Navigating the complexities of mortgage lending requires expertise and a willingness to explore alternative options, especially when a client faces initial rejection. We've gathered insights from seasoned mortgage brokers and branch managers, who share experiences ranging from solving credit score discrepancies to finding an alternative FHA Loan for a veteran. Discover five compelling stories that highlight the adaptability and resourcefulness of these mortgage professionals.
- Finding Creative Approval Methods
- Solving Credit Score Discrepancies
- Using Local Knowledge to Solve Loan Declines
- Discovering Overlooked Qualifications for Veterans
- Finding Alternative FHA Loan for Veteran
Finding Creative Approval Methods
Let's not beat around the bush... Mortgage loans are incredibly challenging. Luckily, at X2 Mortgage, we're able to get very creative when it comes to loan approvals as we work closely with underwriting. In a particular scenario, we had a client who was denied by two lenders due to an excessive debt-to-income ratio before contacting me. Once we had an initial conversation with the client, we came up with a game plan to squeeze out just a tad more qualifying income. By slightly increasing income and providing a much lower mortgage rate, we were able to get the debt-to-income ratio in line for an approval. Not to mention that we got the client all closed up in a matter of two weeks to stay on schedule for their closing!
Solving Credit Score Discrepancies
Recently, I had a client come to me who was declined for a mortgage with another broker. She was unsure why. We completed an application, and when I pulled her Equifax credit score, it came up as 0. This would be why she was declined. I instantly pulled her TransUnion credit bureau report, and her score was well above 700, giving her approval with several lenders that accept TransUnion credit reports. I also called Equifax and discussed the 0 credit score with them; it turned out she had two reports with them, and once they were merged, it fixed the problem. I educated my client to watch her credit reports and not just rely on them to ensure they're right. In the long run, the client is a happy homeowner.
Using Local Knowledge to Solve Loan Declines
We love getting this realtor's call: Their buyers selected the lender and are now declined for the loan. Most of the time, the reason for the decline is preventable or can be addressed with additional documentation and/or a different loan product. Digital lenders do not have local community knowledge about proper tax rates or property insurance costs. This causes errors. They lack training in self-employed borrowers and alternate documentation programs. They fail at agency guidelines for FHA, VA, and USDA. We just helped a buyer with limited income close on a $500K purchase after two retail lenders told him he wasn't qualified. They did not ask enough questions.
Discovering Overlooked Qualifications for Veterans
Veterans facing initial declines on VA loans may actually qualify due to various reasons often overlooked. Here are some key insights based on loans that my team has successfully closed after being denied by other lenders:
- Credit Score: While VA guidelines don't specify a minimum credit score, some lenders have overlays requiring a specific score.
- Loan Limits: Despite VA removing loan limits for qualifying veterans in higher price points, some lenders still impose them.
- Multiple VA Loans: Veterans can have multiple VA loans over their lifetime, even simultaneously, if they qualify and have sufficient entitlement.
- Partial Entitlement & Down Payment: Many are incorrectly advised to make large down payments with partial entitlement. For qualifying veterans, the down payment should only be 25% of the difference between their remaining benefit and the new purchase price.
And of course, my legal department would want me to mention that this is not a commitment to lend, that other restrictions may apply, all loans are subject to approval, and that information is subject to change without notice.
Finding Alternative FHA Loan for Veteran
While collaborating with a veteran to obtain a VA home loan, the customer's loan was declined due to no VA entitlements. Although he has a DD Form 214, the VA would not issue a Certificate of Eligibility (COE). After a closer look at his DD Form 214, we found out he was discharged from active service two months short of being eligible for his COE.
The solution was easier than you would think. He had low credit scores and truly little money to put down, so we flipped to an FHA with a DPA loan, and he was able to close on time. He was extremely happy and turned what was a dead VA loan into a happy homeowner.
