Tuesday, January 07, 2014

New Loan Requirements for Getting a Mortgage

It seems that many people would rather visit a dentist than talk to a loan officer to qualify for a mortgage.   And while there is more physical pain from the dentist chair, there is something extremely uncomfortable about having your entire financial history scrutinized and analyzed while your future hangs in the balance.  I get it.  My credit score is in excess of 800 and I still feel weak in the knees when I need to get pre-approved.

Effective January 10, 2014 there are new lending rules that make it essential for potential home buyers to get qualified for a home purchase as soon as possible.  It is not that the criteria to qualify has changed drastically, it that there is now no fudge room.  There is a strict maximum debt-to-income ratio if the lender wants to sell the loan through one of the agencies, such as FNMA, GNMA, VA, etc.  and many banks just are not interested in giving loans that don't qualify to be sold. 

Getting approved for financing is not just about credit scores.  It's about verifying income and assets.  Employment is also verified, which is not as simple as it seems, since today many more people are contract employees or independent contractors.   In addition, all debts and liabilities are looked at, including child support and alimony.  And then there is the credit history.  Mortgage qualifying is also about determining a monthly payment that includes taxes and insurance that works for the buyer as well as determining how much cash will be required at closing. 

There is a lot that can go wrong in this complex formula of mortgage qualification and the sooner that the borrower knows, the sooner it can be corrected.  Whether it is saving more money for the down payment, paying down debts or improving a credit score, time and sound financial advice from a seasoned mortgage professional are key to success.  A loan officer can advise on what bills to pay off first for the most rapid improvement in score and whether or not it makes sense to close accounts or consolidate debts. 

I don't send my clients to a loan officer to torture them.  I do it because I want them to succeed in their goal of purchasing a new home.  And I want them to succeed as painlessly as possible.   There is a lot of information on the internet about mortgage qualification and some of it is good, some of it is totally wrong and all of it is very general.   It does not replace the specific advice that you will get from a loan officer. 

So go ahead and make the call.  Hopefully all your news will be good news.  And save all your fretting for the dentist chair.  Just don't forget to brush twice a day and be sure to floss.  :-)
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