Today’s post is the first on a series that will explore unexpected problems that can threaten real estate deals.
Today we will explore your options if a bank or other mortgage lender threatens to turn down your application because of your employment history or income level.
The problem . . .
Maybe your income is simply not as high as what the bank likes to see from loan applicants. Perhaps you have only had your current job for a few months. Or maybe you were unemployed for six months two years ago. And suddenly you are hearing about those problems from the bank where you applied for a mortgage loan.
For institutions that run ads claiming to want your business, banks are pretty finicky. It seems that they can come up with an endless number of reasons for turning you away!
But there are solutions you can apply if you encounter this problem . . .
- Offer to make a larger down payment. If you can offer 30% or even 25%, some banks will offer you a mortgage without verifying your employment or income.
- Find a partner, a relative or other person who can cosign for the loan with you. It’s a strategy that usually pleases banks. But remember that your cosigner is taking a risk. If you default on mortgage payments, he or she will be as responsible as you will.
- Apply for mortgages from several lending institutions. The fact that you have applied to one lender does not prevent you from speaking with others. Because banks can be eager to win your business, try explaining the snags that you encountered with your first application and see if they can do better.
- Consider applying for loan types that you might not have considered when you filed your first application. Variable rate and balloon mortgages, for example, can be easier to obtain than fixed-rate loans. So if you encounter snags, ask your bank whether you could qualify for a different type of loan.
- Use a mortgage broker to find a mortgage for you. Mortgage brokers represent multiple lending institutions and try to connect them with borrowers. One of the larger ones is Lending Tree (http://www.lendingtree.com). You can learn more about mortgage brokers from the National Association of Mortgage Brokers (http://www.namb.org).