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The credit crisis has been in our media, tabloids, discussions for 3 years, so why am I bringing it back up?

I learned long ago while I was in the restaurant business to never forget where you came from.  I started out as a dishwasher, then moved my way up the ladder to reach General Manager of a fine dining restaurant.  On any given Saturday night, you’d find me in my 3 piece suit behind the line washing dishes, preparing meat, chopping vegetables, whatever it took to get the job done.  By remembering where I started allowed me to survive and thrive, not to mention receive credibility and admiration from my employees.

Now as a loan officer that has survived the last 3 years within the thick of the credit crisis, I want to remind those that have survived with me of just how far this crisis reached and remind those where we came from.  I want to show my new clients the highs and lows of the past, to set their expectations on what’s to come in their transaction.

I want to demonstrate that remembering where we’ve been will only make us stronger.

This video by Johnathan Jarvis is the best I’ve seen for demonstrating the who, what, when, where, how of the Credit Crisis.  Watch this 11-minute video and tell me how you feel in the comments section below.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

I’ll tell you how I feel – after I stopped pointing the finger at everyone else wondering who’s to blame or who’s going to solve this problem – I started asking these questions:

• How can I help?
• What can I do to develop myself?
• How can I become part of the solution?

Today, I am part of the solution.  Along with my team of referral partners we’ve helped over 150 families in the past 3 years reach their goal of home ownership by developing systems that work.  Our transparency and direct approach proves to be the successful way to maneuver through the credit crisis.

Who’s the next person you know who needs a “designated driver” through the credit crisis?

Jonas Kruckeberg
951-506-4663 | Email

Buying a home in this market can be difficult to say the least.  Buying a new home with a loan when your current home is upside down seems near impossible. Not for Jim and others like him.

You see, Jim, like many people out there, makes decent money and unfortunately he paid too much for his home 5 years ago.  Luckily he used a 30 year fixed loan on his current residence so the payment is set, however, the value of his home in East LA County has dropped more than 50%.

Most people will walk away from something like this, but not Jim.  He’s put too much of his own money, time and heart into his home to just up and walk away.  Jim will honor the repayment of his debt over time unlike many others.  However, Jim now wants to move to Temecula, California, roughly 60 miles away where home prices have dropped near 60% from their 2005 high.

Needless to say, there are some fantastic homes at incredibly low prices plus interest rates are at their absolute bottom.  Jim found the home he wants in Temecula, but he now faces a challenge that few are able to overcome.  He must demonstrate to a mortgage lender that he is buying a new primary residence and not an investment home.

His current residence will become a rental after he takes possession of the new home, however the lender will not allow rental income to offset his debt obligation.  That poses a problem as he will now have to qualify for the new home with the liability from the departing home.  In order to count rental income on a departing residence you must have a) 25% equity in the home and b) have experience as a landlord – basically showing a history of renting property.  Jim has neither.

The next challenge for Jim is finding a lender that allows higher debt to income ratios.  Many lenders are diving into the safe haven of ≤45% total debt to gross income. That’s a good rule of thumb for all as this will enable most to survive.  When your DTI is  ≥50%, that poses a significant risk for future delinquency.

Jim doesn’t worry about delinquency as his income is stable and he knows that the rental income on the departing residence will offset his debt, but again, the lender doesn’t care about that rental income for the new purchase.  Jim’s overall DTI is 54.2% with both residences and other liabilities (car, credit cards).  That is slightly under the 55% threshold for some lenders, so we’re good, right?

Not so fast.  Although he qualifies with income, credit and assets, he now has to face the labeling of “Buy and Bail.”  The majority of lenders shy away from any new purchase transaction that entails a departing residence upside down in value as they feel the borrower will eventually foreclose on that home – posing a possible risk to the new home.  No lender wants to contribute to the ongoing slew of foreclosures; therefore many would simply close their doors to this loan.

Jim is destined to buy this new home.  He wants to hold on to the home in Los Angeles, rent it out, keep it for his children for the future.  He has good intentions.  So, I instruct him to do a few things for the new lender:

• write a detailed letter of explanation about the situation, demonstrate his DTI will be 38% with rental income and under the guideline of 55% without it – therefore having enough income to pay for both residences
• provide proof that he is actively marketing his departing residence for rent
• show that the new home is a ‘trade-up’ in value
• sign an additional disclosure for the lender that demonstrates he will take possession of the new home as his new primary residence within 60 days of closing

None of this guarantees approval from the lender.  This is simply building his case as an attorney would build a case for his/her client.

The lender accepted the documentation and proceeded with the loan.  This is a true success story not only for Jim but for FHA.  Without FHA and our ability to provide sufficient evidence to overcome the objectives, Jim’s dream of building a legacy for his family would have stopped short.

Jim is now thoroughly enjoying his new home and has a solid renter in the LA home on a 3 year lease.

Who do you know like Jim that has a home upside down in value and wants to pursue purchasing a new home in California?

Call me today at 951-506-4663 to discuss the situation.

Your comments are certainly appreciated.

Read Other Success Stories

No Credit Score Borrower Buys First Home in California

California First Time Home Buyer Under 620 Credit Obtains FHA Loan

California FHA Loans and the Kitchen Sink

Is it really possible for a California first time home buyer with under 620 credit score to obtain a FHA loan? Most people would disagree. The Jonas Kruckeberg Team fights day in and day out for clients to obtain their dream of homeownership, so to all the naysayers let this be a demonstration that it can happen.

Amidst all the negativity in the mortgage market, in the media, in your e-Mail, we all need a little good news. Hearing a success story can be invigorating and/or inspirational. Here’s a recent success story that could help you or someone you know maneuver the way to homeownership through FHA.

Caroline is a first time home buyer with a 609 FICO score and several unpaid medical collections which disqualified her from almost all FHA lenders since they require at least a 620 score and up. If her brother did not refer her to me, she would still be attempting to rid herself of past debts & collections to raise her score. I assessed her credit, income, assets and found a lender that would accept the lower credit score. After several days of building the file to completeness, we received a full approval from the FHA lender and went straight to ordering loan documents to be signed.

Caroline jumped in her car with her husband, drove 40 miles one way to my office & thanked me, high fived me, blessed me for being THE loan officer that said YES to working with them to obtain their home (no one else wanted to assist).

Do you know anyone that is a first time home buyer with a sub 620 credit score that would like to purchase a home in California with a FHA Loan?

Call 951-506-4663 (HOME) to schedule your free strategy session so you too can become a happy homeowner. You may use my Complete Secure application for a California FHA Loan online or Download a California FHA Application to fax or email.

California FHA loans require documentation – a lot of documentation.  That’s a good thing, in my opinion.   This compilation of paperwork is typically sent in by fax by my clients.  The problem is – trying to fit a Stainless Steel Kitchen Sink through the fax.  At least that’s what it seems like you have to do now.

One of my clients, Mr. Dylan, faced a dilemma like this – although it had nothing to do with a fax or a sink.  No, his problem was a bit larger than that.

Mr. Dylan had a home in Menifee, CA that was underwater in loan to value (value significantly lower than his current mortgage balance).  Of course he wanted to buy another primary residence, however, this residence was a Condominium in Ladera Ranch, CA that required a spot approval.

Most FHA lenders and HUD have an issue with homes underwater when attempting to buy another.  They feel the departing residence will be deserted, plus he’s “trading down” in size from a single family residence to a condo.  What’s a guy to do?  Well, he was able to afford both payments, his debt to income ratios were in line, and his situation made sense.

Mr. Dylan came to me through a referral from a real estate agent partner who said “if Jonas can’t do this, no one can.”

The cards were against my client.  Instead of going around these objections we addressed each cautionary or red flag head-on by providing sufficient and supportive evidence for my client’s transfer from the Inland Empire to Orange County.  For example, he was moving to OC for a position within his company that paid more;  he was changing his lifestyle by moving to the highly desirable Ladera Ranch;  and he showed evidence of actually renting his departing residence.  Although the proof of renting his home was not a requirement, nor was it allowed for income purposes,  it was a simple act of good faith.  We wanted to prove to the best of our ability that this WAS NOT a buy and bail as most people would slap a label on it immediately.

Mr. Dylan and I worked together for 5 months to get approved, find a home of his liking and close the transaction.  He was appreciative of my persistence, determination and most of all, my transparency.   Plus, we both prefer stainless steel appliances which made him a little reluctant to give up his kitchen sink – but with that Jonas Persistence he was able to get it over to me.

Great Video from Tim Davis and friends.

Who do you know like Mr. Dylan that is purchasing a new primary residence in California that needs transparent, professional mortgage guidance?

Email me at jonas@jonasloans.com and place TRANSPARENCY in the subject line.

Look forward to hearing from you.