Getting A Mortgage Loan In Today’s Market (And How An Exceptional Realtor Can Help)
Anyone considering an upcoming home purchase should be aware of how to get a home loan in today’s market. The four basics are still the same:
A down payment,
A provable, stable income,
A healthy debt to income ratio, and
A decent credit score.
The requirements in each of these categories got significantly more stringent after the 2009 banking debacle when sub-prime lenders flooded the market with junk loans that eventually led to a market crash and recession. Once burned and twice shy, today’s lenders are much more cautious and demanding, especially with the tight restrictions imposed by our government to ensure this sort of thing does not repeat.
What does this mean for today's home buyer without perfect credit or a low down payment? Approval for a mortgage loan is still possible, even for those who cannot achieve a 700 plus credit score or have 30% or more for a down payment.
A superstar realtor can guide you through these stringent, new requirements if he or she truly understands the process and has the tenacity, patience, and determination to increase your chances at getting a mortgage loan. He or she must also be very well connected and well versed in getting their buyer over the hurdles that may arise. And if you aren’t quite there, he or she can guide you on what to do so that you will be.
Lending Hurdles a Great Realtor Can Help You With
Before even attempting a mortgage loan, find a superb realtor in your market, meet with them and have them walk you through the lending process. The first thing they should mention is documentation and what you need to do to ensure you can prove your financial security.
1.) Down Payment Documentation
Yes, you may have just gotten a $20,000 gift from grandma that you plan to use for part of your down payment, or you will be able to transfer $10,000 from your kids’ college fund. Your realtor should inform you that before you start transferring or depositing these funds, you are going to need to show where they originated from and why.
With the onset of terrorist attacks in the last decade, a strict requirement within the mortgage lending industry now also requires an explanation for where your down payment comes from. You cannot just show up with a bank statement showing a couple of large deposits with the simple explanation: “It was a family gift.” You must show a paper trail and a valid origination of the funds or you are going to raise red flags with the lender that will greatly slow the process down.
2. Tax Returns
The same goes with tax returns. A good realtor will have an arsenal of connections that he or she regularly works with. Even if you feel married to the accountant that’s been doing your family’s taxes for decades, sometimes a realtor can recommend an accountant astute in structuring your tax returns with a future mortgage loan in mind. This kind of savvy with your returns can sometimes make all of the difference.
3. Credit Score
According to a recent post by Polyana De Costa for bankrate.com, “Bob Walters at Quicken Loans states that ‘borrowers generally can get conventional loans with FICO scores of 680 and 5 percent down. Those with lower credit scores normally have to apply for FHA loans. Some lenders offer FHA loans for borrowers with scores of 620 and down payments of 3.5 percent, but others have stricter requirements.’ ” (1.)
A savvy realtor will look at your credit score and be able to guide you to the best lender based on what it is, the one who will actually have the highest chances of getting you approved at the very lowest interest rate.
Lenders are humans too, and a strong, mutually reciprocal, working relationship with your realtor can make the difference between setting your approval process on fire or having it end up on the bottom of the pile, no matter what your specific factors are.
"If someone pays attention to their credit, their debt versus credit, and if they plan properly they can get a loan done," says Pava Leyrer, president of Heritage National Mortgage in Grandville, Mich. (1.)
The key is to work with someone in the industry that has great connections, understands not just the market but also the lending process and how to get you approved. A strong, well-connected realtor can be your hub for everything you need to get the job done, even under less than ideal circumstances.
© 2017 Elisa Fortise Christensen
Citations
De Costa, P. (2017). Is It Hard To Get A Mortgage Nowadays? | Bankrate.com. [online] Bankrate.com. Available at: http://www.bankrate.com/finance/mortgages/hard-get-mortgage-nowadays.aspx [Accessed 25 Jul. 2017].
Summary: Are today’s mortgages only reserved for those with perfect credit scores and loads of cash on hand? What it takes to get a home loan in today’s tight market.
Keywords: home purchase, mortgage loans, getting a mortgage loan, home loan without perfect credit, home loan with low down payment, how to get a home loan, approval for mortgage loan, home buyer without perfect credit or one-third down payment,
