Every day I get calls from my Real Estate "partners" asking me to pre-qualify their customers and send out
a pre-approval letter. I am always happy to do this, it's my job !
Lately however, I seem to be getting more and more pre-qual requests on customers who simply don't qualify for any type of mortgage financing in todays market. (Ahh, the 1990's, what a decade for mortgage guys)
All conventional mortgages in this country are underwritten using four (4) basic guidlelines that we teach in our classes using the acronym: I.C.E.A.
I - Income/Debt Ratio
C. - Credit= "Fico Scores:
E. - Equity --The Percentage of the Loan Amount divided by the Appraised Value or More Simply put
the Down Payment = Loan To Value or L.T.V.
A. - Assets.-- How much money the borrowers have for Down Payment & Settlement Costs.
It's true that there are still mortgage programs out there that will do the "No Income" or "Stated Income" loan, but the trade off is usually a much larger Down Payment/Lower LTV (70% or lower)
Credit Scoring remains, in most cases, at a minimum of 620-660 range.
Assets - Cash for down payment, settlement and escrows pretty much ALWAYS has to be verified when the loan is for a Purchase.
Soooooooo, in my never ending quest to educate the real estate establishment on the finer points of mortgage financing, I have put together a small list of some "Red Flags" to look for on a customers application that will give you a big "heads up" that this borrower just won't qualify.
And so with all proper respect to Jeff Foxworthy, Here is a short list of "They may be a reject if"
If your customers credit score is lower than his I.Q.-- He may be a reject
If your customer is on a 1st name basis with 3 or more bill collectors -- He may be a reject
If when your customer cashes his pay check at the local quik-e mart, the clerk asks him "how would you
like your cash, heads or tails ?" -- He may be a reject
If your customer needs a co-signer and he says his grandchild will co-sign but he has to wait until June when the kid graduates from high school --- He may be a reject
If your customer lists as an asset his collection of Fred Flintstone Jelly Glasses -- He may be a reject
If the appraiser can take ALL the interior pictures of the subject property with only 2 photos- He may be a reject
If your customer is a "little short" on cash for the down payment but tells you not to worry because he just bought $100 worth a lottery tickets and he's feeling real lucky this week-- He may be a reject
If your customer tells you that she is a "working actress" and that her last job was a guest role on "All in the Family" -- She may be a reject
If your customer is a Public Relations Manager and his ONLY client is Osama Bin Laden-- He may be a reject
If your customer wants to go "stated income" when he is the hot dog vendor at the local high school hockey rink and claims he makes $150,000 per year -- He may be a reject
There you have MY list, if anyone out there can think of others, please post, I'd love to hear from you !
Peace, Love, Learn, Grow
Ken Nelson: The Mortgage Sherpa
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