Consumers securing mortgage loan financing today at times might be frustrated with the amount of paperwork needed to get their mortgage application signed off. As a result, you must meet ATR which is ability-to-repay requirements to secure mortgage financing. As a result, some people depending on how technical their file is may experience more paperwork frustrations. Here are a few things you need to know so your loan application is going to make sense…
Contrary to popular belief it’s not as simple as just having good credit, good income, a low debt to income ratio, and money in the bank. Granted those are the ingredients for getting mortgage financing, but it must make sense. Make no mistake the mortgage underwriter is the decision-maker of the mortgage company. They need to feel good about the loan and be able to defend their approval if ever audited. In other words, your application must make sense. The loan application ought to pass a litmus test- would a reasonable logical person make this move or do this loan? That is always going through the underwriter’s mind when granting you financing. Here are a few scenarios for example to illustrate our point.
Let’s say you have a primary house, and you owe $200,000 on this primary house and you have ample home equity. It would be odd for you to say you’re going to rent out the property and go buy a new primary home for $200,000 two to three hours away from the departure residence. It just wouldn’t pass a make sense test. Here’s why- what’s the motivation driving you to buy this new other property? If the property was being sold relocating would make sense.
Another example maybe you’re a first-time home buyer using an FHA 3.5 % down loan and let’s say you work in Santa Rosa, California, for example, well let’s say that because housing prices in Santa Rosa are a little on the high side let’s say you want to move to Butte County which is about 3 hours away from where housing prices are more affordable.
You’re going to keep your job in Santa Rosa, but you’re going to go buy a primary home outside the area. It doesn’t make sense because no underwriter is going to believe you’re driving three hours a day five days a week to your job. Now if you can telecommute with your job that would make sense, if you can be repositioned within your employment organization to a location more centralized to where you’ll be living that also makes sense.
Another example is let’s say you have a primary residence on 1234 Main Street. You and your family have outgrown this home. You really like the neighborhood so want to buy a new home. A new home is just a few minutes down the street and you’ve rent out the other home, and use the rental income to offset the mortgage payment. It will likely not pass as an owner-occupied home, due to the proximity of the new home to the old one.
If your scenario is anything unique or out of the box it doesn’t necessarily mean the loan won’t close, it just means you have to have an underlying element of why you’re making the move buying the property or relocating, etc. Most of the believability has to do with occupancy. Remember the underwriter is only doing their job by asking these questions. Be upfront, be transparent with the mortgage company tell them about what you’re trying to accomplish, and work with them, not against them to achieve the common goal. An experienced loan officer who knows and knows what the underwriters will ask for can be immensely beneficial in helping navigate you and your family through the sometimes often unique and complex world of mortgage finance.
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