I Love My Job!

Wow! Another new year ahead of me. Its always exciting to face the first business week in January and think about all the houses yet to be seen and the great homes yet to be found for friends, family, current clients and new clients.

2011 brings new challenges to home buyers and seller. As the old saying goes "For warned is for armed."

The magic words "your loan has been approved" are getting harder to hear. Home buyers are being asked to document and account for every penny, every financial action taken and get assurances from employers of continued job security. Home lending practices have drastically changed. Many programs home buyers relied upon have vanished.


According to RISMEDIA, August 2, 2010 article "Here are the top seven reasons banks are denying home loan requests:

1. Poor credit: The borrower may have a heavy down payment or excellent equity built-up in their house, but if their credit score is under a certain threshold, obtaining a new loan or refinance from a traditional bank is challenging. Even FHA (Federal Housing Administration) loans, which have traditionally catered to borrowers with lower FICO scores, have an average borrower credit score of 693, according to CNN Money, which is above the national average.

2. Insufficient liquidity: If the borrower does not have a heavy down payment (20%-30% for most banks) and strong excess liquidity, banks don’t want to take the risk on funding their loan.

3. Lack of income: The borrower does not have consistent proof of income for the last two to five years. Regardless of how good their credit score is or how much equity they have in their home, if they can’t show the bank proof of income, loan approval will be tough. This can be a big hurdle in the loan process, particularly for retired borrowers.

4. Lying on the application: Banks have learned their lesson and are no longer putting up with borrowers stretching the truth on their applications.
5. Debt: Borrower has excessive debt and their debt-to-income ratio exceeds the bank’s guidelines.

6. Unemployment: Most lenders will like to see at least two years of stable work to issue loan approval.

7. Self employment: Lenders are looking at self-employed applicants with a lot more scrutiny these days, making it very tough for these borrowers to get approved."

If buying a home of your own is part of your 2011 plan start with a phone call to an experienced loan originator. Here is where "buy local" can really pay off. A mortgage professional working for a local bank or mortgage company will provide you better customer service. They are more knowledge about local loan programs, trends and options than an online lender.

Before you call have:

1. Most recent pay stubs
2. Most recent tax returns
3. Most recent bank statements
4. Most recent list of outstanding loans. (i.e. car loans, bank loans, credit cards)

Armed with this information your mortgage professional will be able to provide you with an accurate assessment of your home buying power.

And, by the way, do not let multiple lenders pull your credit multiple times. This will significantly drop your FICO score and, in some cases, make it impossible for you to buy a home.

Questions? Email me at nell@talk2nell.com

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