Tips to Assess a Risky Mortgage Borrower
August 29, 2017
It is often believed that mortgage is a long and complex process. To an extent, it is even true. However, an efficient mortgage professional’s job is to ensure that each applicant is thoroughly reviewed before the loan application is submitted for approval. Knowing before hand about the borrower’s credit history and their paying ability can reduce the costs associated with due diligence and also accelerate the process.
There are several methods that lenders use to ensure that the borrower will make the payments consistently. The three most important things that determine the borrower’s eligibility is their credit, their income and the house itself. Needless to say, the borrower’s income should be able to support the added burden of mortgage payments, their credit should comply with basic guidelines and the property that they want to buy or refinance should be appraised for the same amount required.
A borrower can be flagged as risky if they fall in one or more below mentioned categories. As a mortgage specialist, you can not only assess the risk profile of your borrower by using these key matrices, but also recommend them steps to improve their credit situation and increase their possibility of securing the loan.
Low Credit Score
For any lender, this is the holy bible when it comes to evaluating a borrower. They can just review the credit score and get a fairly decent idea about their payment patterns. Once the credit report has been obtained, you can run an analysis to check if the score is within the acceptable range. In case it is below 620, you can suggest tips to the borrowers to improve their rating. The process should start at least 90 days before filing the application. This will give the borrower enough time to turn things around.
Irregular Employment Background
The lenders will always rate W-2 workers with 40 hours a week as attractive. If your client works part-time and does not have 2-year tax returns, then they can appear as a risk to the lender. As a mortgage professional, you can review the tax returns and truly figure how much money can the borrower actually afford.
Outstanding Financial Obligations
Income and credit scores notwithstanding, the other blemishes in your client’s file include unpaid tax liens, delinquent car loan or student payments etc. If these delinquencies make it to the credit report, the underwriter will have a very good reason to reject the loan. It is the borrower’s responsibility to be current with their payments and rebuild their credit history to successfully qualify for the loan.
Lack of Funds for Down Payment and Closing Costs
If the borrowers do not have sufficient funds to cover the down payment and closing costs, then it can certainly be a red flag for lenders. However, a well informed mortgage professional knows how to fill those gaps by finding the most relevant assistance programs, such as private mortgage insurance.
Guiding borrowers through the loan process is one of the most important tasks that a mortgage professional has to undertake. To make the process seamless, these professional work with consultants who understand the mortgage lender’s psyche and can offer expert guidance along the way. As a premium service provider of end-to-end mortgage services to lenders and brokers Expert Mortgage Assistance has a team of well qualified experts who can provide seamless backend services including assessing your borrowers’ risk profile. Working with experienced professionals like us can effectively take the load of securing mortgages off your back.