It is a simple fact that it is more difficult to get a mortgage now than it was during the height of the real estate frenzy last decade. Back then, the process was streamlined and mortgages were easy to come by. We all saw how that played out and it is understandable that nobody wants to see a repeat of that insanity.
Lenders these days are understandably more cautious about whom they will lend to and the properties they will lend on, but the fact remains that mortgage companies and banks are in the business of lending money and it is in their best interest to figure out how to make loans. Contrary to what you may have heard, it is not “impossible” to get a mortgage and you don’t necessarily need to have “perfect” credit.
Your biggest ally when pursuing a mortgage will be your mortgage professional and you’ll want to pick one that is knowledgeable, experienced, and one with whom you feel you can have a good working relationship. There are usually a lot of deadlines and timeframes to consider with a mortgage, such as close of escrow for a home purchase or a rate lock expiration date, and you want to make sure you can rely on your lender to do their part to meet the deadlines.
Another thing to consider when choosing a mortgage professional is for whom they are originating loans. Some professionals, commonly referred to as direct lenders, originate mortgages for the lender for whom they work. Others, commonly called mortgage brokers, originate mortgages on behalf of other lenders. Some mortgage professionals may also work as both direct lenders and brokers. This is an important distinction because brokers typically work with numerous lenders and may have access to a broader variety of loan options than a direct lender, which could lead to a better deal for you or provide you with more qualification flexibility. A broker is sort of a lending matchmaker trying to match you, the borrower, with the lender that will best fit your needs.
Whichever mortgage professional you choose, it is best to arrange a meeting early on. Ask what their process is, what the general qualifications are, how much of a down payment or equity you’ll need, what financial information and documentation they’ll require, and what timeframes you can expect. Be open and honest with your mortgage professional about anything that you think could have a potential impact on your ability to qualify.
Discuss any past or present credit issues that may show up on your credit report. Don’t make the mistake of assuming you can’t qualify for a mortgage just because you might have a blemish on your credit report. There may be a minimum amount of time that will need to have passed since a derogatory credit item before you can qualify for a mortgage, but these timeframes can vary widely depending on what the issue is and what, if any, special circumstances may have existed at the time of the delinquency, short sale, foreclosure, bankruptcy, etc. Your mortgage professional will help you understand how your credit report might affect your ability to qualify for a mortgage.
Talk to your lender about your income sources and any requirements the lender may have to fully include your income in their calculations. Some income sources, such as rental income, royalty income, business income, pensions, distributions from retirement accounts, and others are treated differently than regular “paycheck” income. If you will be relying on these income sources to qualify, it is good to know ahead of time how they will be counted or if there is any advance planning you can do to help ensure the income is counted.
Discuss the specifics of the property you would like to finance with your lender ahead of time. Any unique or unusual characteristics of the home or property may impact the availability or terms of a mortgage. Some things that could give lenders pause include an unusual size of the home (either too large or too small), unconventional building materials, a house in need of repair, lack of utilities, excessive amounts of land, other buildings on the property, agricultural or commercial use of the property, and/or difficult access, among others. A lender will require an appraisal on the property in order to determine the value. If the appraiser can’t find recent sales for comparable properties with similar characteristics, you may have more difficulty getting a mortgage. It is better to know this ahead of time than to be surprised after you have already paid for the appraisal and gone through the rest of the application process with your lender.
During the loan approval process, you also want to avoid changing employment or incurring new credit obligations like credit cards or car loans, as these things could complicate or jeopardize the mortgage approval process.
As you can see, there is a lot of consideration that must go into obtaining a new mortgage, both from the borrower’s standpoint and the lender’s standpoint. Choosing a quality mortgage professional will help you understand all of your options and assist you in navigating the process with relative ease. QCBN
Country Bank is a full service community bank serving Yavapai County with offices in Prescott, Prescott Valley, and Cottonwood. Ryan Glennan, NMLS # 478327, is a vice president of Country Bank specializing in commercial lending and residential construction loans. Please visit www.countrybankaz.com or call 928-443-9595 for more information.