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When Good Credit, 20% Down Isn’t Enough To Secure A Mortgage

When good credit, 20% down isn’t enough to secure a mortgage

When buying a house, most assume that securing a mortgage should be an easy process. Whether because they have good credit or they have a solid down payment for the house, many think it really doesn’t matter who they work with to get the loan because it should be a pretty straightforward thing.

The reality is there is a ton of work and constantly changing rules that your mortgage provider will need to navigate in order to secure your home loan. So even with great credit and a solid amount of cash, you must have an efficient and competent loan officer on the job. Otherwise, get ready to be stressed out!

The biggest potential issue you’ll face when working with the wrong mortgage provider is wasted time. And in real estate, time is critical because often there are multiple deals being worked out at the same time. Buyers might also be selling and sellers might also be buying. Making the deal come together for all parties requires a strong attention to detail and understanding of the various circumstances at play.

As an example, we heard a story about a husband and wife who were second-time home buyers with excellent credit and had a 20% down payment ready for a new home. They were also selling at the same time and already had an offer they were working with. Still, they had issues securing the loan and getting to the closing table on time. The problem: the loan officer.

What the loan officer didn’t recognize was that because the husband had recently left a job and started a business, while he had an income and strong credit, it could not be counted for the loan. Freddie Mac and Fannie Mae want to see two years of income in order to feel comfortable counting the income for a mortgage application. Instead, what the loan officer said was that in order to close on the house, the couple would need to bring 40% to closing. Yes, 40%!

At that point the couple dropped that particular mortgage provider and found another, more reputable organization to work with. The reality was, the couple needed to sell their existing house prior to buying the new house in order to secure the loan. Any competent loan officer would have recognized this right away, but instead the couple had wasted three weeks of time and countless back and forth with the previous lender.

To add insult to injury, the couple was under the impression the lender was local the whole time. They found out from some research online that the lender was actually based in Montana while working for a Michigan-based company. The couple felt like they had been scammed and had lost all trust and credibility for that particular lender, and rightfully so.

Moral of the story is that there are many unforeseen circumstances that come to play when securing a mortgage and buying a home. You’re going to want to work with a group that is local and understands the local market, has relationships with real estate agents that can speed the process along, will meet with you face-to-face, and is always available to answer your questions.

You don’t want to sign a document with a closing date and miss the date due to incompetence on the part of your loan officer. It is far more stress than anyone should deal with.

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