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What are lenders really looking for?
Lenders will initially look at:
Employment - Employment is a critical part of the mortgage application. Being employed continuously for the past two years is helpful. Being in the same line of work is preferred, since it shows that you have been consistent in that field. There are loan programs out there that DO NOT REQUIRE EMPLOYMENT history, however, the cost of the loan is generally higher, with a higher interest rate and the need for “compensating factors.” Compensating factors would include a large down payment, strong assets such as stocks or cash in the bank and having a good credit report. Income - Being able to properly document your income helps with loan approvals, however, this is not a requirement. Loan programs such as “stated income” loans are available. The income should be in line with what a typical person in your job capacity would earn. Going to Salary.com can be a good checkpoint for the underwriters. A large discrepancy between the “stated income” and that of the profession could be a red flag to the investor. It is important to keep the numbers closely in line. Side note: Although this is a great product, the basic fundamentals of qualifying should still apply. You don't want to get in “over your head” on a home. Sure, you can qualify at a ridiculous “stated income”, but wouldn't you rather be able to afford the home in the first place? Assets - If you can document your assets you should! Assets would include cash in your bank accounts, stocks, 401k's, cars, boats, certificate of deposits and anything else that would be considered “liquidable.” Don't confuse these with personal items such as clothes, furniture, televisions and jewelery. Credit- If you have some small items on your credit report that are collections you may want to pay them off to improve your credit. There is a great benefit in working with a mortgage professional to make sure that you look through your credit report together and check for issues that can be addressed. Many people feel that they are in worse off positions than they really are! Don't simply assume that your credit is awesome or really bad. You might be surprised to find the results! Available Loans for Bad Credit Borrowers - There are lots of loans available for people with bad credit, including:
When refinancing, the most beneficial item to help you in qualifying is the equity in your property. If you have lots of equity, it will be much easier for you to get the loan you are looking for, even if you have bad credit! Some lenders do not require a minimum credit score for some loan programs if a borrower has enough equity in their property. When consolidating debt, lenders will often allow you to refinance and pay off your debts with the proceeds. They know this will help raise your credit rating and improve your monthly cash flow, while eliminating those higher interest rate payments. Many lenders require that debts be paid off directly to your creditors to make sure the debts are paid off. A lender may decide to pay off your car loans, credit cards, student loans or other debt. Make sure you know these in advance, or you may end up being surprised at the debts you have to pay off. Many lenders will also require that bad debts and collections be paid off. For a variety of reasons, some borrowers do not want to pay these off. There are specialized lenders that do not require all of these to be paid off, or they cap the payments, so you get to keep more of your cash during a “cash out” refinance. Be sure to work with a local mortgage professional that will take the time to go through your situation. Everyone's situation is different and seldom are two loans alike. By working with an informative mortgage professional, you will reap the benefits of feeling comfortable and informed throughout the entire loan experience! Scott Gormley Blog: http://activerain.com/blogs/lendingmagician "You find the perfect home, we'll find the perfect loan!" |
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Oak Valley Mortgage-California Home Loans and Refinancing Chico, CA Office Phone: (530) 592-8362 Cell Phone: (530) 592-8362 More information... Contact Oak Valley Mortgage-California Home Loans and Refinancing |
