When It Comes to Mortgages, Keep an Open Dialogue

The number of prospective homebuyers coming back onto the market is increasing. With high Loan-to-Value loans becoming popular again, people who will apply for low money down loans will also increase. That amount of risk, will trigger the Underwriter to look over that file with caution. Let?s be honest, many borrowers still have a bad taste in their mouth when it comes to lending. You may be likely to see borrowers who believe that sharing information with the bank is bad.

Lenders and Title companies alike would greatly benefit from encouraging borrowers with non-traditional credit issues, like foreclosure or short sales to write detailed letters of explanation to submit with the application. This extra information could greatly expedite and underwriters decision to extend credit and ultimately could be the difference between approval and denial.

The most common of those could be classified into 3 categories:

1. Previous homebuyers who have delinquencies on their credit reports
2. Consumers who lack credit depth
3. Prospective homebuyers who are paying student loans

Previous Homebuyers with Delinquencies

Seven years have passed, and many of those who lost their homes due to foreclosure, bankruptcy or in a short sale are ready buy again. These applicants will be seeking a high loan-to-value-ratio loan.

Consumers Who Lack Credit Depth

Increased communication will also benefit those who have excellent credit scores but do not have any transactions in their credit histories to support these numbers. In these instances, applicants have many opportunities to present other forms of evidence to their lenders that can demonstrate creditworthiness. Some of these documents include the following:

? Nontraditional-credit trade lines
? Bank account statements
? Letters of explanation
? Rent-payment histories
? Retirement accounts

Student Loans

Some people are currently repaying their student loans, but their monthly installment payments are not fully amortized. This means that their payments are much lower than would be expected on such high amounts of debt. Open communication allows lenders and borrowers to determine how repaying these loans affects a homebuyer?s ability to repay a mortgage.

Real estate experts don?t know exactly where the housing market will go this year, but they do know that it is going in a positive direction. This encourages a more open lending process that can qualify more people for a home loan. If lenders can focus on creating open dialogue with borrowers, it could go a long way towards ensuring that underwriters get the information they need to reduce risk and help them buy the homes of their dreams.

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