Your Atlanta Area Broker Serving All of Georgia

Loan Details

You Have Not Paid Your Bills On Time / Credit Scores

This is the most common reason that borrowers are turned down at regular lending institutions. The simple solution to this is to use a lender that uses underwriting guidelines that are much less restrictive. There are 3 major credit-reporting bureaus namely Equifax, Experian and Trans Union (EFX, EXP & TU). When getting a mortgage loan usually all 3 bureaus information is pulled at once in a report called a tri-merge. Because 3 bureaus are pulled there are 3 different credit scores displayed. Usually all borrowers on a loan need to have at least a 500 middle credit score. Compare this to scores well into the 600's that regular lending institutions usually require. The credit scores of the primary wage earner are used to grade the loan. Rarely are scores averaged or a single bureau is used, but usually the highest and lowest are thrown out and the middle one is used. I have a few lenders that allow scores under 500 as they pay more attention to the number of times late on various trade lines. Obviously the higher your scores and/or payment history the better your loan terms will be, but you do not need good credit to qualify for a loan. If you have made a lot of late payments it is usually better that your lates were not on your rent or mortgage payment, but significant lates on those may be allowed.

You Have No Credit Established

Some borrowers have no tradelines (accounts) showing on their credit report, because either there are none or a lending institution has not reported the tradeline(s). This usually results in a borrower having no credit score at all. That is not always a bad thing though. Some of our lenders will assign a credit score to a borrower based on their mortgage or rental payment history. In that case they usually want good solid proof of that payment history (see below).  If you have had some loans that do not show up on your credit report, you may want to ask the institution to report the information to the bureaus (especially if it is good). Collection accounts that you have been paying regularly do not count as tradelines.

Mortgage / Rental Payment History

The most important payment to make on time is your mortgage or rental payment. Equally important is your ability to prove your payment history. Generally your last 12 months payments are examined the closest. Your payments are not considered to be late unless they are at least 30 days late. Many times late payments made more than 12 months ago are ignored. The best proof of payments are copies (Front & Back) of your last 12 cancelled rent checks, money order receipts or a written verification from a lending institution, escrow company or a property management company.  Mortgage payment histories that report on the credit report are always acceptable, but not rental histories.  Most lenders tend to not believe the word of private individual landlords and mortgage holders, but sometimes verifications of cash payments to a private individual are acceptable.

You Have A Recent Bankruptcy

In short, you might qualify for a 100% mortgage loan the day after a bankruptcy is discharged. The more time that has passed since your bankruptcy the better your loan terms will be. When measuring the age of a BK the discharge date is used on chapter 7's and the filing date is used on chapter 13's. With many lenders a 4 or 5 year old BK is not even considered a factor. With some, a 1 day old BK is not considered a factor.  Usually your BK must be discharged to get a mortgage loan, but in some cases a chapter 13 can still be in progress as long as you will be paying it off with the proceeds of your new debt consolidation refinance loan.

You Have Had A Home Foreclosed On

Home foreclosures are treated nearly the same as a BK's.  You may qualify as soon as the home is foreclosed on or possibly even during the foreclosure proceedings.  The more time that has passed the better your loan terms will be.

You Have Unpaid Collections / Charge-Offs / Judgments / Repo's

Many lenders ignore all unpaid collections, etc. However, some require either some payoffs or to have the balances paid down to specified levels. When the lender has knowledge of the following items they must be paid off prior to closing or using the proceeds of your new loan: Liens against the subject property that would be higher priority than the new mortgage and tax liens against you as a person that are recorded in the same county as the subject property.  Payment arrangements that have been set up for these things are usually not a reason for them not to be paid off.  I do have lenders though that will lend you money and not make you pay off most collections.

You Were Told You Do Not Make Enough Money

When determining how large of a payment you will be allowed to go up to lenders will use debt ratios. Take your monthly gross income and multiply it by the maximum allowable debt ratio. Then subtract out all other consumer loan and credit card monthly payments. The remainder is your maximum allowable house payment. Example: $3000 X 45 - $575 = $775 max. payment. Most of the lenders I use allow between 45% and 55% debt ratios. If a lender allowed a 55% ratio instead of the 45% used in the example then the max. payment would have been $1,075 instead. Regular lending institutions usually do not allow over 42% debt ratios. If these higher debt ratios do not help your particular situation then read the next section.

Documentation Types

Different doc types refer to how you are going to prove your employment, income and/or assets. The most common is full doc, but for many borrowers full doc will not work for one reason or another. Each lender has their own versions of alternative documentation, so the exact requirements will vary a lot. Following are some common characteristics of the various doc types:

Full Doc Wage Earner - You provide your last 2 years of W2's or 1040's, last 2 paycheck stubs from current jobs, and employment is usually verified by underwriting with your last 2 years employers.

Full Doc Self-Employed - You provide last 2 years 1040's and a YTD P & L statement. Other forms of proof of self-employment are usually required.

Lite Doc / Alt Doc / Bank Statement Program - This is program in which you provide 6 - 24 months of personal or business bank statements.  The lender looks at your deposits as your income.  You still have to prove that you have been employed, but the income amount comes from the bank statements instead of some other source.  This works well for many self-employed borrowers or commissioned employees that do not have a set income.  It also works well for people that have been depositing additional monies on a regular basis from sources that may be difficult to document so long as you can document at least a source.  Most of the time transfers from another account and abnormally large deposits will not be counted.  Each lender's guidelines vary a great deal on bank statement programs.

Stated Income Doc - This is where you simply state on your application how much you make, but the amount is not verified in any way. You only have to prove employment or self-employment. The amount you state needs to be believable given the line of work you are in. With some lenders stated income is only for self-employed borrowers, but many allow it for W2 wage earners as well.  You may or may not have to document your assets.

No Ratio - This is similar to stated income, except you do not list an income amount on the application at all.  Income amounts are not verified independently with your source of income.  You may or may not have to document your assets.

NO DOC - Last but certainly not least is No Doc. With No Doc loans you do not state your employment, income or asset information on your application. The lender looks only at what they know about your credit and whether or not you will experience a great deal of payment shock as compared to your current rent or mortgage payments. Your current rent or mortgage payment proof will usually need to be pretty solid, because this is their only way of knowing if you might be able to afford the new loan.

Hard Money - Hard money lenders are certainly a last resort.  Most will only loan you about 65% of the value of a property.  In some cases you do not even have to fill out an application and they may not even pull a credit report at all.  Hard money lenders care more about being sure of the property's value and making sure they are only loaning you a small amount in comparison.

You Have Been Told You Do Not Have Enough Money Down To Purchase A Home / Not Enough Equity On Refi's

When talking about how much is needed down we must separate down payment and closing costs. Down payment refers to the amount you are putting towards the purchase price only. You will also have to pay closing costs. When a borrower is qualified for a 90% LTV (loan-to-value ratio) loan that means they need 10% of the purchase price plus closing costs. The loan does not cover 90% of both the purchase price and the closing costs. Some borrowers that are turned down by regular lending institutions come to me and qualify for 100% LTV in which they only need to pay for some closing costs. In general my lenders allow much higher LTV's as compared to regular lending institutions (100% LTV on purchases & 125% LTV on refinances).

Seller 2nd Mortgages / Seller Carry-Backs - Some borrowers unfortunately do not qualify for 100% LTV from my lenders and they do not have much money to use towards their home purchase. There may still be hope if they can find a seller who is willing to carry back a 2nd mortgage. A seller 2nd mortgage is where the seller is willing to accept a portion of their purchase price in monthly payments from you instead of getting it all at the closing.

Example: You have had some major credit problems and can only qualify for an 80% LTV loan and your seller is willing to carry back a 2nd mortgage in the amount of 20% of the purchase price.

Generally your 2nd mortgage interest rate and term is up to you and the seller to negotiate. Payments are usually paid directly to the seller, but if you prefer an escrow company can handle the transactions for you. Sometimes it may be hard to find a seller willing and able to go along with a seller 2nd mortgage, because they may owe too much on the property themselves or they do not like the risk of you not paying them. It may help if you assure them that a 2nd mortgage lien would be filed in the county records and that means that if you try to sell or refinance the home their lien would have to be paid off. Many times a seller that is willing to do a contract for deed (CFD) is also willing to do a 2nd mortgage.

Closing Costs - Total closing costs on the loans I do can range anywhere from under $1,000 to $9,000 or more. Every loan scenario is different and the costs will vary with each loan. When refinancing your home, you can usually finance all of your closing costs into your new loan except for your appraisal. On refi's and purchases alike you pay the appraiser when they do the appraisal.  Appraisals run about $300 and may be able to be paid with a credit card.

Seller Paid Closing Costs - In most of the purchase loans I do I plan that the seller will be paying some of your closing costs. This amount is conceded by the seller and is not a loan like the 2nd mortgage mentioned above. Sellers are usually willing to do this as long as they are getting a high enough sales price. Sellers are limited on how much they can help and the limit is usually 3% - 6% of the purchase price.

What Documents Do You Need To Provide

I do not require any documents to be brought on your first visit, but if you want to be prepared for all questions you might be asked during the application, you may think about bringing some of the things mentioned in this section.

Employment Information for the last 2 years except on No Doc loans. Employer's names, addresses, phone #'s, dates worked from & to and pay rates. Bring W2's, 1099's, 1040's or whatever applies to your particular situation. If self-employed bring your business card, letterhead, copies of ads you have run, business licenses, etc.

If you receive income from court ordered child support and you wish to disclose it then bring the court order and the proof that you actually receiving it.

If you already own real estate, bring information on its value, your payments, taxes, insurance and leases for renters.

Verification of rent / mortgage payment history is not required for the first visit, but please know how many late payments (by at least 30 days) you have had in the last 12 months. If your payment history is on your credit report, you will not need to gather this for me.

If you have had a BK, I will need your petition that you filed in the beginning as well as the discharge document.

If you have no credit established, I might need account information for your utility bills, etc.

For all asset accounts (checking, savings, retirement funds, etc.) I need the last 2 months worth of statements.

Once you purchase a home (if doing a purchase loan), I will need the purchase contract between you and the sellers with all addenda signed by all parties and a copy of the front and back of the cancelled earnest money check.

If you are refinancing a home that you purchased on contract for deed or land contract (CFD), I will need a copy of that contract.  If your CFD payment is escrowed by an escrow company give me their contact information.

How To Fix Your Credit Report

Please click here to download instructions for fixing errors on a credit report (one page .pdf file)

Credit scores: You know that paying your payments on time is the best way to raise your credit scores and/or keep them high. However, you may not know of some other things that help your scores. When you have multiple credit inquiries (credit checks) your scores can go down. Because of this, applying for credit at every institution available is not a good idea. If you have more than 2 or 3 revolving accounts (Visa, MasterCard, Discover, American Express, JC Penny, Best Buy, etc.) you have too many. Try consolidating debts onto less cards and call to close any revolving accounts that are open, but unused ($0 balance). When your current revolving balance is near the limit and/or original balance then that will hurt your scores as well. Try calling your revolving account companies and having your limits raised or pay the balances down to about 25% of the limits.

There are many other life situations that sometimes require unconventional or creative financing. I will do my best to tailor your loan to fit your particular needs.

Georgia Residential Mortgage Licensee.