In March 2020, the exotic mortgage world came to a halt as the COVID-19 pandemic spread across America.
Aggressive, creative and quirky mortgages, like those that counted deposits on bank statements as income, were suddenly dust in the wind.
But government-sponsored mortgages like those from Fannie Mae, Freddie Mac, the Federal Housing Administration and the Department of Veterans Affairs continued full steam ahead.
Mortgage volume hit a record high of $4.3 trillion in 2020, up from $2.5 trillion in 2019, according to the Black Knight.
Still, exotic mortgages (i.e. non-qualified mortgages) fell to $37.3 billion in 2020 from $52 billion in 2019, according to Inside Mortgage Finance.
Fast forward to March 2021. This so-called unqualified mortgage space has come back strong and is more aggressive than ever. Can you say Mr. Toad’s Wild Ride?
Starting this week, you can use Bitcoin or any cryptocurrency (which, mysteriously, is unregulated and has no central authority) to buy anything from your starting house to your lavish palace – without any thought as to how you propose to come up with the monthly house payment.
No proof of income for you. We are talking about a minimum down payment of 25% on loans as large as $3 million.
Just spit out your Bitcoin or other recent cryptocurrency statement and call it good for your down payment, as well as settlement fees and cash reserves. However, you will need to liquidate this Bitcoin in cash and transfer it to escrow before the close.
On the other hand, Fannie Mae does not recognize Bitcoin or any other digital currency unless it has been previously converted into US currency and deposited in an eligible and previously seasoned asset account for at least two months. Fannie also needs a paper trail showing that the funds in the cryptocurrency account previously belonged to the borrower.
However, to get this unqualified loan using Bitcoin, you only need to have an average FICO score of 700 or higher when depositing 25% – or an average score of 660 or higher when depositing 45%. Other than that, it’s little more than a fog-the-mirror loan.
Rates for this mortgage start in the mid-5% range.
The down payment, closing costs, and any required cash reserves can all come from a gift, be it cryptocurrency, stocks, or cash.
Here are some other dazzling and exotic honorable mentions:
- A loan for an independent borrower who establishes his own profit and loss statement over 12 months. No bank statement is required and the minimum 20% deposit can come from gifts.
- A 1099 loan for an independent contractor without accompanying tax returns. Tax deductions for heavy loads are not charged to you.
- Mortgages for borrowers currently in forbearance.
- Loans on rental property without having to qualify with as little as 20% down payment, as long as future rents are at least 75% of the mortgage payment.
- A loan with only 10% down payment using average deposits on bank statements for a year to show income.
Freddie Mac rates the news: The 30-year fixed rate averaged 3.17%, 8 basis points higher than last week. The 15-year fixed rate averaged 2.45%, 5 basis points higher than last week.
The Mortgage Bankers Association reported a 2.5% drop in mortgage application volume from the previous week.
At the end of the line : Assuming a borrower gets the average 30-year fixed rate on a conforming loan of $548,250, last year’s payment was $100 more than this week’s payment of $2,362.
What I see: Locally, well-qualified borrowers can obtain the following fixed rate mortgages with a cost of 1 point: A 15-year conventional at 2.125%, a 30-year FHA at 2.375%, a 30-year conventional at 2.75% , a 30-year conventional high balance ($548,251 to $822,375) at 2.25%, a 30-year conventional high balance at 3%, and a 30-year jumbo pegged at 2.99%.
Eye-Catching Loan of the Week: A fixed rate over 15 years at 2.25% without points.