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Janine Bodway

Short on Income?

Thursday, June 20, 2013 - Article by: Janine Bodway - Acceptance Capital Mortgage Corp - Message

The loss of Stated-Income and No-Income/Asset loan programs has created more documentation requirements for our strong asset borrowers with proven credit history and financial stability. For many reasons, some borrowers may not really have a long 2 yr history of documentation for their income but do not understand that to be an issue with excellent credit and strong assets. We are in a new day and that is not necessarily enough anymore, even if you could pay cash.

Asset Depletion Programs are designed to offset ratio guidelines for borrowers with significant assets. There is no minimum age requirement and they are perfect for complex income scenarios that one may run into.

How Do I Estimate How much Income the Buyer's Assets Produce?
A full review of all assets along with a calculation will be prepared. For every Million Dollars your customer has liquid, we can count roughly $5,000 in monthly income based on an average rate of 5%. So a buyer with $1.5 million in assets would have approximately $7,500 in additional income each month.

Let's Look at an Example:
? Borrower's income is $5,000/month but DTI is too high to qualify.
? Borrower has $1,000,000 in liquid assets.
? The underwriter uses Asset Depletion to help with the DTI by running a mortgage calculation at 5% over a 30 year amortization on the borrower's $1,000,000 assets.
? Calculation: $1,000,000 at 5% over a 30-year amortization:
Result: $5,368/month additional income for qualifying purposes. This amount is added to his existing $5,000 income so now he has $10,368/month for qualifying purposes.
Sometimes we run into issues with conventional financing and just need something alternative for a very qualified Buyer. Having some alternatives can be helpful and provide the consumer with a choice rather than a denial that can be very offensive.

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