6 Ways to Get a Mortgage More Easily

Despite homeowner relief and low interest rates, many homeowners are still struggling to get mortgages today. I ran into this issue myself–11 lenders later, I found the one that was decent. It takes patience and is often frustrating. Struggling the most are those with either lower than 700 FICO scores, or those who are self-employed who were using stated income loans. Here are six tips to getting a mortgage more easily in today’s market:

Be prepared with documents! Scan your pay stubs, keep copies of your current employment records and, if you are self-employed, keep a letter from your accountant and business license copy in a PDF format. This saves tremendous time when you go to file.

Stay away from companies that will “raise your FICO.” Most of these are scams–they will take your money, but you won’t see your credit score increase. One way to do that legitimately is to pay off 50 percent of each credit card, rather than pay off your high interest cards first (which makes the most financial sense in most cases). Once your cards drop to 50 percent of their available limit, your FICO goes up because you are considered a less risky borrower. Another way to improve FICOs is to not close old loans and show them paid off. And until the end of the year, if you are an authorized user on someone else’s card, this can help improve your score, too (provided he or she is not over his or her limit!)

(Ed. If you can find a good mortgage broker who will help you raise your credit report score then take advantage of it. In many cases mortgage brokers are not any better at credit score improvement than the companies she describes. Our recommendation for credit report repair services are good as gold and that can be backed by the Better Bsuiness Bureau.)

Shop around–big time. Lenders are advertising easy loans, but the devil is in the details. Look out for origination fees (as much as 2 percent or more of the loan amount!), penalties for having a “lower than 700″ credit score, and companies that wont take your loan if you have a second mortgage.
Maximize your first mortgage. Try to get as much as you can on your primary mortgage because the cost of home equity lines of credit and seconds today behind other loans at the 75 percent combined loan-to-value rate is very high.

Don’t just take your broker’s word for it. Some brokers have access to great lenders that you don’t have access to through wholesale lending. But that doesn’t mean you shouldn’t also shop around yourself. Compare what your broker finds to what you find, and be prepared with all the documentation you can handle.

Do your own appraisal. Particularly on jumbos or in areas that are “declining markets” (each bank is different in terms of ZIP codes they consider in the declining market arena), the banks often use internal appraisals. And rather than overinflating price as many did, they’re coming in at far less than they should to be fair and accurate. Having your own appraisal can be a good baseline to see whether the banks are ripping you off. If they can show a higher loan to value, they can charge you more for the loan!

Dani Babb
Entrepreuner.com