Here's how I qualified the friend I mentioned in my last post:
The magic word in his case was EQUITY. Many lenders are using automated underwriting systems now days. Basically, the loan officer enters in all of the applicant's information into a computer program. The program rolls it all into a mathematical formula, taking every aspect of the profile into consideration, then spits out an approval (or denial). These automated underwriting programs are often very favorable to people who have a lot of equity in their place.
Like I mentioned in my last post, my friend had a 590 credit score, a Bankruptcy, and 24 consecutive mortgage lates on his credit. But he had about a 70% Loan to Value. Guess what? He was able to qualify at conforming rates because he got an automated approval!
Here's what fannie mae is saying about their automated underwriting system called Desktop Underwriter (DU):
Save Borrowers Time and Money and Improve Customer Service
- Less cumbersome documentation requirements.
- Fast, objective loan recommendations.
- Streamlined property valuation features.
Make sure your loan officer tries your file through automated underwriting before you settle for subprime rates!
Jeremy
2 comments:
Yes, I agree, getting a new mortgage if you have a bad credit score is easier today than it has been in the past few years.
Many lenders have become more flexible out of compassion for borrowers who have had past credit problems. Or simply, they have realized that borrowers who are seeking financing with a less than perfect credit score are just as much a profitable market as customers with a more positive credit status. In any case, the result is good for those borrowers that need to refinance their current mortgage, but do not have a good credit history.
Lenders tend to charge a higher rate to take into account that the borrower is a potential bad risk.
Before you try to get a new mortgage you should find out how bad your credit history is. You may find out that it is not as bad as you thought.
Depending on the situation, a bad credit borrower may not even need to settle for higher rates. In this case I was able to qualify my friend on conforming rates because his loan to value was so low.
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