Feb
6
Working With A Mortgage Lender To Secure A Mortgage Loan
In even the roughest economies, people get mortgages. It may be tougher at some times than others, but mortgage lenders are in the market of loaning money. You just need to find a way to ensure you are the one getting the loan.
Long before you get to the point of applying for a mortgage, you should know your credit score. You need to know what lenders think of you financially. Are you viewed as a credit risk, or are you someone who pays his bills on time and qualifies for the lowest interest rates? If you find out your score is 720 or lower, you know you have some work to do in order to improve your score before you apply to a mortgage lender to borrow serious money. Pay all of your bills on time each month and work on paying off any incurred debt. Do not apply for new credit cards. Your score can change quickly, but you will have to work at it. People with poor credit are like to pay a higher interest rate, or they will not be able to finance the complete cost of the property.
By law, you are entitled to a free annual credit report. Go online to MyFico.com to find out your credit score. And apply to TransUnion and Equifax for a free, annual credit report.
If your poor credit prevents you from getting a mortgage loan, consider getting someone to co-sign the loan for you. Young adults often turn to a parent who has established and maintained a good credit rating. The benefit is you get the loan and you have a chance to establish good credit.
The problems arise if you default on your payments. It then falls on your co-signer to take on your debt – a situation that can cause familial rifts. And similar to co-signing for the loan is having someone else apply for the loan for you.
Bad credit loans are an option for people with poor credit – or those with no credit history at all. Unsecured personal loans are one of the riskiest types of loans to make. There are lenders who will make this type of loan, but be careful that it is a legitimate operation and not a scam. You do not want to apply for money that you cannot afford to repay.
Secured loans are another option. Like they sound, secured loans offer lenders more security. The borrower offers up collateral – something of value as
1000
security for the loan, such as property. If the borrower defaults on the loan, the collateral can be seized by the lender. Companies offering secured loans are often involved in refinancing and mortgages. The interest rates on secured loans can be 25 percent to 50 percent less than that on unsecured loans.
In today’s economy, it can be tough for the self-employed to get a loan. Most mortgage lenders want proof of income. They want to know they will get their money back if they make a loan. Unfortunately, self-employed workers depend on themselves for their income. They are often one accident away from unemployment.
It used to be that self-employed borrowers could get a stated income/stated asset loans, also known as an Alt-A mortgage. The borrower stated his income and the bank took him at his word. Unfortunately, these loans fell out of favor when the housing market tanked and the economy went south. Today’s self-employed borrower needs to provide proof of income. You should expect to show your tax returns and detailed financial records for at least the two previous years.
You may be asked to file an IRS form – 4506 or 8821 – both of which allow the lender to review your tax return. And those who get a loan will probably pay a quarter of a percentage point more and may be asked to put down 20 percent of the purchase price in cash.
If a self-employed borrower has a spouse with a regular job, it may behoove the borrower to list the spouse as the primary applicant for the mortgage and the self-employed spouse as a secondary applicant.
If you are self-employed, try to plan several years in advance of seeking a mortgage loan. You need to find a way to look better on paper. Streamline your debt, create a reserve fund to carry you in slow times and get financial advice on how to improve your cash flow.
If you are not sure where you stand financially, consider using the services of a mortgage broker. They work with a number of lenders and know which ones can best serve you. It is their job to pair up the right borrower with the best lender. If you have time to search out the best fit, do it. But, if not, let a professional take over the task.
By: mor123
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Barbara Delp is a freelance writer who writes about real estate and how to get a mortgage loan.
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