As a loan originator, when you are evaluating the risk of a borrower there are four major scenarios that raise a red flag when it comes to the credit worthiness and risk assessment. On today’s show Doug and Tammie discuss four scenarios to determine whether or not you are a risky borrower and how you can improve your chances.
1. Your credit score is below 620
One of the quickest ways for a lender to get a snapshot of your ability to make future payments is to check your credit score and see how you fared with financial responsibility in the past. You can receive one free report from each of the three credit reporting agencies (TransUnion, Experian, and Equifax) once a year, and some lenders will run an analysis to determine what can be done to bring your score within an acceptable range.
2. You don’t have steady employment or you have less than two years of self-employment income
W-2 employees working a minimum of 40 hours per week are the most attractive to lenders. If you are working part time, or if you don’t have at least two years of tax returns to properly represent your self-employment income, acquiring a loan becomes trickier. Have a mortgage professional look over your tax returns to determine how much home you can really afford.
3. You have financial responsibilities you aren’t taking care of
While credit scores and income are important, there are larger issues like delinquent child support payments, unpaid income tax liens, and delinquent federal student loans.
4. You don’t have a down payment
Lenders prefer that borrowers be financially vested in their new home from the get-go. So if you don’t have a down payment, you’ll have to jump through more hoops to showcase your financial worthiness, and private mortgage insurance will most likely be a requirement of your loan. However, your lender may be able to help you find down payment assistance programs to help bridge the gap.
How can you improve your chances?
Doug has a laundry list of things he suggests borrowers monitor while going through the process of acquiring a loan,. Among the top items are acquiring a credit report, working to pay down debt and bring all accounts into good standing, and either securing funds for a down payment or searching for homes that allow 100% financing.
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