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Good Credit is King, When Qualifying for Mortgage
Programs
If you want to purchase a new home or refinance your current
mortgage, be sure to check out the wide array of loan programs
available. If you have less than excellent or even poor credit,
you can still qualify for a loan. If you have outstanding credit,
though, you are in the proverbial driver's seat, when it comes to
selecting your loan program. Be sure to find a good mortgage
consultant, and carefully explain exactly what you need. Here are
just a couple of "outside-the-box" programs that come in handy
for some people but require excellent credit ratings.
Stated loan programs are designed for a person whose income or
assets fluctuate from month to month and year to year. Not many
banks offer stated programs. Many people who need stated programs
get turned down by not only banks but by inexperienced mortgage
brokers who don't understand the breadth of the programs at their
fingertips. So, you may have to enlighten them with your own
insight by telling them this is the program you need.
Stated programs are for people who may not qualify for a
conventional loan, because they do not meet income requirements a
lender has. A prime example is someone who does not show all of
her income on a W-2 tax return, for one reason or another. This
person may make enough money to cover the mortgage payment, but
she can't prove she makes it on paper. Lenders like to see two
years of W-2 income. This proves to them that you consistently
make enough money to pay back the loan. Now, it's important to
note that this is a good credit program, and a lender will want
someone with at least A-minus credit for approval. Here is where
all that work to maintain your spartan credit record is going to
pay off.
What the stated loan requires is all standard documents,
except income verification. In other words, the loan officer is
going to state your income on the application, and no proof is
required. Please note that this program is not intended for
someone who works at McDonalds to try to state that he makes
$200,000 yearly, so he can get approved for a $400,000 loan. It
is intended for people, like salesmen, whose income varies or for
businessmen, who work on bonuses, which they may not receive
until the next year. As long as the income is reasonable for the
profession, no underwriter will ever question it. So, if you
needed to make 60,000 yearly for approval, but you only show
$54,000 on last year's W-2, your mortgage broker can get you a
stated income program, and he will simply write $60,00 on the
application. Don't worry, the lender won't ask for pay stubs or
tax returns. Your credit rating speaks for itself. In other
words, the lender sees that you have an excellent payment history
on your other debts, so he is willing to take on a bit more
risk.
A stated asset program works the same way, and good credit is
required for approval in this program, too. Lenders require cash
reserves, in order to cover several months of mortgage payments,
in the event something goes wrong after the loan closes, like you
lose your job or get hurt. This can be a problem for people who
have no savings, stocks, or retirement accounts, which are all
acceptable forms of reserves. If you fall into this category, you
simply ask for a stated asset loan, and the mortgage broker will
state enough assets on your loan application to appease the
lender.
This seems fraudulent, you might say. It isn't, as long as you
follow the guidelines set forth by the lenders. Remember, they
created these programs, so they could loan more money. You'll
pay, of course, because the lender will hit you with a premium on
your rate, because the loan is more of a risk. So, instead of
getting a 6% rate, you might get as high as 6.75%, but at least
you'll get your loan.
There are many other loan programs that allow you to borrow
more of the equity in the house, let's say up to 95% or even
100%, due to a great credit rating. Some programs allow for an
improvement on your interest rate.
It's always important to ask your mortgage broker if there is
some kind of incentive because you have A or A+ credit. Most
lenders allow the mortgage broker to either give you the break in
rate, or they'll give it to the broker in a cash commission. Many
unscrupulous brokers will never mention the credit bonus to you,
and they'll make up to .25% of the loan amount for
themselves.
So, if you had a $200,000 loan, and the lender allowed a .25%
interest reduction or commission to the broker, and the broker
takes it, instead of giving it to you, that mortgage broker would
make $500.00 extra dollars, which would be paid by the lender. Of
course, if you had received the .25% better rate, your payment
would decrease by about $30.00 each month and $360.00 each year.
That's nearly $2,000 if you have the loan for five years that you
would lose to a greedy mortgage broker. So, always ask for
something, due to your excellent credit.
And always remember, with good credit, you are king. And kings
always make the rules. Learn more at
www.winningthemortgagegame.com
Mark Barnes is author of the wealth-building system, Winning
the Mortgage Game and other investment real estate books. He is
also a suspense novelist, and his new novel, The League, will
thrill both suspense and sports fans. Learn about Mark's
wealth-building system and get his free home loan course at
http://www.winningthemortgagegame.com.
Learn more about The League and read an excerpt at http://www.sportsnovels.com
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