Balancing Your Total Scorecard
There are many factors that are needed for a full loan approval. It’s not that easy to say “Hey, I make over 100 grand a year, my credit score is in the high 700’s, why are you asking for all this stuff?”
In general, it’s easy to say the person with the 800-credit score, no debt and a large retirement income will be one of the simplest and fastest loans to approve. The system can easily throw a monkey wrench into the mix once a lender finds out the same person owns ten rental properties.
It’s not much different at the other end of the realm. One person with a 580-credit score, lower monthly income and little or no savings may see a truck load of conditions before seeing a full loan approval. Sometimes just spending a few months of prep time and balancing debts, income and saving can make a big difference for this person.
All most all lenders sell their loans to Fannie Mae and Freddie Mac. So, in order to complete their process, they use one of the those AUS (automated underwriting system). In the Fannie Mae and Freddie Mac’s underwriting systems they use what is called a total score card. They give us the rules which are referred to as guidelines but they don’t tell us how the point system is scored. I would imagine it’s to help prevent loan fraud. What we do know is how best to work this. This does come through years of experience and closing many loans every month.
Someone once asked me, if you don’t know how the points are scored how do you know how to reach that goal. Other than just being a wise guy and tell them I am experience and good at it, I explained it as, it’s like being a pitcher in baseball. There are no specific sights or angles and everyone has a different approach to their target, it’s just a lot of practice and experience to know when and how to release the ball.
Similar to the pitcher knowing when to throw a fast ball or a curve ball, a good loan originator can help direct the borrower in whether it’s more important to pay down a large debt or have their money in a savings account for reserves or a larger down payment.
Finding that right combination of down payment, credit score, debt to income ratios, and loan type for each borrower can be an art form to get them in to a home with the best deal on the market.
Preparing to purchase a home with a cash or a mortgage loan does take some time and proper planning. Rushing in to a situation could only lead to disaster or extra unneeded expenses, ask questions get your facts, lets us help you prepare and plan and we will see you at a happy closing table.