6 ways to get a mortgage more easily in today’s crazy market
Despite homeowner relief and low interest rates, many homeowners are still struggling to get mortgages today. I ran into this issue myself – 11 lenders later I found the one that was decent. It takes patience and is often frustrating.
Those struggling the most are those with either lower than 700 FICO scores, or those who are self employed that were using stated income loans. Here are 6 tips to getting a mortgage more easily in today’s market.
Be prepared with documents! Scan your pay stubs, keep copies of your current employment records, and if you are self employed, keep a letter from your accountant and business license copy in a PDF format. This saves tremendous time when you go to file.
Stay away from companies that will “raise your FICO”. Most of these are scams – they will take your money but you won’t see your credit score increase. One way to do that legitimately though is to, rather than paying off your high interest cards first (which makes the most financial sense in most cases), is to pay 50% of each card. Once your cards drop to 50% of their available limit, your FICO goes up as you are considered a less risky borrower. Another way to improve FICOs is to not close old loans and show them paid off – and until the end of the year, if you are an authorized user on someone else’s card, this can help improve your score too (provided they’re not over their limit!)
Shop around – big time. Lenders are advertising easy loans, but the devil is in the details. Look out for origination fees (as much as 2% or more of the loan amount!), penalties for having a “lower than 700” credit score, and companies that wont take your loan if you have a 2nd mortgage.
Maximize your 1st mortgage. Try to get as much as you can on your primary mortgage because the cost of HELOCs and 2nds today behind other loans at the 75% combined loan to value rate is very high.
Don’t just take your brokers word for it. Some brokers have access to great lenders that you don’t have access to through wholesale lending. But that doesn’t mean you shouldn’t also shop around yourself. Compare what your broker finds to what you find, and be prepared with all the documentation you can handle.
Do your own appraisal. Particularly on jumbos or in areas that are “declining markets” (each bank is different in terms of zip codes they consider in the declining market arena), the banks are often using their own internal appraisals and rather than over inflating price as many did, they’re coming in far less than they should be to be fair and accurate. Having your own appraisal can be a good baseline to see if the banks are ripping you off. If they can show a higher LTV, they can charge you more for the loan!
Dani Babb
