Was Your Southern New Hampshire Real Estate Financing Declined?

If you’ve recently applied for credit to finance a Southern New Hampshire real estate purchase, and were declined, you might be wondering why a lender would deny you credit.  Most lenders have a checklist of qualifications necessary to get approval for a home loan, and some don’t have anything to do with what your credit score is.  Here are the basic reasons a lender may deny a mortgage loan (Or, as mortgage consultant Charley Farley refers to them, the Four C's of Mortgage Lending.):

Cash - The amount required really depends on what program you are going with.  (VA, FHA, Conventional, etc.)  Not having enough money for a down payment or closing costs doesn't necessarily mean waiting to buy until you've saved up more.  Maybe you can make use of a seller credit towards your closing costs, or perhaps a friend or relative is willing to 'gift' you some additional funds that will enable you to buy now while the tax credit is still available.

Collateral - Your lender will do research to ensure that the property you are buying is worth what they are lending you.  Also, different types of properties are seen as more or less of a 'safe' investment for lenders and will influence the lenders decision, since 2 Families and Multi-Families have higher default rates than single family and condo properties.

Credit - The lender will review your credit report as well as consider your credit score in determining whether you have a sufficient and satisfactory credit history.

 ·     Little or no credit.  You may be under the impression that no credit is better than bad credit, but you’d be wrong.  A blank credit history is not something a mortgage lender wants to see.  A lender needs some idea of how you make payments.  You can build your credit history by getting a department store credit card, and using a maximum of thirty percent of your available credit to make purchases (keeping a good Credit-to-Debt ratio).  Consistently paying off the balance in full every month will soon add up to good credit, and lenders will look more favorably at your loan application.

·     Bad Credit.  It'll be difficult to find a lender that will approve a person with bad credit.  It’s not the end of the road, however.  You can improve your credit score with a little hard work and still buy that Southern New Hampshire real estate you want.  You’ll want to get a copy of your credit report from all three of the major credit bureaus.  If you have frequent late charges or many items in collections, you’ll need to call each company and arrange to get your accounts current.  You’ll be surprised at the difference each timely payment makes on your credit score.

Capacity - Comparing how much income you have with how much debt you are carrying enables the lender to determine how much additional debt in the form of a mortgage payment you can afford.

·    Income-to-Debt Ratio.  Most mortgage lenders will decline a loan application if your income to debt ratio is too high.  The percentage of your income allowed to be applied towards debt can vary depending on how much money you are putting down and how high your credit score is, up to a maximum of 50% on government loans and 45% on conventional.  If you personally figure on just above a third of your income for all your debt, you'll be well within the lender's comfort zone.

Let me help you get on the road to a Southern New Hampshire real estate loan.  Call me at 603-821-1134 or email me at dave@daveheeter.com for more information.