By Tammy Engel
Mortgage Advisor
'You can have any loan you want!'
Mortgage Matters
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Um, no, you can’t. But this was said by someone holding themselves out as a lender, to a friend of mine. He heard, “If you put 20% down, you can have any loan you want!”
First, a check of the NMLS Consumer web site shows the lending experience of the speaker. The Nationwide Mortgage Licensing System will tell you if a person is fully licensed in lending, or is just registered, how long they have worked in lending, and who they have worked for. In this case, the speaker is registered as a lender for the last six months, and has spent a lifetime in corporate lending. In no way does that mean there is any real boots-on-the-ground experience. See what I mean at http://www.NMLSConsumerAccess.org. As an example, check my NMLS number 235051.
The benchmark of 20% down is still somehow seen as the holy grail of lending, because at that level you won’t need to pay mortgage insurance. But any seasoned lender knows there are programs that allow for as little as 5% down with no PMI. Further, there are loan programs with very low PMI rates that require less than 5% down.
So if we assume she was talking about getting a “vanilla” conventional loan, there are still more things to consider. For these loans to be approved, you need at least four years away from a bankruptcy. The listener had a BK two years ago.
Vanilla loans also require fully documented income. The listener has been self-employed for just one year. That won’t work – we need two years of federal tax returns for new business owners.
Last, conventional loans max out at a certain debt ratio. It’s a number lower than any other loan type, and not everyone can hit that bar. Sometimes the loan program needs to be adjusted to account for a high level of debt.
It drives me crazy when people throw around blanket statements about mortgage. Haven’t we learned that guidelines are still in flux, and everyone’s situation is different. To be sure you’re getting the best advice in structuring your home finance transaction, verify the experience of your chosen lender.
Tammy Engel is your local Mortgage Advisor, and has been working for your best interest since 1990. Contact her at 661/822-7325 for purchase, refinance, and reverse mortgage.
