Home > Blogs > Dionne Bass > Ask The Underwriter

Ask The Underwriter: Compensating Factors?

By Dionne Bass

Education & Training with Ask The Underwriter Mentor/ Mtg. Underwriter

February 19, 2008 12:56 AM

Compensating Factors: Information used to strengthen your mortgage loan file. Not a definite, but definitely worth trying.

There are times to let sleeping dogs lie and there are times to let out the battle cry and bring on the: COMPENSATING FACTORS! When your borrower falls short you need HELP!

Here are some examples of Compensating Factors:

No adverse credit in past 24 months
Credit Score is higher than required score for the programs
CLTV (Combined Loan To Value) is below the max programs guidelines
Reserves are greater than the required program guidelines
Debt Ratio is below industry standard 28/36
No payment shock
Income stability
Borrower has a history of handling this level of housing expense
Documentation to confirm the adverse credit was an isolated and extenuating circumstance.
Large Down Payment

As I mentioned earlier, these are not definites, but as my best friend father says:

"Nothing beats a failure like a try" (or something like that!)

D. Bass

Mortgage Underwriter & Trainer

www.alphamortgagetraining.net

Comments(6)

Comment

Show All Comments

Sort:

Steven Keefe

Coldwell Banker Sky Ridge Realty - Lake Arrowhead, CA

Thank you for the insight. It is great to see that other strengths in the file are evaluated.

Feb 19, 2008 01:02 AM

Joe Adams

Major Mortgage USA/Branch Manager - Montrose, CO

My underwriter calls these files my "cause" files. They are the ones worth fighting over, but let me tell you they wear you out. I would add one more........ The borrower just finished say the nursing program and their potential for higher income.

Feb 19, 2008 01:20 AM

Dionne Bass

Ask The Underwriter - Atlanta, GA

Blog: Ask The Underwriter

Steven- I wish I could tell you that it's done all the time, but that's why I wrote this post. It's starting to get busy again and you want to have your ducks in a row.

Joe -GREAT ONE! College Students and Borrower's that have returned to school are candidates for "compensating factors". We definitely like to see the income going up!

Thank you both for reading my post and I hope you guys come back!

Feb 19, 2008 01:29 AM

Cynthia Tilghman, Realtor® Onslow County NC Home Specialist

Kingsbridge Realty, Inc - Hubert, NC

Hi D. Bass,
Now I do like that saying "Nothing beats failure like a try". That is worth remembering and sharing.

Feb 19, 2008 02:44 AM

Cynthia-I try and keep that in mind when the going gets tough!

I hope you visit us again.

Feb 19, 2008 03:40 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

D. Bass compensating factors are great when your close but just not there. But the problem is that some Loan Officers think that compensating factors are some magical formula that is going to turn a bad loan into a good loan, and then are all over the Underwriter when she/he says sorry Charlie not going to happen.

Compensating factors are a great tool you for those loans that fall within the parameters that you listed, but not a tool to be abused.

Feb 19, 2008 08:30 AM

Ask The Underwriter: Compensating Factors?

Comments(6)

Dionne Bass

Service Areas

Real Estate Resources

Recent Posts

Popular Posts

Additional Information