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What Are Lenders Looking For In Approving A Mortgage
(page 2 of 2)
People looking to purchase a multi-unit property for the purpose of renting
out part of it will be looked at in terms of whether or not they will
be able to make the mortgage payment without the additional rental income.
I you loose your tenant, or they are delinquent on the monthly rent payments,
will you be able to make up the difference for as many months as needed.
Having a co-borrower on the application can improve the prospects for
approval, if that individual has also fulfilled all of the criteria, especially
the first three points mentioned above.
Do not think that a deficit in one or two areas will get you bumped from
the loan process. If you exhibit strong points in other areas they can
balance each other out. If you have always been a financially responsible
person and the value of the property in question is a lot higher than
the amount you wish to borrow, that can easily offset the fact that you
may not have a large down payment or need to borrow from your family to
raise one. Every case is examined individually and then a determination
is made.
What's The Next Step?
Once Freddie Mac and Fannie Mae do all of their analysis both agencies
will respond to your application in one of three ways:
- They'll Approve the Application if it appears that there is little
risk of you defaulting.
- They'll Refer the Loan to a Human Underwriter to clear up any questions,
but you still stand a good chance of being approved.
- They'll Refer Your Request with Caution to a human underwriter even
though it appears that you will not be approved, just to be certain.
The Fannie Mae system, at times, will give your loan a refer rating no matter
what your analysis shows if:
- Your debt to income ratio is unusually high relative to their comfort
zone, 36% to 38%.
- If you have less cash in the bank than is needed to close.
- You previously filed for bankruptcy or suffered a foreclosure and
the date is unknown.
- If you declare either of these problems but your credit report doesn't
have a record of it.
If you educate yourself to these criteria, before going to make application,
you will be able to chart the best course to getting your loan application
accepted, if you have fallen short on some of the points. If there is
little or no chance of you getting approved, it is more prudent to not
make application at this time and save the money for an effort in the
future.
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