In this age of automated underwriting, some loan reps forget that the qualifying guidelines within their software programs do not rule absolutely. If you fail some "standard" loan rule, you can still gain mortgage approval if you stress your compensating factors.
What types of compensating factors will lenders consider? Virtually anything positive that reasonably demonstrates that you will faithfully pay your monthly obligations. Here are a dozen examples:
Write Out Your Compensating Factors
After you list your reasons why you can afford the mortgage you want, don't just tell your loan rep. Explain in writing. Get supporting letters from your employer, minister, landlord, clients, customers, or anyone else who can vouch for your good character, creditworthiness, job performance, or personal responsibility.
Sometimes, too, it's a good idea to write out a family budget. Show your lender that your monthly income exceeds your monthly spending. (VA loans may actually require this step.) Then back up your budget with proof: financial records, cancelled checks, letters, and all of the compensating factors you can think of. With convincing written evidence, you'll break through qualifying guidelines that deter or delay ill-prepared borrowers.
These efforts do not merely help homebuyers; they also help beginning investors. Such preplanning conveys persuasive information about your ability to pay back the funds you borrow. It further shows the loan rep (and underwriter) that you prepare diligently and responsibly. You're not jumping into this investment without thinking it through.
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