An economic event like foreclosure, short sale or bankruptcy gives borrowers a handful to worry about. Recovering from extreme credit issues is a long process that takes years to amend. What’s more stressful then wondering if a new mortgage lender will consider you creditworthy, or in other words, a good risk?
Mortgage lenders carefully inspect the backgrounds of each of their loan applicants. Lending money to buy a home is a long-term risk that should not be taken lightly, especially with prospective borrowers who have histories of negative economic events. Although borrowers are obligated to make loan payments on time, that is not always the case, especially when a borrower has a poor credit history.
Even though the Federal Housing Administration’s Back to Work program is designed for families with previous financial hardships, lenders continue to look for satisfactory credit in their borrowers. This implies that borrowers with late housing, installment debt payments, delinquency and other derogatory credit issues are not accepted into the program.
The mortgage process usually begins with a lending representative interviewing the prospective borrowers face-to-face, online or by phone. Many lenders will offer loans to eligible families before they ever shop for a new home. This option allows borrowers to have an idea of how much money they have to work with, thus saving them time and preventing disappointment. Borrowers should be sure to bring their bank account numbers, credit card bills, pay stubs, W-2 forms and other proof of employment history.
The most important document during this process is the loan application. The application will give your lender the opportunity to assess your risk value and creditworthiness for a new mortgage. There will be questions about your income, liabilities, credit, assets and the home you wish to buy.
Once a lender is able to prove a borrower’s eligibility, the lender will analyze the risk of lending to establish an appropriate interest rate and loan term. There is no standard or formula for offering rates, but most lenders follow the rates of government-related agencies.
Back to Work program lenders allow borrowers to put down only 3.5 percent on a new loan with no premiums nor fees at closing.
If it’s possible to offer you a loan, lenders typically do what they can to make it happen. However, “Back to Work” program lenders do not want to approve a loan where the borrower will have late payments and eventually become delinquent. The best thing you can do while you’re waiting is to boost your credit score. Your local mortgage expert will be able to provide tips on how to raise credit while in your specific situation.
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