Stay in-the-know with Brian Wickert, David Wickert and WTMJ’s Mark Seigrist as they discuss the American housing market, and give you the tips and tricks you need to stay on top of it.
On this week’s Accunet Radio Show:
Brian and David dig into the effect of commission-based income on mortgages, America’s troubled housing market and how to find your real credit score.
Here are the highlights:
- New home sales have fallen 6.9% as reported by the Wall Street Journal – with a 17% margin for error. Their report of a “troubled” housing market really depends on where you look, and in what price range.
- SE Wisconsin is experiencing possibly the biggest housing dearth in the area’s history. We’re miles behind March 2018’s house sales in the <500k range, and it’s not looking up anytime soon.
- A lot of people on the market for a new home look up their credit score using what they think is an “official” FICO score – But FICO has over 60 kinds of credit reports, and not all lenders use the same ones.
The state of available inventory is as tight as a lug nut on a flat tire.
A 25-year-old client has been at his job for 16 months, where he earns a base salary plus commission. He’s in the market and ready to buy now — there’s just one problem: Standard mortgage lending Fannie Mae/Freddie Mac rule is you need a 24-month track record of commission or bonus income to use that income to qualify. The rule books say you can get by with 12 months only if there’s a good, well-documented reason.
How do you go about getting the exception to the 24-month rule? Gather documentation:
- Gather his W-2, year-end paystub for 2018 and most recent paystub.
- Lay the story out in a memo for the underwriter – there’s human judgment involved here. Gotta tell the story.
- Note that he made $91,000 in 2018, which was his first year in sales. He’s on-pace to make $99,000 in 2019, so lead your underwriting horse to water.
- Ask for and receive a letter from his employer’s president talking about how there’s nothing but upward potential ahead of the home-shopper.
We got that information packaged up and sent in for an underwriting review Wednesday morning. Almost rock solid.
We present the best version of you to make the cleanest approval possible.
How’s the Wisconsin housing market doing?
Despite plenty of willing buyers, there just aren’t enough listings to go around. Single-family home listings are far behind where we need to be to beat March 2018 sales, at least in the <500K price range:
|Asking price||SFD Listings||March 2018 sales||# of Months Supply|
|$200K – $249K||39||49||0.8|
|$250K – $299K||38||63||0.6|
|$300K – $399K||100||70||1.4|
|$400K – $499K||120||43||2.8|
|$500K – 749K||175||32||5.5|
|$750K – $999K||93||5||18.6|
What credit score do lender’s use?
Most home-shoppers check their credit scores with FICO to get an idea of what they’re looking at. But what most home-shoppers don’t know is that there are over 60 different “flavors” of FICO scores (one for buying a house, another for getting a credit card, etc.). Accunet (and about 90% of mortgage lenders) use:
- Equifax Beacon 5.0
- Experian/Fair Isaac Risk model 2
- TransUnion FICO Risk Score, Classic 04
This has an effect on your monthly payments. The difference between a 723 and 756 FICO in terms of monthly payment is $33/month, because the cost of Private Mortgage Insurance varies based on down payment and credit score. 5% down on a $322,000 purchase price is about $33 a month due to the difference in mortgage insurance cost, and $765 difference in closing costs, because Fannie Mae charges that much more in a “risk premium” when we deliver with a lower-scored home-shopper.[elementor-template id=”10109″]
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