HOW BANKS WORK

A Quick Guide to Home Financing

Income/employment

Two years at same job is not necessary

Two years job history not always even necessary:

Ex. graduating college, sick/family leave, etc. (one paystub required, with conditions)

More than six months absence requires six months back to work IF new job

Two years history necessary to consider the following income types:  Commission, bonus, tip, temporary, contract, or a second job

 

Credit

 Minimum allowable scores:

 -Conventional (Fannie Mae and Freddie Mac) 620

 -FHA 500(however, below 580 it is very restricted)

 

Ways to improve credit score:

 Your credit cards/lines of credit will almost always report within 5 business days of your monthly due date.

*You want your credit cards/lines of credit to report, within your ability, the following balances*

Three tiers for credit cards and revolving lines of credit balances:

Good <49% of available limit;

Better <24% of available limit;

Best 2%-9% of available limit.

*Your score is actually higher if you leave a small balance than if you pay it off.

FHA only requires a 3 year waiting period for Foreclosure and Short Sale, and 2 years for a Chapter 7 Bankruptcy. You can also have multiple incidents, as long as they are all past the specific waiting period.

**Once approved, please do not solicit any new credit until your loan is closed. Even credit inquiries could affect eligibility.**

 

Assets

Down payment verification

 Two months of bank statements with necessary funds (down payment, closing costs, reserves) showing in account, or deposits need to be sourced. Examples are payroll, tax refunds, and other types of verifiable deposits (N/A for self-employed borrowers).

 **Please do not deposit cash, payroll checks from others, or personal checks. Could affect eligibility.**

Gift funds

Please consult your loan officer before you deposit any funds from others into your account. This needs to be documented correctly.

Other assets, 401k, IRA, Pension, etc.

Can help approval if you’re on the fence.

Property

Different down payments and reserve requirements for different types of property, owner occupied, investment, 2-4 units, etc.

Must be in appraisable condition or a renovation loan is needed.

Large acreage is generally not a problem as long as it is not generating Sched. F (agricultural) income.

An owner’s title policy is always recommended. An inexpensive one-time fee to avoid any future questions about ownership.