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Lending Rejection
When financial snags develop in the loan application
process, it can tear home-buying dreams to shreds. By buyers
talking to their real estate agent (BERYL GOSNEY at 425-344-2222) and their loan officer,
though, you can learn about potential pitfalls and offer advice
on overcoming challenges before it's too late.
This is one more MAJOR reason why Buyers should ALWAYS talk
with a lender BEFORE they househunt!
Not only is getting a Pre-Approval Letter vital to making an
offer, but a lender and real estate agent both have a "check
list of items" they want to review with ALL prospective
homeowners --- first time homebuyers and veteran homeowners
alike!
In the end, this insures buyers they will secure the loan they
need to get the home they want, and, that's simply good
business.
Look at Their History:
The first step to helping clients assess their financial
situation is encouraging them to request their credit reports
from EACH of the three major credit reporting bureaus:
Equifax,* Experian* and Trans Union.* Buyers need to check each
report for accuracy and to take immediate action to correct any
errors.
By going to www.Preview-Property.com buyers can obtain any of these
reports for a low discount price, giving them three-bureau
credit reports and their credit score.
Watch for Warning Signs:
When reviewing their credit history, buyers should watch for the
red flags that might cause lenders to view them as a bad risk.
Below, we look at some of those warning signs and offer advice
on actions your buyers can take to improve their odds of getting
a loan.
Red flag: Low credit score:
Action: Buyers with a score of 650 or less
should plan to attach documentation and written explanations for
the negative points of their credit history. For scores
under 620, they should expect a longer application
process and probably a higher interest rate.
Red flag: "Maxed out" credit cards, overall excessive debt load.
Action: Buyers should pay off, or at least pay down, some
accounts. Avoid filing for bankruptcy or hiring a
credit-counseling agency; both show up as credit-history
negatives. Instead, talk to creditors about making settlement
payments (paying only a percentage of the actual balance).
Red flag: Frequent late payments, late payments on multiple accounts, several
consecutive late payments or any late housing payments (mortgage
or rent).
Action: Buyers need to provide lenders with written
explanations for all late payments. Lenders tend to be
understanding about extenuating circumstances, such as an
extended illness or a divorce.
Red flag: High number of recent inquiries into buyer's credit history, which
may look to lenders as if the buyer applied for multiple loans
and was rejected.
Action: Buyers need to minimize loan applications. When
shopping around for the best deal, apply with just two or three
lenders.
Red flag: Total debt load is more than 36 percent of buyer's monthly gross
income.
Action: Buyers should work on paying off debt, as noted
above. Also, Buyers should be sure they are accounting for all
income, including such sources as tips or alimony.
Red flag: Estimated mortgage payment is more than 28 percent of buyer's
monthly gross income.
Action: Buyers, get with your lender and real estate agent
(TEAM). They work in the industry daily and have creative
suggestions to lower the mortgage payment, perhaps through a
larger down payment made possible through a gift from a
relative.
Red flag: High loan-to-value ratio.
Action: If the appraised value of the house is much lower
than the asking price, buyers can try to negotiate for a lower
price. Otherwise, buyers should consider a lower loan amount -
either through a larger down payment or a lower-priced home.
Another idea is to seek out an ARM (adjustable rate mortgage),
but be sure to understand how the ARM interest rates works.
Accentuate the Positive:
Even with a few dings in a buyer's credit report, lenders may
grant some leeway if any of the following positive factors are
evident, according to the Federal National Mortgage Association
(Fannie Mae):
- Large down payment
- Energy-efficient features in the home
- Proven ability to handle large mortgage or rent payment in past
- Potential to build up good savings
- Potential to advance in career and increase earnings, based on
strong education or job-training traits
So, was some of this information helpful? We sure hope so, that
is why we have send these informational emails. Our goal is to
do all we can to assist each and every client we possibly can.
Note: It CAN and WILL Happen!
The only thing that stands in the way is your willingness to ACT!
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