Advice In Choosing The Right Lender

The Importance Of Choosing The Right Lender

Choosing The Right Lender is extremely important for mortgage borrowers who had prior credit issues, prior bankruptcy, prior foreclosure, prior short sale, prior deed in lieu of foreclosure, have open outstanding collections, have charge off accounts, have higher debt to income ratios, do not have verification of rent, have lower credit scores, have late payments after bankruptcy and foreclosure, have recent late payments, just had a Chapter 13 Bankruptcy discharge, have judgments, have tax liens, or have other credit and/or income issues. Just because one mortgage lender says you do not qualify for a home loan does not mean that you do not qualify for a mortgage loan with another mortgage lender. The first place a mortgage borrower thinks about when they need a home loan is to visit their local bank and apply for a home loan there. Unfortunately, banks are one of the toughest places to qualify for home loans and their requirements are much tougher than mortgage lenders that have no lender overlays. Most banks have mortgage lender overlays. Overlays are additional mortgage lending requirements that are in addition to the minimum mortgage lending requirements that are required by FHA, VA, USDA, Fannie Mae, and Freddie Mac. For example, the minimum credit score required to qualify for a FHA Loan by HUD, HUD is the parent of FHA, is 580 FICO Credit Scores. However, most banks will not touch anyone who does not have a credit score of at least 640 FICO credit scores. The bank has mortgage lender overlays on credit scores. There are other lender overlays that banks and mortgage lenders have such as mortgage lender overlays on debt to income ratios, lender overlays on collection accounts and charge off accounts, and lender overlays on verification of rent and credit tradelines.

Choosing The Right Lender: Debt To Income Ratios

There are many mortgage loan borrowers who do not qualify for a mortgage loan because their debt to income ratios are too high and the bank or mortgage lender that they go to have mortgage lender overlays on debt to income ratios especially with FHA Loans. Under FHA Guidelines On Debt To Income Ratios, the maximum debt to income ratios permitted is 56.9% DTI for any FHA Borrowers with credit scores of at least 620 FICO. However, most banks and most mortgage lenders will cap the debt to income ratio limits to 45% DTI. Some mortgage companies will go to debt to income ratio caps of 50% DTI as long as the FHA Borrower has credit scores of at least 680 FICO. This creates a problem for FHA mortgage loan borrowers who have debt to income ratios of 56.9% DTI and have lower credit scores. Choosing The Right Lender who has no lender overlays on debt to income ratios like myself is crucial in securing a FHA Loan. I have no lender overlays on FHA Loans and whatever the FHA Guidelines On Debt To Income Ratios are that is what I go by and can approve and close any FHA Loan borrower who meets the minimum FHA Lending Guidelines. FHA also allows as many non-occupant co-borrowers to be added to the main borrower for borrowers who have higher debt to income ratios.

Choosing The Right Lender: Collection And Charge Off Accounts

Under FHA Guidelines On Collection Accounts, outstanding collection accounts and charge off accounts do not have to be paid by the FHA Borrower for the borrower to qualify for a FHA Loan. However, most banks and many mortgage lenders will require that all outstanding collection accounts and charge off accounts to be paid in full and that the zero balance be recorded on the borrower’s credit report before proceeding with the mortgage process. This is not necessary if you choose the right mortgage lender and choosing the right lender who has no lender overlays is so crucial if you have many collection accounts and charge off accounts. I have so many borrowers who contact me and were told that they do not qualify by multiple other mortgage lenders because they had outstanding collection accounts and charge off accounts but I ended up approving and closing their FHA mortgage loans without them needing to pay their outstanding collection accounts and charge off accounts. If you are told that you do not qualify for a FHA Loan unless you pay off your outstanding unpaid collection accounts and/or charge off accounts, please contact me at 262-716-8151 or email me at gcho@gustancho.com and I will be able to help you get your FHA Loan approved and closed in a timely manner.

Choosing The Right Lender: Judgments And Tax Liens

Many mortgage companies will not take your mortgage loan file submitted into processing and underwriting if you have an outstanding judgment or tax lien on your credit report unless you have paid off the judgment and/or tax liens and the zero balance is reported on your credit report. There are two solutions to having judgments and tax liens where you can still have outstanding judgments and tax liens and still qualify for FHA Loans.

FHA will allow for those borrowers who have outstanding judgments or tax liens to qualify for FHA Loans if they have a written payment agreement with the judgment creditor and/or the Internal Revenue Service and have been making at least three monthly payments. The borrower needs to provide three months canceled checks to the mortgage lender. Once a written payment agreement has been made with the judgment creditor and/or the IRS, you cannot pre-pay the three months of payments upfront and need to make at least three months worth of payments.

The second choice is that you can pay off your judgment and/or tax lien at or prior to closing of your home loan. You will need a payoff letter from the judgment creditor and/or IRS and pay the funds to the title company where the title officer will record the payment in full. You can pay a negotiated amount of the judgment as long as the judgment creditor will release the judgment.

If you are a borrower who were told that you do not qualify from other mortgage lenders due to their lender overlays or got a mortgage loan denial, please give me a shout at 262-716-8151 or email me at gcho@gustancho.com. Let me evaluate your situation and see if we can make it work. I am available 7 days a week, evenings, weekends, and holidays to take your calls and answer any questions you may have.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

Comments are closed.