Rules are inherently restrictive, but if there’s one thing the mortgage industry does well, it’s circumvention.
For example, taking what appears to be a pretty small box and searching for openings to create a new niche product.
That’s exactly what Banc of California has done via their Banc Home Loans correspondent line, despite the many rules that define a QM loan.
Get a Mortgage One Day After Foreclosure or Short Sale
While the concept of getting a mortgage one day out of foreclosure isn’t necessarily new, Banc Home Loans is offering some pretty aggressive terms while staying within the QM realm.
For instance, they allow loan amounts of up to $1 million at 80% LTV for both purchases and rate and term refinances (owner-occupied only), even if you were foreclosed on yesterday.
You can even get a mortgage if your bankruptcy was discharged just two years.
In the $1 million to $2 million tier you can borrow up to 75% LTV, or as high as 70% between $2-$3 million. Not enough? Borrow $3-$4 million up to 65% LTV.
The only restriction is that you can only have one foreclosure or short sale on your credit report. So if you walked away from two properties, you’re out of luck.
Now you might be thinking there’s a high credit score requirement for this program, given the generous LTV thresholds and the lack of foreclosure/short sale seasoning.
But you’d be wrong – you can get this loan with a credit score as low as 660, which while not as low as what the FHA considers acceptable, is still on the lower end.
So you’ll have to hope your previous missteps didn’t derail your score too much. Assuming you started with a pretty healthy score, there’s a good chance you’ll be able to stay in this range and qualify.
At the same time, mortgage lates are perfectly acceptable, as are installment/revolving lates on other credit lines with an explanation. In fact, you’re allowed up to four 30-day late payments on other loans in the past 12 months.
However, collections that appear on your credit report will only be approved on a case-by-case basis.
All This and Still QM?
Yep. It’s simple really. The QM rules, while fairly extensive, only have a few key requirements beyond ensuring the borrower has the ability to repay the loan.
And this program does require full verification of income and assets, including pay stubs and tax returns, along with six months of PITIA.
Additionally, the max DTI ratio is 43% and there is no interest-only option offered via the program, or any negative amortization or balloon payments. The loan term is also the standard 30 years.
You can only take out an ARM with this program, either the 5/1 or 7/1, and you must qualify at anywhere from 2-6% above the start rate. In other words, you’ll need some decent income to stay under the crucial 43% DTI limit.
So there you have it. You can do some pretty aggressive stuff while staying firmly under the QM umbrella, though you can bet the underwriting will be pretty intensive.
For the record, first-time home buyers are not eligible for this program, which I suppose goes without saying, given it’s geared toward those who’ve previously lost their homes to the bank.
Read more: Get an FHA loan just one year after foreclosure, short sale, or BK!
(photo: Horia Varlan)