If you are going through the mortgage process and the topic of Compensating Factors comes up, you might have no clue what your mortgage expert is talking about. Well in this article we will go over the current 2017 Compensating Factors and how you can use them to ensure that your mortgage gets approved and funded. There is a common misconception amongst potential borrowers and that is they believe that if they meet a loan program’s minimum requirements as set for Conventional, FHA, VA, or USDA they are guaranteed a loan. Well this is definitely not the case and individual lenders can decide who they will fund loans for and most lenders will have their own Lender Overlays or additional requirements on top of the loan program in order to determine credit worthiness. Lenders are under no obligation to make any and every loan as they are looking out for their own risk and how risky individual borrowers will be. Just because a loan is government insured as seen in FHA loans, no lenders wants to go through a borrower defaulting on a loan so it is in everybody’s best interest to take on as little risk as possible. FHA monitors all defaulted loans that they insure, and if it is seen that a certain lender has a lot of defaults they could be under scrutiny and even have their HUD funding removed. Now, in an effort to ensure that borderline borrowers will indeed be able to handle their mortgage obligations, there are Compensating Factors. Now the 2017 Compensating Factors are positive factors that a borrower uses to strengthen their case and credit worthiness to the lender and allow their credit profile to be approved for a loan. Underwriters will be looking for 2017 Compensating Factors if there are borrowers that have increased risk due to various reasons.
If you are curious as to which borrowers will need to show Compensating Factors, the list is as follows and not limited to:
– Borrowers without established credit or credit scores
– Borrowers with low credit scores
– Borrowers who are living with family or are living rent free who cann’t show evidence of rent being paid
– Borrowers who have high amounts of collection accounts on their credit report
– Borrowers with higher debt to income ratios
– Borrowers with employment gaps or short-term employment or industry experience
– Borrowers dependent on gift funds to facilitate their mortgage closing as they do not have their own funds to use
Mortgage lenders have about five compensating factors that they are looking for when it comes to approving and funding a loan. I will go over each one below for a better understanding on how the 2017 Compensating Factors can help in getting your mortgage approval.
As you can see the 2017 Compensating Factors are vital in ensuring your mortgage approval if your credit worthiness is questionable. The goal is to present the strongest case possible to mortgage underwriters and compensating factors will do exactly that! Here at Loan Consultants we can help you with the 2017 Compensating Factors and getting you the mortgage you deserve. Please reach out anytime day or night at 888-900-1020 or email us at firstname.lastname@example.org.