Mortgage Minute: Getting Creative in a Shifting Market

In response to this constantly swift-moving and uncertain real estate market – a statement that for most buyers and sellers sounds dramatic but is rather consistent for those of us who in work in the real estate industry – more and more we are seeing buyers get creative with the type of loans they use to purchase a home. 

As interest rates rise, buyers may be told they don’t qualify for the same loan they qualified for just a few months ago. It’s important that buyers and their realtors know about products that may seem like specialty mortgage or loan products, but in our region of California, are everyday products we offer. 

More and more we see clients that are asset-rich yet qualified-income poor, which just means that they have done a good job saving and accumulating wealth, and now live off their accumulated wealth and investments. The definition of “qualified income” specifically pertains to a calculation based off tax returns as reported usable annual income per banking guidelines. Keep in mind there are several ways to create additional income outside of what your tax returns show with products like Structured Distribution or Asset Allocation loans. These loans specifically take asset accounts and allow for a calculation which yields additional monthly income that can be used to qualify. In the case of the Structured Distribution option, the client will be required to take a distribution from one of their retirement accounts, only once prior to the close of escrow.

Another great solution for clients to buy homes without having a high level of qualified income is to utilize products like Departing Residence or Cross Collateralization loans. These loans can help leverage a client’s existing home and the equity in that home to purchase a new home prior to selling the existing home, in order to not have to write an offer that is contingent upon selling. There are specific details and guidelines each of the above loan options requires but they are far too detailed to explain in this piece. Lastly, Mortgage Advisors can always find private investors to help bridge the gap; they are the most expensive options but also the most convenient and swift, closing in just 7-10 days. 

At the end of the day, there are still several great solutions for those who have been told they don’t qualify. We would love to help or refer you to someone that can for those extremely unique solutions.

Matt Genovese is a Senior Mortgage Advisor with Finance of America, NMLS-1047256