What Real Estate Lenders Look For
Lenders control many programs -- some make use of over 200! Generally, lenders look for the following typical standards, with many exceptions:
1. Absolutely no late mortgage payments
2. Credit score above 580
3. If bankruptcy, no charge-offs or collection accounts afterwards
4. If bankruptcy, only 1 late payment afterwards
5. Two active revolving accounts in good standing
6. Good employment history or stated income
7. Three to six months reserves (covering mortgage payment, taxes & insurance) in savings
8. 55% income to debt ratio
9. Appropriate loan-to-value ratio on purchase property
Borrowers obtain a loan by bringing something of value to the table. One of the following assets ought to get you financing:
1. Good credit score
2. Good income
3. Good cash down payment and reserves
Seven Loan Types and Finance Terms
Understanding the variety of loan types and terms enables you to choose an effective lender. Here are seven important loan types and related terms:
1. "A" Loans
Borrowers with great credit, a good cash reserve, good employment, and a debt-to-income ratio of less than 33%, qualify for "A" loans. These loans typically cost less upfront for points and costs, charge no prepayment penalty, and offer lower interest rates.
2. Sub-Prime Loans
Credit reporting agency websites portray Americans as having great credit. These informational articles and graphs mislead and cause struggling home buyers to feel inadequate. In fact, my Countrywide lending contact told me that 60% of all applicants are considered "sub-prime" borrowers. Sub-prime borrowers usually are those with credit scores under 620 or those with other conditions such as undocumented stated income, poor employment history, or credit issues such as collections, charge offs, and late payments.
3. Stated Income Loans
Most applicants for a mortgage have a full-time job with income tax returns verifying income for the past two years. Other borrowers, like me, with multiple streams of income must get loans with stated income. Some lenders require two years of bank statements showing deposits equaling the required total income, proving the ability to make the mortgage payment.
4. Full-documented Loans
These loans require tax returns, employment verification, bank statements, and other individual lender demands. Other processing types, more flexible and easier for the borrower to gather information on, do not necessarily cost more. High credit scores, big down payments, and large cash reserves ease documentation requirements.
5. Conforming Loans & Jumbo Loans
According to Fannie Mae and Freddie Mac guidelines, "conforming loans" are mortgages for less than the following allowable amounts at the time of this writing:
(Unit= dwelling or housing unit)
1 unit $333,700
2 units $413,100
3 units $499,300
4 units $625,000
Note: the amounts are higher in Hawaii and Alaska. Other states like California, New York, and Florida join the higher limits this year. The dollar amount of these loans changes periodically.
Conventional lenders also use the term conforming loans for loans which are not Fannie Mae and Freddie Mac loans. Conforming loans simply refers to the dollar amount; it doesn't mean you get a Freddie Mac or Fannie Mae loan.
6. "Jumbo loans" are for higher dollar amounts.
You need jumbo loans to finance properties requiring larger mortgages than the limited conventional loan amount. Jumbo loans usually charge higher interest rates than conforming loans.
7. Home Equity Line of Credit (HELOC)
If you already own your own home, consider a Home Equity Line of Credit, with few fees and lower costs, for purchasing investment property. Use this line of credit for a large down payment on your investment properties over and over. With twenty percent or more down on an investment property, you get better financing plus save on loan costs.
(c) Copyright 2004, Jeanette J. Fisher. All rights reserved.
Professor Jeanette Fisher, author of Doghouse to Dollhouse for Dollars, Joy to the Home, and other books teaches Real Estate Investing and Design Psychology. For more articles, tips, reports, newsletters, and sales flyer template, see http://www.doghousetodollhouse fordollars.com/pages/5/index.htm
Several years ago I developed a philosophy in renovating houses... Read More
When we open our doors to strangers, we can never... Read More
Have you ever dreamed of living in a spectacular tropical... Read More
There is curently a huge real Estate boom in America... Read More
If only there were a way to sell your home... Read More
If you want to become a real estate investor, find... Read More
HOW TO SELL YOUR HOME FOR TOP DOLLAR1. Make your... Read More
Purchasing Florida Investment PropertyConsidering researching the purchase of Florida Investment... Read More
Cheap, Bargain, Real Estate; Good Deals, Below Market, Low Priced... Read More
In our fast paced and frantic real estate market, buying... Read More
Do you want to see something that is absolutely amazing?... Read More
I've taught the concepts of Design Psychology for many years,... Read More
Unlike traditional residential real estate mortgages, real estate investment financing... Read More
If you don't have the time to invest working on... Read More
What are the odds that you'll find your dream at... Read More
You're ready to put your home or land (house, townhouse,... Read More
Property Investing Secrets:What No One Ever Tells You-How Real Estate... Read More
Renters are often in a quandary as to whether it... Read More
Homeownership, in any form, is a big step for most... Read More
What if two people pooled their resources and began investing... Read More
San Diego county has always been known for its Luxury... Read More
Leverage: With real estate, people and companies will lend you... Read More
One of our investor students told us of an interesting... Read More
Choosing a first home can be a daunting task, but... Read More
It's a large real estate agency, and the company depends... Read More
Advertising to the "Public"Every home seller likes to be assured... Read More
For posting the "Truth" on your website, some FSBO's will... Read More
As an ASP Home StagerŪ I know how important curb... Read More
As an active real estate investor you probably already know... Read More
If you are serious about selling your home, you probably... Read More
How do you decide whether to sell your home (or... Read More
Central Illinois is an area rich in cultural activities and... Read More
The majority of people in the UK who are looking... Read More
When looking for a new home or property, buyers ask... Read More
Negotiation is the process of communication back and forth in... Read More
Have you ever dreamed of living in a spectacular tropical... Read More
There are a great many books and web sites devoted... Read More
If everyone always did everything they said they'd do, we'd... Read More
Real estate investments come through a variety of different options.... Read More
The latest investment property headline is this: Popular and well... Read More
Unlike traditional residential real estate mortgages, real estate investment financing... Read More
The concept of negative gearing has been originally developed to... Read More
Where should you invest in real estate? If you know... Read More
Property Investing: A Buyer's Secret Weapon When Purchasing Real EstateMy... Read More
There are five major factors to consider when selling a... Read More
An example of seller financing: Years ago I bought a... Read More
Title insurance is generally associated with insuring a purchaser's or... Read More
Buying a house in Scotland is slightly different from buying... Read More
What's the difference between death and taxes?Death doesn't change every... Read More
Cheap, Bargain, Real Estate; Good Deals, Below Market, Low Priced... Read More
Is it your dream to one day own a holiday... Read More
Finding the right buy to let mortgage is crucial to... Read More
Realtors are all a buzz about this new form of... Read More
Lake Havasu real estate is a hot commodity. With surrounding... Read More
Is landlording the way to go if you are starting... Read More
Starting real estate business is not that simple. Multiple aspects... Read More
Doesn't it seem like everyone you know has a friend,... Read More
In our fast paced and frantic real estate market, buying... Read More
One of the biggest mistakes people make when selling a... Read More
STEP#1. First you have to recognize that in order to... Read More
Several months ago, the 3,000-member California Association of Mortgage Brokers... Read More
There is more to buying raw land than meets the... Read More
In today's real estate market, astute buyers are also looking... Read More
A typical real estate commission on a $234,000 home (national... Read More
Babyboomers whose children have left home, commonly known as "empty-nesters"... Read More
The real estate bubble is a hot topic today; annual... Read More
Real Estate |