How Do Mortgage Underwriters Qualify Borrowers & Approve Home Loans
This BLOG On How Do Mortgage Underwriters Qualify Borrowers & Approve Home Loans Was UPDATED On October 6, 2017
How Do Mortgage Underwriters Qualify Borrowers: Credit scores and income is what determines whether a borrower meet the minimum requirements for a mortgage lender to review mortgage application. How Do Mortgage Underwriters Qualify Borrowers is by reviewing all documents provided by the borrower and make sure that they meet all guideline requirements of the loan program.
- Every mortgage lender has minimum credit scores minimum for them to accept a mortgage loan application.
- For example, FHA has a 500 minimum credit score requirement for a mortgage loan borrower to qualify for a mortgage loan.
- Mortgage lenders have something called overlays which are their own guidelines that surpass the bare minimum FHA minimum requirements.
- In order to qualify for a 3.5% minimum down payment requirement, a mortgage loan borrower needs a minimum credit score of 580 FICO or higher.
- Home Buyers with credit scores between 500 and 579 can qualify for FHA Loans but 10% down payment is required.
- However, there are many mortgage lenders who require minimum credit scores of 620 FICO or 640 FICO or higher because of their own FHA credit score overlays.
- Some FHA insured mortgage loan lenders even require for their borrowers to have credit scores of 680 FICO or higher.
Lenders are allowed to have higher lending requirements than the minimum required by FHA. How Do Mortgage Underwriters Qualify Borrowers is to make sure borrowers meet all FHA Guidelines PLUS the company’s own lender overlays.
How Do Mortgage Underwriters Qualify Borrowers With Credit Scores And Credit Report
Mortgage loan underwriters are the decision makers who decide whether to approve or deny a mortgage loan borrower’s mortgage application.
- Mortgage loan underwriters will look at the mortgage loan borrowers credit scores.
- Underwriters will also thoroughly review borrowers credit report.
- Underwriters will very carefully analyze and look to see whether the mortgage loan applicant is credit worthy.
- Just because a borrower has high credit scores does not mean that the mortgage loan borrower is financially responsible.
- On the flip side, just because the mortgage loan borrower has low credit scores, that does not mean that the borrower financially irresponsible.
There are cases where a borrower has gone through financial hardship such as periods of unemployment, divorce, death in the family, or medical issues.
- The mortgage underwriter will look at a ten year window of a borrowers credit scores and credit report as well as payment history.
If a borrower has mediocre credit scores but has had a history of consistent late payments in the past ten years, the mortgage underwriter will probably come to the conclusion that the applicant is not a financially responsible borrower. The chances are that their mortgage loan application will not get approved.
- However, if the mortgage loan applicant has had five years of perfect credit and a two year of credit derogatory and late payments.
- Mortgage Underwriters will review whether or not the borrower had a great payment history and re-established credit in the past two to three years.
- The mortgage underwriter will consider this particular mortgage loan applicant a genuine financially responsible mortgage applicant who has gone through a short period of hardship.
- Underwriters will look whether or not the borrower has since recovered and will deem this candidate a good credit risk.
Credit Scores And Credit Report
Credit scores and credit report is used by mortgage loan underwriters as a measure of predicting the financial credit risk of the mortgage loan applicant.
- Studies prove that a person’s past credit payment behavior is a great predictor of how he or she will pay their credit obligations in the future.
- If a mortgage loan applicant has had a long history of not paying his or her bills on time.
- The chances are that they will not change this behavior in the future and the chances that this person will get a mortgage loan approval will be extremely slim.
Recent Payment History & Bank Overdrafts
Mortgage Loan Borrowers who are going to plan on getting a mortgage loan make sure to pay monthly bills on time and not have any late payments in the past 12 months.
- Bank overdrafts are closely scrutinized as well.
- Many banks and mortgage bankers will not even look at any mortgage loan applicants who have had even a single overdraft in the past twelve months.
Even if the overdraft was one dollar some lenders will not approve borrower.
- The Gustan Cho Team at USA Mortgage are direct lenders with no lender overlays on government and conventional loans.
- We will accept late payments in past 12 months if the Automated Underwriting System yields an approve/eligible.
- Overdrafts in the past 12 months are allowed with us as long as they can provide a good letter of explanation.
- Being hung over and not being able to make a payment prior to a due date is not a good letter of explanation.
Borrowers who need to qualify for mortgage home loan with a direct lender with no lender overlays, please contact The Gustan Cho Team at USA Mortgage at 1-800-900-8569 or text us at 262-716-8151 for faster response. Over 75% of our borrowers are folks who either gotten a last minute loan denial by other lenders or are stressing over the mortgage process due to being improperly issued a pre-approval. All of our pre approvals close because all pre-approvals at The Gustan Cho Team at USA Mortgage are full credit approvals issued by our mortgage underwriters. We are available 7 days a week, evenings, weekends, holidays via phone or email us at email@example.com.