If you’ve been considering purchasing a home, but have been turned down for a mortgage by a mainstream bank, you’re not alone.
Given the strict rules of buying a home these days, lenders look at credit scores, income, loan-to-debt ratios and more. The federal government guidelines have tightened, with debt-to-income ratios rising to 43 percent (from 38 percent). This simply means you either need less debt or more income as a buyer in order to qualify for a mortgage loan.
But, there’s hope. A community bank.
Community banks have more freedom to set their own guidelines, allowing underwriting flexibility that big banks do not have, via portfolio loans. If you’ve been discouraged by hearing “no” from a traditional lender, you may want to look into a community bank. These banks use more of a common sense view to determine your ability as a borrower to pay your mortgage on time and in full based on the job you have, your earning power (including any potential promotions, raises, etc.) and your financial portfolio.
Talk with your Realtor about a local bank recommendation. Ask other friends, neighbors and co-workers if they have a community bank they prefer. Meet with a loan officer and put your best effort into presenting your desires for home ownership.
Now, this being said, of course you will still need a solid credit score, good standing history of paying bills on time and being responsible to your debtors. But, the common sense approach to mortgage lending by local banks is a viable option if you’ve been turned down by the big banks.
Portfolio loans are structured a bit differently than traditional loans, with shorter terms, and they may also have an adjustable rate mortgage or additional fee(s). But, if facing the looming costs of renting a home versus the payoffs to making the leap to home ownership, some of these costs are worth it. In addition, you can refinance your home within a few years to a traditional mortgage.
As your local title company, contact us to help. We look forward to hearing from you.