Overcoming Barriers to Financing




“Believe you can, and you are halfway there.” Anonymous

The top three hurdles mortgage customers must conquer are fixing credit issues, finding enough qualified income, and fast-tracking the funds needed to close the real estate transaction.  Time is a great healer when it comes to older derogatory credit accounts. An experienced mortgage loan officer can help find qualified income for a borrower, sometimes in the back pages of the tax return. A borrower who does not have enough funds to close the loan can get help from agencies and gifts from other people.

Overcoming Credit Issues

Benton and Baily were disappointed that their payment would be slightly higher since the mortgage rates had gone up before they got their offer accepted on buying a home. So the answer for Benton and Bailey was to improve their credit scores.

By paying down their credit cards to show they were using less than 30% of their revolving credit limits, their score rose enough to put them in a much better price level for their mortgage. Find more information about improving credit scores at www.myfico.com.

Review your credit history at www.annualcreditreport.com and correct any errors you see on your report.  Unpaid judgments need to be satisfied before time to close on the transaction. However, collections and past due accounts do not always have to be paid right away. Consult with your mortgage officer about dealing with delinquent credit accounts on the report.

Overcoming Lack of Funds to Close

Noah and Norah had been renting a home for over a year in a neighborhood they liked, and they enjoyed being close to family who helped them take care of their son. They made an offer to their landlord to purchase the home where they were living. The landlord accepted.

Noah and Norah had paid off some other debt and did not have enough money to cover the down payment and closing costs.   They did not want to ask their family for a gift but got approved for down payment assistance from a HUD-approved agency in their city instead.  The down payment assistance program from the city allowed Noah and Norah to pay less than $1,000 of their own money at closing.   A great resource to find down payment assistance programs around the country is  http://downpaymentresource.com/about/leadership/.

Gifts from family are typical sources of down payment funds for borrowers, even though gift money does not work for all loan programs.  Frequently, borrowers can get a loan secured on other assets like their 401k retirement program. Loans secured on other real estate or cash value on a life insurance policy can sometimes provide the funds needed for the borrower to get approved and closed on their mortgage. Unsecured loans are not acceptable for most mortgage programs.

Overcoming barriers with self-employment income

On the day Mr. Palmer saw a home for sale that he knew was his forever home, he made his offer to the seller.  As a successful business owner, Mr. Palmer confidently marched into his bank to get his mortgage approved. However, he was shocked when his banker shook his head no and handed Mr. Palmer back his tax returns stating that he did not show enough qualified income after expenses were deducted.

Mr. Palmer found an experienced mortgage loan officer who knew how to start at the back of the tax return and work forward, adding back to qualified income paper expenses like depreciation on equipment and the amount he deducted for business use of his home. In addition, mortgage programs allow certain other expenses to be added back to qualified income depending on the circumstances and the documentation supporting those circumstances.