Global income if considered with regards to commercial mortgage underwriting is the income of the borrower. This process involves the way through which the commercial mortgage underwriters try to get a clear idea on the total NET income of the borrower. The global income calculations are done based on the total income of the person applying for the commercial mortgage. The calculations are to be done irrespective of it being an online mortgage application or an offline one.

Calculating the global income

In case of the commercial real estate mortgages, one thing is quite common for a borrower. That is he/she can have different entities which may be showing profit and some others that is going to show loss. It is similarly common a thing which can be seen, this is that most of the borrowers’ personal expenditures actually far exceeds that what they are able to actually make through the different sources of their income in commercial real estate. In case a commercial real estate borrower is going through a tough time and if he/she has low income, it would get tough for that person to get a real estate mortgage.

For example let us consider a case of commercial refinance. IN this case let us take that a commercial refinance is to be done on a commercial mortgage which is owner occupied and has a loan amount adding up to almost $1,000,000. The rate on the proposed real estate loan is 6.5% and the loan term is on a 25 year amortization schedule. Now it is always better to keep an example simple so as to get a better understanding of the whole fact. So, we are considering that the borrower has one business and also has personal income & other expenditures; no other items are to be taken into account. On analyzed view after paying on the business tax returns, non cash expenses like depreciation, the interest, and amortization and so on, you may be able to see that there is $150,000 as net income to service the proposed mortgage.

Again on personal front, the borrower is supposed to pay himself $100,000 per year from the business; the W-2 income. Let us consider that the monthly bill of the borrower is $4,500. In majority cases the banks double the personal expenses which show up on personal credit report so as to cover all kinds of personal expenses which do not actually show up. Thus it is $4,500 x 2 x 12 months which again equals to $108,000. So, according to an under; as per underwriting guidelines the person is $8,000 short of personal income. This amount then gets subtracted from the $150,000 net income from business. Thus, global net income of this person is only $142,000.

What is an FHA loan?
FHA loan or FHA insured loan is a mortgage loan insured by the Federal Housing Administration (FHA).

Does FHA provide the loan?
No, the FHA does not provide the loan. It guarantees that the FHA will pay in case the borrower defaults on the loan payments. Because of this guarantee, lenders are willing to make large mortgage loans.

How do I qualify for an FHA loan?
To qualify for an FHA loan, you should have a decent debt to income ratio. In general, the ratio has to be better than 29/41. You don’t need an absolutely perfect credit record to qualify for an FHA loan but you must meet certain credit criteria. Also, you must apply through a regular lender if approved by the FHA. Another important thing is to document your income well. In order to get approved for an FHA loan, you must account for every penny (of income) that comes in.

What are the benefits I will get with an FHA loan?
As the loan is insured by the Federal Housing Administration, you will receive several benefits:

1. A down payment as low as 3.5 percent
2. Easier to use gifts for down payment. Whereas other loans don’t allow money to come from family members, employer or charitable organizations
3. Lower closing costs than what you shell out for a conventional mortgage
4. Lower interest rate as compared with a conventional mortgage
5. In case of foreclosure you will get assistance from the federal government

Is there a limit on how much I can borrow?
Yes. There’s a limit on the maximum amount you can borrow. The FHA loan limits vary according to the variety of housing types and the state and county in which the property is located. To look up your area’s loan limits, visit HUD’s Web site.

How do I secure mortgage insurance for a FHA loan?
To secure mortgage insurance for your FHA loan you need to pay an upfront mortgage premium and a monthly premium. In general, the upfront mortgage premium ranges between 1.50% and 2.50% of the mortgage balance where as the monthly premium amounts vary between .50% and .55% of the balance.

Homebuyers in need of an FHA loan can buy a property that had been owned by the seller for less than 91 days as long as the property met certain conditions. The 90-day anti flip rule was introduced to eliminate fraudulent flipping of houses where the seller inflated the price of the house values far beyond its true market worth. Say you buy a rundown house at a bargain price, do some fix-ups here and there, and then sell it after a few days later for a price that is twice what you paid when you bought the house. To curb such predatory lending practices FHA has had a strict rule for years: FHA borrowers can’t buy a property which has been owned by the seller for less than 90 days.

But the recent economic meltdown saw a rapid increase in foreclosures, and, to improve conditions in communities where foreclosure activity is high and also to stabilize home prices the Obama administration came up with a temporary policy that expands access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.
So, does it mean giving a fresh leash of life to the real-estate fraudsters? Well, the FHA has set certain conditions on the waiver. The waiver is limited only to those property sales that meet the following general conditions:

“All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.

The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.”

The waiver has been effective from Feb. 1, 2010 through Feb. 1, 2011.