In getting a mortgage, conventional, FHA and VA home loan are the most popular types of mortgage among applicants. But even if information about these types are widely available today, some information still remain classified or unknown among applicants. But knowing about these other details will be helpful for applicants. The following are some usually unknown details about mortgage and mortgage lenders in general.
Understand the Real Poor Credit Score
Lenders typically look at credit scores before approving loan applications. References online group credit scores in specific brackets. Each bracket is then identified as excellent, good, fair and so on. Lenders look at these scores to see whether a client is eligible for a loan or not.
However, the confusing part is identifying which of these scores are considered low credit scores. Experts say that the credit scores within the fair to poor brackets compose the low credit score category. This means that people with these credit scores will already get higher interest rates. A fair credit score is a score within 601 to 660 while poor credit score is within 501 to 600. If your score falls in these brackets, expect that your rate will be higher than the usual.
Underwriting Process is Done Differently
Underwriting is the process of approving loan applications. Most people see this process on their closing costs with underwriter’s fee as one of the expenses to settle. However, what people don’t know is that underwriting process can be done manually or automatically. Manual underwriting is where lenders will use their judgment to approve loan applications. They have underwriters checking out all documents then approve them once clients proved their ability to pay loans.
Some lenders, however, use software to conduct automatic underwriting. The software will use specific metrics to approve loans. Metrics include total debts, credit score, income, and others. If the software sees that all numbers are met, then it will approve the application and clients will get their mortgage.
Most of the time, lenders typically do manual underwriting for clients applying for low credit scores. These applicants often show other documents to show their eligibility in handling loans. Lenders will also see whether applicants just suffered from some financial troubles or if they are not responsible in paying their financial obligations.
Staying with Your Current Lender may be Beneficial for People with Low Credit Score
Some people who suffered from low credit scores tend to leave their current lenders and remortgage. However, experts said that this is not the best thing to do. People who get low credit scores would like to remortgage to get better rates. However, this is not the case as other lenders won’t give them better rates upon jump shipping. They may even get worse rates than what they have with their current lenders. Furthermore, moving to new lenders may only affect their impression of the applicants. Not only will their credit scores affect their first impression, lenders will think that the client is not responsible and will easily leave lenders in cases of low credit scores. They may not pass mortgage pre approval procedures.
The best move for these clients is to stay with their current lenders, build their credit scores or equity, then go to new lenders once their scores improved.
Different Types of Private Mortgage Lenders
Some people settle with private mortgage lenders. They don’t look for credit scores in approving clients’ applications. They can grant loans to anyone with higher interest rates and mortgage rates. What many people don’t know is that private mortgage lenders come in different types. There are individual lenders, syndicate lenders, and mortgage investment corporations. Individual lenders are single individuals who grant loans to another person for a return. Syndicate lenders are groups of individuals who pool funds to provide mortgage to a client. Mortgage investment groups have more people pooling funds, allowing them to provide loans to more clients. They need to comply to special lending regulations before providing loans.
Whether you apply for a home loan online or by visiting lenders personally, knowing these details will give you a better idea about mortgage and mortgage lenders. Consult with the most reliable lenders to get better rates and more relaxed policies that suit your needs.