“I’ve heard it is very hard to get a mortgage today. Is that true?”

Yes, when compared to the times when no income documentation loans, no down payment proof, no debt to income ratio were considered, and credit scores were not of importance.

But no, if you consider lending like it was your own money.

It is almost common sense underwriting. Except there are many definitions of “common sense.” Unfortunately, what borrowers and mortgage loan officer consider commons sense, doesn’t count.

Here’s an overview:
1) Credit Scores: A middle credit score of 740 is today’s gold standard. Some lenders will go as low as 620. The lower the credit score, the more “pricing bumps” the interest rate will have, and the mortgage rate will be higher.

2) Income: Must be documentable, on-going, and stable. The self-employed, those who rely upon commission or bonus income, those who rely upon dividend and interest, or have alimony or child support must document a past history and that this income will continue for at least three years.

3) Down Payment: 3.5%-5% required, unless a veteran or you qualify for USDA loans. In some cases, all of the down payment can be a gift.

There are more considerations –
If there is less than a 20% down payment, there are two sets of guidelines to meet – the lenders and the Mortgage Insurance companies.

Mortgage Insurance Guidelines are strict. Debts to income ratio’s and credit scores have little flexibility.

Unlike the past, those that should not qualify for a home mortgage won’t get one. But those who do, will be moving into their new home or refinancing to a lower rate and payment quickly.

How to Plan For Your Next Mortgage
1- Know your credit score. The credit scores that are pulled from free and consumer credit sites are a good indicator, but will be higher than those from the credit reports your lender will use.

2- If purchasing, get pre-approved before you get in a car to look at homes. A pre-approval is different than a pre-qualification. This will specifically tell you the documentation you need, and reduce downstream stress.

3- Don’t be surprised if the underwriter asks for more information after reviewing your file.

4- Remember that even though at times it may not seem to be true, the underwriter does want to approve your loan.

Those are my thoughts. Now, what are yours? Comment below!

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