Tips to Successfully Obtaining a Mortgage in Today's Lending Environment

By
Mortgage and Lending with Guaranteed Rate NMLS# 2611 NMLS #151088

With today's tightened lending guidelines, it is critical for buyers and agents to understand what it needed to successfully obtain mortgage financing today.  This post was inspired by Buyer frustrated over the mortgage process in Key West Florida. written by Elizabeth Birmingham.  In it, she brings up a lot of today's challenges faced by buyers and agents.  By being better educated, agents can also do their part to lessen the negative impact. 

Many of the issues that she mentioned below are there for very valid reasons given the current state of the real estate market. 

1. Bad Credit scores are now between 620 and 660. The bank usually says no to thee buyers automatically. This is really not a true statement.  Most FHA/VA/USDA loans require a 640+ FICO.  For FHA, we do offer a 580-639 FICO program.  With a 20% down payment, conventional mortgages for a primary residence will go down to 620+.  An investment property will generally reuqire a 660+ or a 680+ FICO due to the increase risk.

2. Not enough income. This is a no brainer and will never change. That is 100% correct.  If sufficient income to support the mortgage payment cannot be documented, then the mortgage cannot be approved.  This is why it is very important that all income documentation (pay stubs, W-2's, and Federal Income tax returns) all be reviewed PRIOR to a Pre-Qualificaion certificate ever being issued.

3. Paperwork glitches. Missing forms, incomplete information on the application can slow or stop the process. 15% of of application are slowed down because the buyer did not complete the application correctly or provide proper documentation. Incomplete applications become a big challenge for all involved.  When buyers only supply a few pages of a document, that is not acceptable.  Some also do not understand the importance of getting everything in ASAP.  Once a buyer is under contract, time is of the essence with any request for documentation.  All non payroll direct deposits must be explained and documented.  Very often, they have not kept proper copies of what is needed.  With sales contracts, I often see contact info for the closing attorney/title compnay misisng along with that from the HOA. 

4.  Homeowner Association issues. Only on condos, do HOA issues really pose an problem with the mortgage approval.  Condos go through a more stringent approval to better examine their overall stability since it impacts every owner in the project.  Things such as owner occupancy, pending litigation, and delinquency of HOA dues are evaluated.

5. Problems in the neighborhood. If the neighborhood is in decline. broken into distressed homes with major repairs needed are often a black mark on the appraisal. Only the subject property would really be directly impacted if repairs are needed.  Homes in severe need of repair that have closed would generally not be used as comps for an appraisal.  If they are used, then condition adjustments should be made to the final value. 

6. Appraisals. If the home doe not appraise the banks won't lend. The maximum loan to value is based on the lesser of the sales price or the appraised value (only USDA and renovation loans use the higher appraised value).  The seller and buyer can always renegotiate the transaction based on the new value.

7. Bank Conditions. Underwriters all want something different. Each bank has a different set of rules and documentation requirements. Lender overlays are very common in today's market.  Some are simply much tighter than others.  It's critical for the loan officer to know them all inside and out.

8. Gaps in employment history can wreck havoc on a buyers chance of getting a mortgage. Overtime income must be consistent and documented. Even rental income is scrutinized. If the borrower has a 6+ gap in employment, then they must currently be employed for at least 6+ months before the income can be used for qualifying.  Bonus/overtime/commission income, must be received at least 12-24 months before it can be used.  Unreimbursed Business Expenses claimed on tax returns are also deducted from the borrower's qualifying income.

9.  Discrepancies in title work, contracts or name inconsistencies. Paperwork This is where agents need to be very careful when writing a sales contract.  Pull the USPS for the address so that its 100% accurate.  Make sure that the buyer's correct legal name is used.  Don't put Bobby or Maggie on the contract if its really Robert or Margaret.  I see addendums all of the time changing names because the agent didn't ask first and used the buyer's incorrect name.  For the title commitment, the closing attorney will use the names exactly as they appear on the sales contract.
 
 
 
 
Having agents set proper expectations upfront will go a long way in making mortgage closings much easier.  Everyone working together will result in the ultimate goal of the closing.  This teamwork will result in the "FOR SALE" sign being taken down much quicker.
 
 
 
 
 
 
 
 
 
 
 
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It is always advisable to consult with a knowledgeable lending professional when navigating today's turbulent mortgage and real estate marketplace.  I am committed, qualified and equipped to help you evaluate your options!

 

Also check out:

Conventional Financing Mortgage Program Overview/Updates

FHA Financing Mortgage Program Overview/Updates

USDA Financing Mortgage Program Updates  

 

Programs Include:

 

  • Conventional (Fannie Mae & Freddie Mac)

  • FHA, USDA, & VA

  • Jumbo to $3,000,000

  • Bank Statement Program for Self-Employed Borrowers

  • Foreign National Program

  • Investor Cash Flow

  • Non-Warrantable Condos

  • Georgia Power Leaseholds for Lake Burton, Rabun, & Seed

 

  • ************************************************************************************************************
  • Rodney Mason is a Licensed Branch Manager located in Atlanta, GA.   He can be reached at (404) 591-2453.
  • Providing financing for all cities across Georgia including: Acworth, Albany, Alpharetta, Athens, Atlanta, Augusta, Austell, Avondale Estates, Blairsville, Bloomingdale, Blue Ridge, Bogart, Brunswick, Buckhead, Buford, Canton, Carrollton, Cartersville, Chatsworth, Clayton, College Park, Columbus, Commerce, Conyers, Covington, Cumming, Dahlonega,  Dacula, Dalton, Dawsonville, Decatur, Doraville, Douglasville, Duluth, Dunwoody, East Point, Fayetteville, Flowery Branch, Gainesville, Greensboro, Hampton,  Hapeville, Hinesville, Hiram, Jackson, Jefferson, Jonesboro, Kennesaw, Lagrange, Lawrenceville, Lilburn, Lithia Springs, Macon, Madison, Metter, Morganton, Morrow, Newnan, Norcross, Oakwood, Peachtree City, Pooler, Richmond Hill, Riverdale, Rome, Roswell, Sandy Springs, Savannah, Scottdale, Statesboro, Stockbridge, Stone Mountain, St Marys, Sugar Hill, Suwanee, Thomasville, Thunderbolt, Tucker, Tybee Island, Valdosta, Waleska, Warner Robins, Waycross, Wilmington Island, Winder, Woodstock, and many more.

    Providing financing for all cities across Alabama including:
    Alabama Port, Anniston, Athens, Auburn, Bessemer, Birmingham, Boaz, Bridgeport, Cedar Bluff, Chickasaw, Clayton, Coden, Dauphin Island, Decatur, Dothan, Eufaula, Fairfield, Fairhope, Florence, Foley, Forestdale, Fort Morgan, Fort Payne,Gasden, Grand Bay, Gulf Shores, Heron Bay, Homewood, Hoover, Jasper, Josephine, Madison, Meadowbrook, Midfield, Mobile, Mon Louis, New Hope, Orange Beach, Oxford, Oyster Bay, Phenix City, Prichard, Rainbow City, Saraland, Satsuma, Scottsboro, Selma, Troy, Theodore, Tillmans Corner, Trussville, Tuscaloosa, Vestavia Hills, Warrior and many more.

  • Providing financing for all cities across Florida including: Altamonte Springs, Atlantic Beach, Boca Raton, Bradenton, Cape Coral, Clearwater, Coral Springs, Daytona Beach, Delray Beach, Destin, Fort Lauderdale, Fort Myers, Fort Walton Beach, Gainesville, Hollywood, Homestead, Jacksonville, Jupiter, Key Largo, Key West, Lake City, Largo, Marathon, Mexico Beach, Miami, Naples, New Smyra Beach, Ocala, Orlando, Palm Coast, Panama City Beach, Pensacola, Pompano Beach, Port St Joe, Sanibel Island, Sanford, Sarasota, St Augustine, St Petersburg, Tallahassee, Tampa, Vero Beach, West Palm Beach, & Winter Park, and many more.

 

  • Providing financing for all cities across South Carolina including: Aiken, Anderson, Beaufort, Bluffton, Charleston, Columbia, Conway, Edisto Island, Florence, Greenville, Hilton Head, Johns Island, Myrtle Beach, North Augusta, Orangeburg, Rock, Hill, Spartanburg, Sullivans Island, Summerville, and many more.  
  •   

    Providing financing for all cities across Tennessee including: Athens, Brentwood, Bristol, Chattanooga, Clarksville, Cleveland, Cookeville, Dyersburg, Franklin, Gatlinburg, Greeneville, Johnson City, Kingsport, Knoxville, Maryville, Memphis, Morristown, Murfreesboro, Nashville, Newport, Oak Ridge, Pigeon Forge, Sevierville, and many more

 

All mortgage lending guidelines are accurate at time of post, but are subject to change without notice.  Please call for the most current information.

    

           

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Rainmaker
601,437
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Rodney - Great list of things that can and do wreak havoc on an escrow transaction and can derail a loan in a heartbeat.  On another note.  I think #9 you meant title work - right.  :)

Oct 16, 2011 07:23 AM #1
Rainmaker
421,501
Rodney Mason
Guaranteed Rate NMLS# 2611 - Atlanta, GA
VP of Mortgage Lending - AL, FL, GA, SC, & TN

Donne....Of course, there are soooo many more to add to it.

Oct 16, 2011 08:42 AM #2
Rainmaker
1,335,160
Michelle Gibson
Hansen Real Estate Group Inc. - Wellington, FL
REALTOR

Rodney - This is an excellent post!  So many buyers think it's easy to obtain financing and that is not always the case.

Oct 16, 2011 03:29 PM #3
Rainmaker
908,388
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

I can see where incomplete paperwork or delayed return would cause timeline problems. Buyers need to understand that time is of the essence and not to skip fully completing their application. I agree about getting the names right the first time. I always ask buyers what is their legal name that is to be used on the purchase contract. Otherwise, it causes confusion for everyone. Great points for today's buyers and agents to keep in mind.

Oct 23, 2011 08:21 AM #4
Rainer
99,375
Steve Matsumoto
Winderemere Homes & Estates: waterfront condos, second homes - Oceanside, CA
First Time Home Buyers - Oceanside, CA

Rodney,

I really appreciate the detail and specificity of this post.  I could imagine a version of this post that would be more "bare bones."  Thanks for being so thorough.

Steve

 

Oct 23, 2011 02:34 PM #5
Rainer
37,241
Jayson Holland
Listings.com - Denver, CO
Jay Holland

Great post. Too bad banks wont go back to the "common sense" approach from 50 years ago. That worked then and would work again. Was that before the government got involved?

Oct 24, 2011 12:42 PM #6
Rainer
478,183
Not a real person
San Diego, CA

Happy Hump Day!

Oct 26, 2011 02:57 AM #7
Rainmaker
421,501
Rodney Mason
Guaranteed Rate NMLS# 2611 - Atlanta, GA
VP of Mortgage Lending - AL, FL, GA, SC, & TN

Michelle....Many buyers (and quite a few agents) still don't fully understand what it takes to get approved for a mortgage today.

Pamela....There are so many things than could be done upfront to make for a smoother approval process.  Many just don't want to take the time though.

Oct 30, 2011 10:33 AM #8
Rainmaker
421,501
Rodney Mason
Guaranteed Rate NMLS# 2611 - Atlanta, GA
VP of Mortgage Lending - AL, FL, GA, SC, & TN

Steve.....Transparency is key.

Jayson.....Today's standards are actually more of the same guidelines of 10+ years ago. 

Russel.....Thanks for stopping by.  Hope you had a great week.

Oct 30, 2011 10:36 AM #9
Rainmaker
1,171,825
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

This is a wonderful list of ways to "sail" through the mortgage process.  At least to make it a little easier.

Nov 11, 2011 01:12 PM #10
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Rainmaker
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Rodney Mason

VP of Mortgage Lending - AL, FL, GA, SC, & TN
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