5 Tips for Resubmitting a Rejected Mortgage Application

rejected mortgage application

Buying a home can be one of the most emotionally exhausting purchases one will ever make in their lifetime. Home buying is a process that begins with the look, which then quickly moves to the romantic imagining of oneself in this home.

You imagine what color you’d paint the walls, you’d imagine how you’d outfit your garden; so the fact that the longer part of the home buying process, the bidding on a home and application for a mortgage can be time-consuming, clerical, and unromantic is the yin to the home buyers yang.

In truth you shouldn’t even look for a home until you are pre-qualified for a mortgage; it will save on the heartache later down the road if you are denied.

Here are five tips of things to do to be successful eventually, when you are, at first, rejected for a mortgage application.

1. Look at Your Home Price

Maybe one of the first things you should do when you’re rejected for a mortgage application is looking at the home you’re trying to buy.

If you’re making nine dollars an hour working part-time at Victoria’s Secret and your husband’s a student; you’re probably not going to get the best house, in the best neighborhood, on your pittance of income alone.

Consider looking elsewhere for a home in an up-and-coming, less expensive neighborhood.

2. Look at Your Credit Score

This is a no-brainer, but if you’re looking at a rejected mortgage application, maybe you need to look again at your credit score.

If there are glaring errors or other factual inaccuracies on your credit score, clean those up, get verification that they’ve been eliminated, and get back on the case of the mortgage company.

3. Look at Your Income

Again, if you’re talking about a home that is going to make you all but bankrupt just to keep up with the mortgage payments, then you might want to reimagine your home buying experience.

The general rule is that your mortgage should never account for more than 25% of your total income; that’s the money you’re taking in every week. So if you make $37,000 a year (net pay) that means that your mortgage should only be $771 or less a month.

Unrealistic expectations for a rising tide of home values and rising income is a lot of what took the housing market under in recent years.

4. Look at Your Unreported Secondary Sources of Income

If you only make $37,000 combined income on the books with you and your spouse, then that’s fine.

But if your mortgage amount on the house you want is more than that $771 dollars, you may need to figure the other ‘off-the-books’ sources of income you have.

If that includes working weddings for cash, your tax-free annuity settlement, or your scores of articles you write for Associated Content, that’s something you need to consider.

There are different ways of handling that income so you should speak to your real estate person about your specific situation.

5. Look at Other Sales in Your Immediate Area

If you are looking to move into a specific neighborhood and you’ve been told that you’ll need to pay at least $400,000 to live there, but you don’t qualify for that much mortgage, look towards other recent sales in the neighborhood; you may be surprised!

If other folks are snapping up homes for far less and you think you’d be able to qualify for mortgages of similar amounts, apply for that much and see if you can’t find the house to match.

Buying a home is an exhausting experience. If you get rejected on your first mortgage application, consider the five tips above and you could find yourself living the charmed life in the home of your dreams in no time!…

Using Mortgage Loan Modifications to Save Your Home

loan modification

A popular online topic is a mortgage loan modification. With the recession and unemployment highs, Americans are struggling more than ever to find ways of paying their bills.

RealtyTrac reported that this past week the number of US households facing foreclosure rose 32%. With numbers like this, many Americans are seeking help with the modification of their home loans.

Although there are qualified programs available, some homeowners are choosing to negotiate a modification with lenders themselves. Here are some tips for going about the negotiations.

Homeowners need to know their current financial position. They need to understand what their expenses are, what their income is and how much discretionary funding is available.

The lender will ask these questions and want to know what financial state they are being asked to work with. Owners who need guidance can contact the Consumer Credit Counseling office for a free financial analysis.

Next, homeowners should contact their lender with qualified information on what their part will be in the modification. If a homeowner has an extra $250 to contribute to monthly payments to get back on track, the lender may be willing to work with them. Remember that lenders want their money. That is their goal and they will work with customers if there is a viable plan to work with.

Lenders will require that homeowners have some plan of action. It’s best to have an answer ready for the lender and be able to justify the reasoning.

If a homeowner’s financial problems are temporary, they should tell that to the lender. It is possible to postpone payments, tack them onto the end of the loan and get the homeowner back on track.

The key here though is saved up funds as the next postponed payment date is coming. Consumers should use cut-backs, short term loans or tap into a nest egg to make sure they are well equipped to handle mortgage loan modification.

Homeowners with adjustable-rate mortgages are in particularly difficult situations when the rate goes up. Higher payments can make serious financial issues arise.

If a homeowner has an adjustable rate, call the lender and request a modification to a fixed rate. They should be ready, however, to present a plan as to how this is going to happen, however.

This is where they should be willing to get a second job, or better paying job, to show the mortgage company that they will be able to make the payments in the future.

In the end, the mortgage loan modification process may be the most viable option for saving a home. Lenders are willing to work with homeowners fairly, but there needs to be adequate communication and justification throughout the process.

All homeowners need to come to the negotiating table prepared with documentation including expenses, income, debt, and the proposed solution to the issue.

Being ready makes lenders more willing to listen and work with the customer. Mortgage companies want their money; they don’t necessarily want the property. And in today’s recessive economy lenders are more willing than ever to try to come to a solution for homeowners and help them save their homes.…

How to Calculate Mortgage Servicing Rights and CPR

mortgage

Mortgage servicing rights involve a lender’s rights to continue to collect mortgage payments and furnish monthly statements and mortgage services to the borrower after the lender has sold the original mortgage.

Mortgage servicing rights are retained by a bank for a predetermined fee, which is included in the borrower’s monthly payment amount.

Servicing rights are considered to be income for the lender and are typically outlined in the mortgage documents as a percentage of the loan’s outstanding principal balance.

According to All Business, an individual would calculate the mortgage servicing rights by first determining what type of mortgage loan is in question. Take the appropriate percentage and multiply it by the original loan amount as follows:

0.25 percent of the principal balance on conventional, fixed-rate loans;

For example on a 30 year fixed principal loan base of $108,900 obtained at a 7% interest rate, the mortgage servicing rights would be calculated as $108,900 multiplied by 0.25, resulting in a total of $27,225.

0.44 percent of the principal balance for loans aged less than one year that are backed by the FHA, Veterans Administration or Farmers Home Association; mortgages that have an originating principal balance of $50,000 or less also fall into this category;

For example, an FHA backed loan of $150,000 would result in mortgage servicing rights of $66,000. This figure is determined by multiplying the principal balance of $150,000 by the 0.44 percentage figure.

0.375 percent for other residential mortgages secured on one to four-unit properties.

For example, a sub-prime loan of $200,000 taken out on a three-bedroom house would result in mortgage servicing rights of $75,000.

CPR refers to an annual expected rate of principal prepayment that applies to a conglomerate of mortgages and securities that are backed by mortgage loans, according to MortgageQnA.

The CPR is used to predict the percentage of mortgage loans within the conglomerate that is expected to be paid in full within the current year.

Determine the CPR by the SMM or Single Monthly Mortality.

According to All Business, the SMM is defined as the percentage of mortgage principal balances that have actually been prepaid in addition to the regularly scheduled principal amount that is part of the loan’s amortization schedule.

In other words, it is the amount of the originating loan’s balance that is prepaid ahead of schedule or before the loan matures since most mortgages allow for prepayment or pay off at any time without incurring a penalty.

For investors of mortgage-backed securities, the SMM is the “prepayment risk.”

Calculate the CPR by using the formula of 1-(1-SMM) to the 12th power. According to MortgageQnA, the CPR could be interpreted as 12 times SMM or the pool’s expected prepayment rate.

For example, if your conventional mortgage falls into a pool with an SMM of 25 percent, the CPR would be determined as follows: SMM or 25 percent times 12, which would yield a CPR of 3 percent.

Simply stated, if a conglomerate of mortgage loans is determined to have a CPR of six percent, then six percent of the remaining principal balances in the conglomerate can be expected to be repaid within the year of calculation.…