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The WOW Factor - Mortgage Lending

by Jon Smith, CRB, CRS, GRI

Having good credit and a steady job just does not seem to be good enough in today’s credit world when it comes to getting your home loan approved.  You need to make an impression.  Below are some great tips I would like to share with you. 

Today’s lenders are a picky bunch when it comes to the loan approval.  Even well-qualified borrowers are expected to jump through some pretty high hoops to qualify for financing.
Have no fear. The tips below and suggestions can help you make the best possible impression on the lender of your choice.
Just as job hunters may wonder what top employers want to see on a resume, prospective borrowers may be curious about what lenders look for on a loan application.
The four C's
The answer may be summed up with a mnemonic called "The four C's,"

•    Capacity, which refers to the adequacy of the borrower's income to cover the interest and principal due on the loan, plus property taxes and homeowners insurance.
•    Character, which refers to the borrower's track record of paying debts, as evidenced by his or her credit history and credit score.
•    Capital, which refers to the borrower's down payment (or equity) as a percentage of the current value of the home.
•    Collateral, which refers to the safety and soundness of the home and the value of the home as determined by an appraisal relative to the agreed-upon purchase price.
Today’s mortgage broker might use a quadrant with "income," "credit," "assets" and "property" in the four corners, but his point is the same as that of the four C's:  What lenders like to see is strength and stability in all four areas.
Maybe your credit score has some dings or you need a stated-income loan.  Borrowers who are qualified but whose down payment will be less than 20% of the purchase price of the home must withstand a second level of scrutiny. That's because mortgage insurers also have to approve such loans, and they have "completely different qualification ratios”. Borrowers in this situation should discuss their options with a loan officer who is familiar with lenders' and insurers' guidelines.
Have paperwork in order
Lenders rely not on the borrower's say-so but on a pile of paperwork to verify and document the borrower's financial position. At a minimum, most borrowers are required to submit the following:
•    One month of paycheck stubs.
•    Two years of W-2 forms.
•    Three months of bank account statements.

Additional paperwork also may be required:
•    If you're self-employed or earn more than 25% of your income from commissions or bonuses, you'll need to hand over two years of income tax returns.
•    If you're divorced, the lender will want a copy of your settlement to ascertain how much alimony or child support you're obligated to pay or are entitled to receive and the duration of those payments.
•    If you've filed for bankruptcy protection within the past seven years, you'll need to show your bankruptcy papers.
•    If you've deferred repayment of student loans, you should provide your deferral agreement as well.
"If (borrowers) have student loans that are going to be deferred for at least 12 months, that may help them qualify, so they would want to bring the account numbers for those loans.  Student loans are counted as debt, but deferral of repayment may strengthen the borrower's application.

Homeowner's Crisis Resource Center

by Jon Smith, CRB, CRS, GRI

It is no secret that foreclosures have increased drastically this year as a result of the subprime lending disaster and a lot of people are wondering if they will be next. For many homeowners there may be options, if they know what to look for and where to look. 

In the event that you find yourself struggling to make your mortgage payments, and you fear foreclosure may be in your future, the National Foundation for Credit Counseling (NFCC) has suggested a few possible alternatives. These options to fend off foreclosure include:

  • Repayment Plan
  • Reinstatement
  • Forbearance
  • Loan Modification

The Federal Trade Commission wants people to know that these alternatives may not work for everyone especially if you are already three or four mortgage payments behind.

For more information regarding the above alternatives visit the NFCC's Homeowners Crisis Resource Center website. They can also assist you in locating a certified housing counselor to explore your options in an effort to fend off foreclosure.

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Photo of Jon Smith, CRB, CRS, SRES, SFR Real Estate
Jon Smith, CRB, CRS, SRES, SFR
Iowa Realty
3521 Beaver Ave.
Des Moines IA 50310
515-240-2692
Fax: 515-453-6404
 

 

 

Licensed in the State of Iowa