby. We’ll have to wait and see if any future legislation or other governmental action with teeth can help to open up the lending guidelines in the near future, but it is going to be tough.
It may not be until the economy and housing markets recover more robustly, that less restrictive refinancing mortgage programs are offered for the self-employed and other homeowners that would benefit significantly with a home refinance.
If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
No-Doc and Reduced-Doc loans were among the first casualties of the tightened lending standards. The option for a homeowner to refinance with anything but a fully-documented income loan is pretty much non-existent in today’s refinance lending environment.
Why you might ask? Well, mortgage lenders do not want to take on any risk after the meltdown. A Full-Doc loan gives them the most assurance of the ability of the refinancing homeowner to repay their loan.
Self-employed individuals have been impacted greatly by mortgage lender restrictions on loan program options. During the great housing boom earlier this decade, most self-employed people simply used a “Stated Income” loan to either refinance or purchase a home. This option was used because mortgage lenders use the bottom-line income for self-employed individuals, after tax write-offs for fully documented loans. Since most self-employed people will not qualify Full Doc after income tax write-offs, the stated income loan option was a very nice deal.
Now that stated income refinance loans have fallen by the wayside, there is little option for the self-employed if their bottom-line numbers do not meet refinance program debt-to-income (DTI) ratio guidelines.
One option for a self-employed person that misses the DTI ratio is to add a working spouse, domestic partner, or other adult individual the permanently resides in the home to the refinance mortgage application. The added income could be enough to meet the DTI guidelines and allow the homeowner to refinance.
Unfortunately, adding another person to the mortgage may not be an option, or may not be something that a homeowner wishes to do. Yes, many self-employed people have been painted into the corner with the current refinancing loan restrictions.
You might also ask why mortgage lenders are not doing more to help out homeowners, self-employed or otherwise, after taxpayer dollars came in to save their behinds? At the moment, the mortgage lenders are fending for themselves and are not required to make loans if they do not wish. It’s unfortunate that the TARP bailout money given to them did not have any strings attached in this vain.
In fact, bank balance sheets are getting stronger and stronger with many of the fat cats actually paying back TARP funds to the government. Still, no relenting on mortgage underwriting guidelines and little help for those trying to get a loan modification.
President Obama has recently put some political pressure on the banks to begin lending once again, but it’s a tough industry to lobby. We’ll have to wait and see if any future legislation or other governmental action with teeth can help to open up the lending guidelines in the near future, but it is going to be tough.
It may not be until the economy and housing markets recover more robustly, that less restrictive refinancing mortgage programs are offered for the self-employed and other homeowners that would benefit significantly with a home refinance.
If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
Labels: business, economy, finance, home loans, mortgage rates, refinance, refinance rates, refinancing
posted by Jim Bisnett at
10:51 AM
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