Denied by a bank for your mortgage?
Most home buyers go to their local bank or the bank they normally have their checking or savings account when they want to apply for a residential purchase mortgage loan or a refinance mortgage loan. They do not think of a mortgage banker or mortgage broker. However, banks have stricter mortgage lending guidelines than mortgage bankers or mortgage brokers. If you applied for a mortgage loan and got denied by a bank for your mortgage, there are many other options for you.
Banks have stricter mortgage guidelines
Most banks require a minimum credit score of 640 FICO and do not want any open collections, late payments, or high debt to income ratios. Every bank has different overlays but the majority of the banks do not want debt to income ratios of greater than 40%. Banks also might require reserves and do not view past bad credit favorably.
Banks have higher mortgage rates than mortgage bankers or mortgage brokers
In general, banks have higher mortgage rates than mortgage bankers or mortgage brokers. The reason that most banks have higher interest rates on mortgage loans is because they have higher overhead. Bankers are exempt in disclosing their mortgage yield spread premium and are exempt from licensure. Any FDIC insured banker does not need to be a licensed mortgage loan originator and are exempt from licensure. They can originate mortgage loans in all 50 states.
Mortgage banker and mortgage broker
A mortgage banker is a mortgage company that funds the mortgage loans they originate. A mortgage banker can also be a mortgage broker. A mortgage banker might want to broker mortgage loans that they cannot fund due to their mortgage underwriting guidelines and overlays. A mortgage broker has correspondence lending relationships with wholesale lenders. A mortgage broker can shop your mortgage loan to get the best possible deal for you in terms of the best terms of the loan and rates. If you have open collections, bad credit, prior bankruptcy, prior foreclosure, charge offs, judgments, and/or tax liens, you might want to seek the services of a mortgage broker. A mortgage broker gets paid by the lender so you do not have to worry about paying the broker a commission.
If you are planning on getting a mortgage loan from a bank, shop various different banks because every bank has different mortgage lending guidelines and mortgage rates. If you get denied by a bank, you might want to consult with a mortgage broker or mortgage banker. If you have problem credit or prior bad credit or high debt to income ratio, a mortgage broker will probably be the best fit for you. There are lenders who can get mortgage loans for borrowers with FICO credit scores as low as 530 and debt to income ratios as high as 56.9%, There are also lenders who can get you mortgage loan approvals with open collections, judgments, and tax liens.
For those mortgage loan borrowers who are members of credit unions, they might want to consult with their credit union mortgage lending department and see what their credit union has to offer. Credit unions normally offer great mortgage rates and terms to their members. However, they might have credit overlays and might want lower debt to income ratios.
There are many options available if you got denied by a bank for your mortgage. You have mortgage bankers, mortgage brokers, and credit unions. If you have got denied by a bank for your mortgage and have questions, please contact me at 262-716-8151 or email me at firstname.lastname@example.org. You can subscribe to our daily mortgage and real estate newsletter at www.gustancho.com .