First have a lender that knows his/her business. Recently I had a buyer that had some money but a credit score 0f 598/625/633. They had several lates last year and one this year. Also a backside ratio of 55%. There were good reason for all and even with the ratio their living style would allow the payment. So here is what we did. With 10% down and 3% for closing costs they still fell into FNMA Level II. With a little work we got them into Level I (.755% lower rate). First we increased the downpayment from 10% to 11%. Next we reduced the cash for closing costs from 3-2% and asked seller to pick up the difference. We then had more $$ in the bank... enough to demonstrate 2 mos payments in reserve. We also paid off two credit cards which had small balances but the resulting payments brought the backside ratio down a little. Buyer is very happy, seller is happy and the mortgage guy and me the Realtor are also happy.
Nothing shoddy or shady. But also might not work for everyone... this buyer had some cash... still the buyer would have taken the higher rate... now they don't have too.
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