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There is a kind of golden rule for home loan borrowers; never come to the application process with less than 12 months of on-time payments on all financial obligations. How can thinking like a loan officer help you in this respect?

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First-Time Borrowers: Think Like A Lender

First-Time Borrowers: Think Like A Lender
March 10, 2019 - First time home buyers may feel that the mortgage loan approval process is a bit of a mystery until they learn how to think like a loan officer. And believe it or not, that’s not as hard to do as you think.

There is a kind of golden rule for home loan borrowers; never come to the application process with less than 12 months of on-time payments on all financial obligations. How can thinking like a loan officer help you in this respect?

Try pulling copies of your own own credit reports and reviewing them as though you had to issue a mortgage loan to the personal the report belongs to-what do you see?

If you see a reliable payment history, you’re one step closer to home loan approval for your first home. If you see a spotty record of payments, would you as the loan officer be inclined to take the risk to help this person make a new home purchase?

What if your credit report shows a one-time problem but otherwise reflects well on the borrower? Wouldn’t you as the lender be more inclined to work with this applicant if they can document in writing why the one-time problem happened and that it’s not likely to recur?

That is one of the keys to understanding how home loans, especially loans for first time home buyers, get approved.

How do people who have bankruptcy or foreclosure on their credit history wind up getting new home loans? In part because they take the time to work on establishing reliable credit habits and demonstrating their commitment to being a responsible credit user.

Thinking like a lender doesn’t just apply to your credit history; your loan officer will likely ask you for bank statements and other financial documents. Bounced checks can be a serious issue in these situations-how long has it been since you bounced a check? If it’s less than a year, you may want to consider waiting until a full year has gone by without one.

Large deposits-depending on the timing- can also raise a flag with a lender trying to verify that your down payment funds come from an approved source. Your lender is required to insure the down payment money does not come from unapproved sources like a cash advance or payday loan.

Your down payment assistance, where applicable, including gifts from friends and family must also conform to these rules and the lender will be required to verify the source of those gift funds, too.

If you are not sure what the lender might make of certain aspects of your credit or financial history, it’s best to talk with a lender before you make plans with a real estate agent or apply for your loan. Know what the lender’s specific standards and requirements are for best results.

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