San Francisco Mortgage News

A Loan For The “Out of the Box” Borrower?

Since the beginning of the housing meltdown and the collapse of the mortgage market, credit and underwriting has continued to get tighter and tighter. The mortgage market has gone from “exotic” to “vanilla” and borrowers with excellent credit, strong equity positions, and significant reserves have been locked out of the market if they did not show adequate income and fit “in the box”. In the good ole days, these were the borrowers that the stated income programs were intended to serve. Instead, the market morphed into an ugly animal that allowed anyone to utilize stated programs and gave the borrowering public carte blanche to lie in order to but too much home.

So what if you are a borrower with great credit, significant equity, and strong reserves? Well if you protect your wealth by filing a creative tax return and minimize your tax liability – you really have no where to go – until now.

Say hello to the Homeownership Accelerator! This loan is a first lien line of credit that allows for a make sense approach when analyzing a borrowers qualifications. The Fed’s would probably say it is a “exotic” mortgage but when you analyze the features and the intention of the program it is a great alternative for many borrowers. The program works like this:

The starting rate (currently) is 3.50% with interest only payments. The program is tied to the 1 Month LIBOR plus (in this case) a 3.250 margin. The premise of the program is that you use it as your household operating account and put all your income against the balance, thereby reducing your interest costs on your mortgage. As the month goes on you utilize the account with checks or a Visa card to buy groceries, pay bills, dine out, go to the movies, etc. etc. etc.. The program works to accelerate the amortization and pay off of your mortgage as long as your cash in flow exceeds your monthly outflow. For a detailed look at the program youu can view a movie that outlines details at http://homeownershipaccelerator.net/.

The creative aspect of the program is that the underwriting is purely make sense and allows credit worthy borrowers who are otherwise locked out of the market to get a home loan.  One “creative” aspect is the allowance of asset depletion to establish an income stream for a borrower.  For instance, if we have a borrower with $1,000,000 in reserves (yes they do exist) then you simply divied the total of reserves by 120 months to establish a qualifying income stream of $8,333 per month.  There is more as the focus is a view of the entire borrower profile rather than the conventional market where we are forced to cram everyone into a box or send them away unhappy and without a loan.