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PROBABLE CAUSES OF LOAN DENIAL & ITS SOLUTION -I

Federal law allows a borrower whose loan has been denied by the lender to know the cause for such a denial. This helps the borrower to find alternatives which could satisfy the lender next time. The loan can be denied on the grounds of insufficient Income, Lack of money for Down Payment, Property value and inappropriate repayment, etc.


Insufficient Income: - The borrower may be denied the specific loan amount becoz the monthly income of the borrower doesn’t justify the Mortgage payment. The borrower can again have a relook at various additional income sources which might have not been considered by the lender while underwriting a loan.

If the borrower feels that the income earned cannot be declared in order to avoid tax implication, or lack of proper documents, then he can opt for No doc or Limited Doc loan. These programs consider the income stated by the borrower without any income documents proof; however, the same should be supported by borrower’s expenditure pattern or history. The lender can view the same through credit report, etc. Notwithstanding, borrower should furnish all information in good faith and the fact should not be concealed or exaggerated.

The same could be understood by the example; if the borrower is declaring his additional income as $500/ Month, then if in the credit report of the borrower there is no payment or late payment more than once or twice of credit card revolving debt of amount of $230, then it would be easily identified by the lender as fake declaration of additional Income.

In such a case borrower can choose various other programs and support offered by Federal to support middle & low income group people and first time home buyers.

Down Payment Issue:- It means that the borrower doesn’t have sufficient funds to make down payment of the property and cover the closing cost of the loan.  This might happen in cases where LTV is very low for that particular loan due to some compliance of guidelines by the bank. In this case also borrower can opt for another program like FHA loan offered by Federal where only 3% is required as down payment and closing cost is covered in Mortgage.

U.S. Department of Veterans Affairs and the Rural Housing Service offer no down payment loans. In recent years Fannie Mae or Freddie Mac have introduced a wide range of low down payment programs including its Community Home Buyer's Program, Fannie 97 (a 3 percent down payment loan) and Fannie Neighbors. If your household income is not more than your area median income, you are eligible for these loan types. These mortgage loans have more flexible lending requirements and allow you to use more of your monthly income toward housing costs. These programs are administered through participating lenders.

A number of states sponsor programs are also there to help first-time homebuyers; and low- to - median-income homebuyers qualify for mortgages. These programs typically offer very attractive loan terms with low down payment

 

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