4 Annoying Mortgage Hurdles & How to Overcome Them:
As recently reported on Credit.com, there are some common stumbling blocks that borrowers encounter, and here are some suggestions for helping you to overcome them:
1. A High Debt Ratio: It doesn’t matter how great your credit score is, or how much money you earn; your housing payments plus your credit obligations cannot exceed 45% of your monthly income! If you have debt preventing you from getting a home loan, one way to possibly overcome this is to consolidate debt into lower payments. Most loan officers can look at your finances and give you advice of what needs to be reworked in order to go forward in the loan process. It is definitely worth your while, if you are looking to buy a home, to work with a reputable lender, build a relationship, and review all options of reducing debt.
2. When the Solution to a Problem Creates a New Problem: Tell me this isn’t frustrating? Imagine your lender requests your end-of-year pay stubs, but this year’s income is less than previous years; so the lender creates another condition of the loan based on this information. A letter of explanation is required about “declining” income. In short, conditions brought on by mortgage conditions due to underwriting require more documentation. I’m here to tell you, resubmissions are normal. Most of the loans I deal with, even with the most meticulous borrowers require 3-4 resubmissions during the loan process.
3. Undocumented Funds: Even if it’s “your” money, you cannot use it if you cannot document it! Any deposits going into your bank account separate from your stated income need to be documented. Even if you are self-employed, lenders will require you to document your funds. Avoid depositing any monies in your bank account that you unprepared to document. In some cases gifts can be used in down payments. Check with your mortgage loan originator to see what programs allow gifts.
4. Business Expense Write-Offs: This is a big one…and your lender will not ignore this issue. Tax preparers will suggest writing off expenses as a way to offset a tax liability, but it could hurt your chances of getting a mortgage by reducing your income. Banks typically average two years of write-offs and subtract that from your income and use that figure when determining your income to debt ratio. Just because the IRS allows these deductions isn’t always in your best interest. Again, check with your lender to discuss what is the best alternative for you when preparing to begin your search for a new home. In some cases buyers need to wait a year or two in order to meet the strict mortgage guidelines that are enforced today.
Even if you have a solid payment history, excellent credit, and low debt, there are factors on how you are “viewed on paper” that are important to understand when beginning your real estate process. Lending guidelines are meant to be used as a way to predict whether a borrower will default on a loan, it’s just that simple. It isn’t very likely that we will see these guidelines loosened up anytime soon, so I cannot stress enough the importance of working with a professional loan officer. The Harris-Peppe Team uses the services of Kelly Rebimbus at Sunbelt Lending. You can reach her at 1-239-273-5239 or you can apply online by clicking here: SUNBELT LENDING APPLY ONLINE
Although, the majority of the transaction in Naples Florida are cash sales, and our team closes approximately 75% cash transactions, many of today’s buyers are considering financing because the rates are still so low. Please let us know how we may be of service to you. Our company is a full service real estate company handing both residential and commercial sales and leasing, mortgages, title and closing services, as well as vacation rentals. We are here to make your real estate transaction as stress free and convenient for you as possible! 1-239-370-0574
Thank you, and make it a great day!
The Naples Real Estate Blogger