Credit Myth #3: A high credit score can make up for a low credit score

After spending over 16 years in the mortgage lending industry I have identified seven myths that consumers commonly hold regarding their credit score.  Over the course of the next few weeks I am going to breakdown each myth and help you better understand how your credit scores are determined so that you can achieve a better outcome for your next loan application.

The third myth is that a high credit score in a joint loan application can make up for a low credit score.  The reality is, mortgage underwriters use the lower of the two applicants’ credit scores when evaluating a joint loan application.  It doesn’t matter if the higher credit score applicant has perfect credit or is only marginally higher.  The underwriter will use the lower of the two scores in determining if the application can be approved and in pricing the interest rate.

Sometimes it may be possible for the applicant with a higher credit score to qualify for a loan independent of the applicant with the lower credit score.  In that instance it may make sense to complete the loan application in the higher credit scorer’s name only.

Please contact me today to learn more about how your credit will impact your next home loan process.

Credit Myth #2: Having your credit report pulled will ruin your scores

After spending over 16 years in the mortgage lending industry I have identified seven myths that consumers commonly hold regarding their credit score. Over the course of the next few weeks I am going to breakdown each myth and help you better understand how your credit scores are determined so that you can achieve a better outcome for your next loan application.

The second myth is that having a lender pull your credit report will ruin your credit score. It is true that credit inquires will reduce a consumers credit score. For each consumer the impact will be different, but for most the adverse effect is very small. In fact, according to THIS ARTCILE one credit inquiry will only reduce a person’s score by less than five points. Take a moment to watch this short video to learn about the special exception that applies to the mortgage industry pulling your credit:

Please contact me today to learn more about how your credit will impact your next home loan process.

Credit Myth #1: You have only one credit score

After spending over 16 years in the mortgage lending industry I have identified seven myths that consumers commonly hold regarding their credit score.  Over the course of the next few weeks I am going to breakdown each myth and help you better understand how your credit scores are determined so that you can achieve a better outcome for your next loan application.

The first myth is that we all only have one credit score.  In fact, consumers have over 40 different credits scores which are determined by various algorithms that specific industries subscribe to.  Please watch this short video to learn more:

Want to learn more?  I found THIS ARTICLE in Forbes online which goes into greater detail.

Please contact me today to learn more about how your credit will impact your next home loan process.

Things to know about purchasing a condominium

Hey, guys. Evan Swanson, Swanson Home Loans of Cherry Creek Mortgage here to talk to you today about the differences between applying for a loan to buy a condominium and a traditional detached single-family residence.

Why are there differences?

Well, understand, as a lender, we always must evaluate the collateral for the loan. When a person buys a condominium, they are buying into a small democracy.  The homeowner’s association, which is charged with the responsibility of maintaining the common areas, which is often the structure in which the condominium is located.  Not only do we have to take a borrower through the traditional steps to evaluate their finances, but we also have a separate underwriter look at the condominium itself to make sure the condominium is governed well and has the financial resources to maintain the property over time.

Loan programs

With regards to specific loan programs, what is there to look out for? If you’re using FHA or VA financing, there is a separate approval process that the HOA must go through and that project will be listed on those websites to determine if they are eligible or not. If the property is not eligible, chances are you’re not going to be able to use those types of financing to buy a condo there.

For FHA:

For VA:

A couple other things for conventional and jumbo loans that an underwriter will likely want to look at:


The underwriter might want to measure as a percentage of all the units in the homeowner’s association what percentage are owner-occupied and what percentage are non-owner-occupied.  Lenders like to see more owner-occupied because, in general, those owners will vote for assessments and maintenance investments that will help maintain the building over time.


Is the HOA currently in any form of legal litigation? If so, litigation has to be complete before a loan can fund, typically. Is the HOA under any major, significant construction? If so, oftentimes the construction has to be completed before a loan can fund.

The underwriter may also want to see if there is a concentration of ownership to a single person or entity? There can be limitations on how much a single entity can own of the entire project.

Residential vs. retail space

And then lastly, does the condo have retail space? Is it a mixed use? If so, there’s limitations on how much of the overall square footage can be allocated to retail and residential square footage.

The bottom line is there’s another set of rules that lenders must follow when helping guide a customer through a condominium purchase.

If you’re thinking about buying a condominium, make sure you’re working with a lender that understands those rules. Of course, if you’re looking for a lender, we would love to be a resource, so contact us today. Talk to you soon. Thank you.

Conforming loans vs. Jumbo loans


In this post and video, I will summarize the differences between a conforming loan and a jumbo loan.

Loan Amount

The first difference is the loan amount, which is ultimately what defines a conforming loan versus a jumbo mortgage.  For 2018, here in Portland, Oregon, the threshold that determines a conforming loan and a jumbo loan is $453,100.00.

A loan amount at that level or less can be underwritten to conforming loan standards, whereas a jumbo mortgage is for an amount in excess of that and is underwritten to jumbo underwriting standards.

I expect the threshold to increase annually overtime.


The second difference is that conforming loans are underwritten to more standardized and simpler guidelines. Fannie Mae and Freddie Mac have produced underwriting guidelines that are applied to conforming loan applications.

For jumbo mortgages, the market is much more fragmented. There are a lot more than two institutions that underwrite jumbo loans and each one has a different set of rules and guidelines.  Therefore, the criteria to approve jumbo loans is a lot less standardized than for conforming loans.

As you might have imagined, jumbo loans tend to be underwritten to a much higher standard than conforming loans. Let me give you a few examples.


With regard to credit, typically we see jumbo loans require higher credit scores, and in addition, the applicant must have more credit depth, more accounts and history on their credit report, than a conforming loan.


Second, in terms of income, we measure a debt to income ratio for each loan application.  This calculation takes into account the amount of obligations as a percentage of the income. We typically see jumbo mortgages limited to a debt to income ratio of 43%, meaning 43% of the household’s income can be allocated to obligations and the new mortgage payment. Whereas with conforming loans, we can typically get applications approved to 45% and in some instances, 49.9% percentConforming loans allow for higher levels of monthly obligations relative to an applicant’s income.


With regard to assets, under a jumbo underwrite, typically the jumbo guidelines will require that the applicant have a multiple of six times the mortgage payment left over in financial accounts after the down payment and closing takes place. Whereas with conforming loans, when buying a primary residence, the underwriter doesn’t necessarily require us to document any financial reserves.


Lastly the appraisal, or the collateral underwrite are different between these types of loans. With a jumbo mortgage we typically always need an appraisal, and in some instances, we might need two appraisals and/ or a review appraisal on top of the initial appraisal. With regard to a conforming loan, we can typically get the loan approved with an appraisal and in some instances even that is waived.

In terms of rates and fees, currently the jumbo and conforming loans are pretty similar, but at times you do see small differences between the two.  The bottom line is the conforming loans will be a little less cumbersome to be underwritten compared to a jumbo mortgage. If you have questions about qualifying for either, I would love to be a resource, contact me today. Thank you.


UPDATE: Eliminating mortgage insurance from a conventional loan

Video Transcript: 

Hey, I’m Evan Swanson of Swanson Home Loans, a division of Cherry Creek Mortgage Co. Inc. In today’s video, I’m going to talk to you about getting mortgage insurance eliminated from a conventional mortgage.

Back in February, I recorded a VIDEO which talks about the details of the Homeowner’s Protection Act, which is the federal statute which governs this topic. However, in my hand, I’m holding a Fannie Mae Mortgage letter, 2018-03, this document was released in mid-July and this changes the rules for Fannie Mae secured mortgages for consumers to get their mortgage insurance eliminated.

Now these particular rules only apply to Fannie Mae secured loans for now. If you have an FHA loan, a Jumbo mortgage, or loan which was secured by Freddie Mac, these rules may not apply. Also, in this video I’m only going talk about a primary residence one unit single family residence. I’m not going to talk about investment properties or two to four units. Those rules are slightly different.

The good news in this document is Fannie Mae is trying to make it easier for consumers to have their mortgage insurance eliminated. They talk about three different scenarios.

1) Getting the mortgage insurance eliminated based on the homes original value so a consumer has paid down the principal to have the mortgage insurance eliminated. Prior to these rules in order to have the mortgage insurance eliminated, a consumer would have to wait until the loan was scheduled to reach 80 percent of the original value of the home regardless of additional principal payments. What Fannie Mae is saying in this document is that they will now take into account the actual principal balance. So if you have made additional principal payments, then they will go off that without having to wait until the loan was originally scheduled to reach that point.

2) You want to take into account the home’s current value. In this scenario, the home value has gone up. It’s appreciated in value and you want the loan servicer to take that into account when determining the loan to value. Prior to these rules you’d have to pay for an appraisal or a broker price opinion and that particular document would create the value that the lender would use. What Fannie Mae is doing is they’re releasing an automated valuation system, it’s not going to be available until spring of 2019, but at that point, loan servicers will be able to cross check the current value of the property with the statistical model and if that valuation supports a loan to value of 80 percent or less, then the mortgage insurance would be eliminated assuming the loan is at least five years old.

If the loan is between two and five years old, Fannie Mae says the loan to value would have to be 75 percent. If the valuation in the statistical model does not support a proper value to have mortgage insurance eliminated, the consumer can still opt to get a broker price opinion or an appraisal to try to get the mortgage insurance eliminated.

3) If you’ve made improvements to your property that have increased the value, then you will have to provide the loan servicer with a detailed list of the improvements that have been made. Then they can go ahead and use that statistical model and if that doesn’t support a broker price opinion or an appraisal can substitute this. Basically the loan servicer can take into account additional improvements in value.

If you meet any of those guidelines, good news ahead. Starting January 1st of 2019, these new rules take effect and it should be easier for consumers to get mortgage insurance eliminated. If you have questions about your scenario, we’d love to be your resource for you. Thank you for the opportunity, we look forward to chatting with you soon.

Don’t get scammed by a mail-order mortgage company!

Video Transcript:

Hey guys, Evan Swanson here to talk to you today about something that drives me crazy. That is phone and mail solicitations on mortgages.

As a mortgage professional, I get them just like you do. The only difference might be I have a little easier time navigating and understanding the information they’re trying to share. I can tell you, 99 times out of 100, these companies don’t care about your financial well-being. They are only interested in making a commission and doing the transaction.

Example, here’s a solicitation my wife and I received recently. Understand, I don’t mind telling you that we locked our rate in at a few years ago. We have a 3.50% 30-year fixed rate mortgage. This company is telling us that we could refinance and get cash out of $41,000. It’s telling us to refinance into a higher interest rate than we currently have. It’s telling us that we can eliminate our mortgage insurance.  Yet, we don’t have mortgage insurance. It’s also telling us here that no equity is required to make the loan.

However, if you flip over to the back and read the small print it says “30-year term conventional loan with a minimum of 20% equity.” Wait a minute. I thought you said there was no equity required?

Here’s another solicitation a colleague of mine got who currently has a 2.50% fixed rate mortgage on their house with 18 years left. Their own mortgage company is soliciting them to try to refinance into a 30-year term at 5.25%, and then it’s telling them they can expect to save money annually. I’m sorry, but if you take a 2.50% fixed rate and turn that to a 5.25%, there is no savings. There may be cash flow savings because they’re spreading their payment of principal over 12 additional years, but that’s not savings to the customer.

Bottom line, guys, if you’re interested in getting your house looked at for refinance, don’t go with one of these solicitation companies. They don’t care about your financial outcome. They’re only interested in their own well-being.

Contact your local mortgage broker today. Talk to someone who knows what they’re doing and will give you a fair assessment of your options.

Of course, I would love to make myself available to you.  Please contact me today!

Eliminating mortgage insurance from a conventional loan

Video Transcript:

Hey there, Evan Swanson here to talk to you today about the elimination of mortgage insurance premiums from a conventional conforming loan.

There seems to be a lot of misinformation and confusion out there about when a consumer can get mortgage insurance premiums eliminated from their mortgage payment.

I like to describe it to customers from a best case and a worst-case perspective. Worst case is what’s written in the law under the Homeowners Protection Act, which is the federal statute, which governs this topic.

What that law says is that a lender can require mortgage insurance premiums to be paid so long as the remaining loan balance is scheduled to be above 78%-80% of the home’s original value. Original value is defined as the lessor of the purchase price or appraised value at the time the loan was taken out.

Worst-case scenario:

On a conventional conforming loan today, with 10% down at today’s interest rates it could take a consumer upwards of 6 years before they reach the point at which they have enough equity that they can have the mortgage insurance eliminated.

Best-case scenario:

Many loan servicers will allow consumers to get out of the mortgage insurance sooner than that, even though federal law doesn’t require them to. I’ve seen policies, which state that after a year, if the consumer has paid down the principle to below 80% of the original value, they can have the insurance removed.

I’ve seen others that show after two years, with the cost of an appraisal, if the consumer can demonstrate a 20% or more equity position that the mortgage insurance can be eliminated at that time. Typically, all these are going to require a clean payment history and some sort of documentation to the lender that the value on the property is what it is.

If you want to learn more about your options to eliminate mortgage insurance or if you want to ask questions, I’d love to be a resource for you and your family. Please, let me know how I can help. Have a great day.

What, when, why mortgage insurance?

Video Transcription:

Hi! Evan Swanson here to talk to you today about mortgage insurance. What is mortgage insurance, when is it required, and why do banks require it?

First, what is mortgage insurance? Mortgage insurance is insurance that homeowners pay for, and the bank is the beneficiary to the insurance coverage. It protects the bank against losses they would incur in the event of default or foreclosure on the mortgage they make.

When is mortgage insurance required? On conventional loans, mortgage companies typically require mortgage insurance whenever there’s less than 20% down. On FHA loans mortgage insurance is required regardless of down payment.

Why do banks require mortgage insurance? To answer that question we have to go back and look at what banks required prior to mortgage insurance. Banks required that everybody have 20% down and the idea was in the event of a foreclosure the bank would have incurred losses and that means they would have missed out on mortgage payments for somewhere between six and 18 months, meaning missed interest income.

If a person can’t afford to make their mortgage payments chances are they can’t afford to maintain the property so once they get the house back via the foreclosure process there’s deferred maintenance the bank has to pay for. The bank would have had to hire an attorney to execute the foreclosure process and then hire a realtor and pay a commission in order to sell the house. The banks require 20% down as their cushion to ensure that if they had to go through that foreclosure process they can still get their loan proceeds back.

Now there are a variety of ways to pay for mortgage insurance but without 20% down banks are going to require it.

If you’re curious about the different mortgage insurance options available to you and want to learn about them I’d love to be your resource for you. Please contact me today. Thank you.

Can I build my closing costs into my loan amount?

Transcript of video:

Hi, I’m Evan Swanson with Swanson Home Loans & Mortgage Trust, NMLS number 120856. In this video, I’m going to answer a question that I am frequently asked by home buyers, which is can I build my closing costs into my loan amount in order to reduce my cash out of pocket? I’m going to answer this question today from a purchase transaction perspective. I am not going to address the question from a refinance perspective.

The short answer to the question is no. A home buyer typically is not able to add the closing cost into the loan amount. The reason for that has to do with the loan-to-value restrictions of a loan program.

Let’s look at this with an example. Let’s assume there’s a home buyer who’s purchasing a property for $300,000, and the loan program they’re using requires a 5% down payment. That means they would put $15,000 down and take out a loan for $285,000. Let’s assume, for example, the total closing costs, prepaid, and pro-rated payments for that purchase is $7,000. So, without anything happening, purchase price $300,000, 5% down ($15,000) plus $7,000 settlement charges.

The buyer would have to bring in $22,000 to close. If we were to arbitrarily add that $7,000 into the loan amount, that would push the loan up to $292,000, and now the loan-to-value would be 97%. If the loan program doesn’t allow for a loan-to-value of 97%, then unfortunately the buyer is not able to qualify after adding that in.

There is a backdoor way that we can address this. The buyer could make an offer to the seller for $307,000, but at closing I want you to subsequently give me a $7,000 credit back to be applied to my closing costs.” In that instance, the buyer would have to bring in 5% down based on a $307,000 purchase price, which is $15,350, and now the seller is giving a credit to be applied to the closing cost.

So, the buyer is now effectively able to finance their closing cost by buying the property for a higher price and subsequently asking the seller to give a credit. There are some potential issues around that. In some markets, that may not be viable. In addition, the house would have to appraise for $307,000 to collateralize or to cover that additional $7,000 credit being asked for.

Again, can loan closing cost be built into the loan amount?  By default, no, in a purchase transaction. In some instances, you may be able to by effectively building them into your purchase price and subsequently asking the seller to pay them.