Mortgage Uncertainties Explained

If you speak to any Realtor or attorney today, they will tell you that the problem with the home buying market is not the price of the home or how that home is marketed to potential buyers. The key concern in the home selling process is whether the buyer will be able to get a mortgage and close.

What can you do to insure that you will be able buy a home and get a mortgage loan?

The quick answer is to make sure that the potential buyer is pre-approved. BUT a pre-approval is not enough to guarantee that the buyer will get a mortgage. Here’s why:

There are four components necessary to close a loan. Those components are:
1. Credit. Is the buyer credit worthy? Do they have acceptable credit scores and is the credit acceptable for mortgage. The buyer may have scores that fit the program, but there may be something on the report that will be unacceptable to a lender lie a recent bankruptcy, short sale or foreclosure etc.
2. Assets. There has to be enough money to make the deal work. The buyer must have the down-payment and closing costs. Sometimes the buyer may have assets but they may be unacceptable. For example, some loan programs Some do not allow a gift, or if there are unexplained large deposits into the borrowers account, those may not qualify as assets.
3. Income. The client must make enough money to pay this loan. The mortgage payment, taxes, insurance and monthly debt are all taken into consideration. Some times a buyer has income sources that are not acceptable such as a short-term second job or a self-employed client that receives a W-2 and paystubs that currently show enough income but were lower on the last tax return.
4. Appraisal. The bank wants to make sure that the house that is being mortgaged is worth what the buyers are paying for it. An independent appraisal report is required. This has become a huge concern. An appraisal is an opinion of the individual appraiser. Even though the buyer may have looked at every house that was for sale and thinks the value is solid, an appraiser may not be able to find other homes within an acceptable geographic distance that can validate the value, or, the appraiser may comment on repairs that may be needed or deferred maintenance or mold and these comments can cause a lender to deny the loan.

A pre-approval from a reputable mortgage professional should cover the first three components. The fourth component, the appraisal, is a wild card and until the appraisal is in and has been reviewed satisfactorily, the deal is not a solid deal.

This is why it is so critical to have a mortgage loan originator you can trust, who has relationships and knows the region well. Understanding these issues and knowing how to navigate the mortgage uncertainties takes a team of committed and knowledgeable people. At First Meridian Mortgage, we pride ourselves on taking care of details to ensure that the loan process runs as smoothly as possible.