Ever since the housing market crash, more and more borrowers are having difficulty getting approved for a mortgage. This is because lenders have since tightened their lending policies. Here are three roadblocks borrowers may encounter when applying for a mortgage.
Roadblock #1: Tighter Income Eligibility Standards
While income from a second job may make a big difference to your financial stability, this might not mean anything to a lender. To mean something to lenders, the second source of income must be documented on a W-2; earned from the same source for one year; or received within the same field for 2 years, with no gaps exceeding 30 days. The problem is a lot of people get paid for their second jobs in cash and can’t meet these criteria.
Roadblock #2: Stricter Income Verification Requirements
While income verification standards have always been strict, there used to be ways for borrowers to bypass these guidelines. Low-documentation and no stated-income loans no longer exist, which can make it very difficult for self-employed borrowers to get a mortgage. Workers who are often paid in cash, such as restaurant workers, can also have a tough time.
Roadblock #3: Lack of Strong Compensating Factors
Strong compensating factors are factors that strengthen your mortgage application. These factors could include a large down payment, a good debt-to-income ratio, ample cash reserves, or a high credit score. These factors offset other negatives and increase your chances of getting approved and receiving good loan terms. Borrowers who lack strong compensating factors will have difficulty getting a loan.
If you’re unable to get a conventional mortgage loan, consider working with Athas Capital Group. Athas Capital Group is a leading nonprime mortgage lender offering non-QM and subprime loans. Visit www.athascapital.com to learn more.