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Got questions regarding your mortgage scenario?

Over the last 14+ years, I have received numerous questions from homeowners regarding different mortgage scenarios.  The answers to some of these questions have changed over the years due to underwriting changes in the mortgage and banking industry.  I thought a little Q & A would be insightful to a current or potential homeowner so I have included the top 5 that I have received in 2012.

 

1)       What is the minimum credit score needed to obtain a mortgage loan? A: The answer to this question has changed the most over recent years.  The simple and safe answer is a 620 credit score but there are some cases where you may need a slightly higher score or you can be approved with a slightly lower score depending on your financial situation.  An FHA loan may allow a slightly lower score but if you want the best possible rate on an FHA loan with the minimum down payment then you want to have a score of 680 or above.  A conventional loan won’t go lower than a 620 score but conventional loans vary more in the interest rate than FHA loans.  The higher the credit score with conventional, the better the rate and the more you can borrow. For example, someone with a 680 score can obtain the max financing of 96.5% and get the same rate as someone with a 740 score on an FHA loan.  However on a conventional loan, the person with a 680 score may see about a .125 – .25% higher rate than someone with a 740 score.  On a conventional loan a 680 score used to be considered “excellent” where now it is probably viewed as “good”.  740 or above is now considered the new “excellent”.

2)       I am self-employed and don’t show much income on my tax returns, can I get a loan? A: Maybe.  Self-employed borrowers need to be able to qualify for a mortgage based off the adjusted gross income they report on their tax returns.  If you write off a lot of expenses and report very little income then it will be difficult to qualify for a loan.  It’s always a catch 22 for self-employed people since they don’t want to report a lot to the IRS for tax purposes but the flip side is that it then becomes difficult to obtain a mortgage loan.  We also require 2 years of tax returns for self-employed borrowers, however there are some cases where we can just use the most recent year.  This is great for self-employed people who didn’t show much income in their first year or went through a tough time let’s say in 2010 but their 2011 numbers were much better.  In that case we would just use their 2011 income to qualify.

3)       I just started a new job last week, do I have to wait 6 months or a year before I can get a loan? A: No.  As long as you are a salaried employee who receives a W2 and in the same line of work then you just need to be on your new job for at least 30 days and show a 30 day paystub to qualify for a mortgage.  The only time it’s a problem is if you switch from a salaried job to a commission only job or self-employed. In that case then you need to wait 2 years.

4)       I don’t have enough money for my down payment, can I get a gift from my parents? A: Yes.  As a matter of fact the gift can cover your whole down payment and closing costs in some cases.  The gift has to be from a family member (parents, brother, sister, cousin, etc..).  It cannot be from a friend, co-worker or any other non-family member.  All gifts need to be properly sourced from the donor.

5)       I am underwater on my current mortgage, can I still refinance and lower my rate? A: Yes as long as your loan is owned by Fannie Mae or Freddie Mac or is FHA insured.  The HARP program and the FHA streamline program allow homeowners to refinance that are currently upside down.  You have to be current on your mortgage over the last 12 months and have originated your loan on or before May 31st 2009.

 

To learn more about our company and mortgage products, please feel free to call Dan Longman, President of Priority Lending Corp, at 954-438-3776 ext.11 or email me at prioritydan@bellsouth.net. Please visit www.prioritylendingcorp.com

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