There are basically four factors that guarantee your mortgage will be approved with lenders now after all of these corrections in guideline requirements. They are:
Work History - (2 Years work history in a related field) Your employment should be in the same area of expertise or be in related field if possible and you should have a two year history in that field. Job gaps are acceptable under certain conditions such as due to pregnancy, college, trade school, or retraining . Workman’s Compensation, Alimony, Child Support is allowable but must be guaranteed to continue for at least three years. Child Support that is adjudicated can be used with three months proof of receipt. Child support not adjudicated must be proven with twelve months of cancelled checks from the payee. You can use a new graduate’s income if they have proof of certification or diploma in a related field. Must have a two year history of W2’s to use part time jobs income typically.
Credit History- No late payments for 12 months on FHA and 24 months on Conventional mortgages. There are exceptions. A 24 month rental payment history preferred. No late payments on rents or a mortgage. Compensating factors that were out of clients control like death of principal wage earner, economic slow downs, etc… that will not occur again will be considered. You can build a non-traditional credit report by verifying at least three alternative credit sources and your perfect rental payment history. Car insurance, Cell phone, house utilities, cable, internet, garbage, etc.. all possible sources.
Savings History/Funds For Closing- You must prove two months seasoning on funds for closing with two months of bank statements on conventional loans. A conventional borrower must have a minimum down payment plus 2 months PITI as reserves. You can use 401K for reserves after you close without ever taking the money out of your 401K. On FHA mortgages, 100% of the funds for closing can come in the form of a gift from any family member, or significant other, or a Down Payment Assistance Grant and 3% Sellers concessions towards closing costs and prepaid expenses are possibilities. This allows you to buy a home now with no money down! This program is available all the time and is only limited by the FHA loan limits. There are no income limits on our program. No reserves required on a FHA mortgage. Borrower can actually get earnest money and homeowners insurance monies they paid upfront…refunded at closing by proving they have paid those funds upfront with cancelled checks or other forms of proof.
Ratios- Ratios are a certain percentage of what your total monthly house payment (PITI and PMI/MIP) For example underwriting guidelines state typically that a borrower should only use 33 percent of their gross monthly income for PITI and PMI/MIP. These same guidelines recommend that the lorrower does not use more than 38 percent of their gross monthly income for their PITI and PMI/MIP payments PLUS their monthly debt obligations. Computerized underwriting has made these percentages very flexible based on compensating factors such as high credit scores, large down payments, large reserves after closing so we have seen this ratios pushed as high as 40/50 but again that is with the above compensating factors.
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