Let’s run down some common situations that might cause trouble with your purchase or refinance loan application. If you want a reverse mortgage, sit this one out: Reverse mortgage doesn’t make you qualify except by being over age 62 and having equity in your home.
“My good faith deposit bounced.” Sorry, that’s a deal breaker. Make sure you have treated your checking account with respect over the year prior, because NSF activity will show that you don’t have a handle on your finances.
“We want to buy a retirement home in Tehachapi but we filed for bankruptcy a year and a half ago.” If this couple were to sell their current home, and own no other property, then we need at least two years away from their bankruptcy to qualify. When buying a second home or investment property, four years is required.
“In 2006 I had a medical collection and it’s supposed to fall off my credit next year.” Even if the original creditor falls off the report in the seventh year, there are companies that will purchase the opportunity to collect the debt now. Many times we see old collections with current dates, and those need to be taken care of before your loan approval.
“We’re using my wife’s retirement to buy this house, but she can’t be on the loan due to bad credit.” If the loan program allows for gift funds, this might be okay, but unless you’re using a government loan the actual buyer needs to have five percent down in their own funds. That might mean putting the money in the qualified buyer’s bank account for at least two months before pre-qualifying for a mortgage.
“My new job is really stable but last year I had some unemployment.” Most loan programs want two years on the job, and any employment gap of more than 30 days is not acceptable. Lenders are on the lookout for “continuity” of income.
“Our short sale finished three years ago so we’re ready to buy our next house.” If that short payoff was for an FHA loan, you may not yet be clear in the CAIVRS database. It’s a government roster showing who has not fully repaid on a government loan, and sometimes their start date can be after the short sale closed escrow. Your wait might be more than thirty-six months.
Even though you know in your heart you have the credit and capacity to be a great borrower, the mortgage landscape continues to shift. Invest just a few minutes with your local mortgage advisor to fully pre-qualify for your home loan before you get your heart set on a house that might not be available when you really can qualify later.