It’s true that Underwriting Guidelines for Mortgage Loans are tougher right now than they have been in decades. But people are STILL able to purchase homes and get a mortgage loan! 8o)

The most important thing for folks to remember is that they need to talk to a mortgage loan officer EARLY in the process… and speak with one that is familiar with YOUR STATE.

North Carolina was the first state to adopt Predatory Lending Guidelines.  This means that we have our own, NC State “Applied” Mortgage Loan Guidelines. Because of that, you need to speak with a loan officer licensed in North Carolina – because no other state has these exact same guidelines (yet).

Here are the top things we are looking at:

Low Credit Scores - Even with a big down payment and good employment history, if the middle credit score is under a 620, the chances of getting a loan are somewhere between slim and none.  This means that TWO of your THREE credit scores need to be AT LEAST 620 for most institutions to make the loan in North Carolina.  The average score for the NC is 668.  With at least 120 days of work, we can generally help counsel folks and help them increase scores so they can become home buyers.

If the borrower has a MAJOR credit issue, and you need to know what the “waiting period is” before they can purchase again, click here.

Down Payment - With savings rates at an all-time low, people are having a tough time coming up with cash!  If the down payment is a gift, and they want a Conventional Loan, the borrower needs 5% of their own savings, plus 2 months of Principal, Interest, Taxes and Insurance in reserves (or savings) after all other costs.

If they apply for a FHA Mortgage Loan, then it can ALL be a gift. VA mortgage loans and USDA Home Loans do not require a down payment at all! In our area, sellers are generally contributing money towards closing costs – but a borrower still needs to be prepared to cover their taxes, insurances, home inspection, appraisal and credit report. (even with USDA Home Loans you are not getting in a home with NO CASH!)

Decrease In Income - Lenders are looking for “consistency” and these past years have been anything but!  Short-term layoffs, decrease in overtime and bonuses come into play here.  A borrower with lower income will need to document that they are not about to be laid off.

Self-Employment - With layoffs and companies going out of business, more people are starting their own business.  You must be self employed for at least two years before we can count that income.  The income REPORTED on the tax returns is what will be used to qualify – so massive write-offs are going to hurt!  North Carolina LAW requires that we verify enough income to satisfy the underwriter that the borrower can make their future mortgage payments.

Back-Up Documentation - Underwriting is only ONE of the steps a loan goes through for quality control. Everything in the file will need to be verified by a 3rd party – like the IRS, the employer, etc.  In addition, prior to closing, there is a good chance that the loan may be reviewed by the lender’s Quality Control person, to make sure the underwriter did not miss anything the first time around.  We recommend that clients keep at least 6 months worth of paycheck stubs, bank statements and 3 year’s worth of tax returns available (not on a moving van) in case we need to provide it at the last minute.

MANY experts suggest that Real Estate is one of the BEST investments anyone can make right now (And Raleigh / Cary is one of the best areas in the country to buy in!).  If you are talking with someone who is going to purchase, or if you are considering a mortgage loan, please call Steve and Eleanor Thorne, 919-649-5057.  We offer the best mortgage interest rates with the lowest fees available in NC – and we know the guidelines!

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