a realistic outlook on the alternatives to a traditional mortgage,
and whether they suit your financial situation right now...
off dont be embarrassed this happens to lots of folks
out there. The good news is that there are options out there.
Just because youre bank said no, doesnt mean that
there isnt someone out there who will say yes! But before
we discuss a few of the other options, we need to understand
why this happened. The first step is to ask the lender who
turned you down, why they did so, I know it sounds simple
but you would be amazed at the number of times that consumers
never ask the lender this question.
number one reason for declines is usually poor credit,
most conventional mainstream lenders rely heavily on your
credit in their decision making process. So its an excellent
idea to know whats on your credit report before the
lenders do. By getting a copy of your credit report you have
the opportunity to see exactly where you stand and understand
what may be hurting your credit score. You may also come across
information and inaccuracies that will need to be updated
and corrected. By dealing with any issues prior to the lenders
seeing them, will only serve to improve your chances of being
reason for declines is that the mortgage amount isnt
simply supported by the property value. This in most cases
is out of your hands, if a professionally licensed appraiser
estimates the value of your property to be a certain amount,
you may disagree but there isnt a whole lot more that
can be done, other than a second opinion by another appraiser.
You can always request to see a copy of the report which will
give you further insight into this area. If youre looking
for a refinance, in some instances with a bit of TLC, property
values may increase. For example a property may be run down,
but with a bit of renovating and cleaning it may have a lot
more curb appeal.
lets say that youre credit score is okay and so
is the property you either want to purchase or refinance and
youre bank has said no, what else can you do?
confirm that the lender has got all of the information correct.
I know this sounds simple but applications with mistakes do
happen from time to time. We are all human and sometimes mistakes
are made when information is entered by loans officers. Most
often these mistakes are related to income and liabilities.
The lender may be using less income and have more debts listed
for you than are actually there, never be afraid to ask the
lender for a copy of your application to review, as doing
so may just make all the difference in the world.
you could try another mainstream bank or financial institution.
Not all financial institutions have the same policies. Some
look at certain types of properties or neighborhoods more
favorably, while others are better suited to those who are
self-employed. While there are others who are a bit more lenient
when it comes to credit, some may be more willing to take
a chance on someone whos been bankrupt in the past.
are some lenders who because they are located in a particular
city or neighborhood tend to lend far more easily there versus
national lenders who may know little about the area. The point
here is that lending guidelines do vary somewhat from lender
to lender; the key is to find one that is better suited to
your individual situation, and the only way to find the right
one is to do your homework.
find out if an increased down payment or reduced loan amount
may work. Sometimes folks are on the edge of qualifying
and with a bit of tweaking a "no" can be turned
into a "yes". In the case of an increased down
payment a friend or family member might be able to assist,
or in some cases you may be able to borrow it from another
source (credit card, unsecured credit line, personal loan),
one which the lender is okay with.
sometimes a guarantor or co-signor helps. You may not be thrilled
about the idea of asking a friend or family member to co-sing
but if thats the difference between an approval and
a decline you may seriously want to consider it. Often in
tight deals the additional income that the other person brings
to the table is enough to push the deal over the top. One
word of caution however, is that you need to make sure that
your co-signor or guarantor will strengthen the deal. There
is no point asking your cousin Ray to co-sign if he just started
at his new job last week and was discharged from bankruptcy
the month before!
fifth option would be to approach a private lender. Unlike
the banks these folks lend primarily to those with less than
perfect credit. Secondly not all private lenders are created
equal, if you are mortgage shopping and you have bad credit,
watch out for the predatory mortgage lenders who will gouge
cant expect with less than perfect credit to get great
rates but in spite of bad credit, within this lending community
there are some norms when it comes to fees and
rates. In order to find out what those are, make the calls
and do your homework upfront to ensure that you end up with
what is fair in the end.
increase your sweat equity. This applies to a refinance, sometimes
the lender may not like but he or she sees in an appraisal
but with a bit of elbow grease often things can be turned
around. Now Im not talking about putting in new foundations
and rebuilding homes, what Im talking about is cosmetic
touch-ups. Its amazing what a fresh coat of paint or
a good clean can do for a home. Cleaning up the yard and or
planting some flowers can do wonders for the curb appeal.
Let your friends and family know what youre up against,
you might be pleasantly surprised by how much theyre
willing to do to help you.
increased value may just be enough to push the deal over the
final option, if all else fails, you may need to put your
dream of purchasing a new home on hold until youre situation
has improved (better credit, more down payment, better employment,
etc). Or in the case of a refinance you might be forced to
sell it in order to prevent a foreclosure or walk away from
it all together. Not easy choices but choices none the less.