|
Compensating Factors
When a mortgage loan application is evaluated by an Automatic Desktop Underwriting (DU) program against a set of stringent requirements. Sometimes, the DU program will allow the strengh of one requirement to compensate for the lacking of the other to issue an approval for an application that otherwise would have been resulted in a rejection. Credit scores, borrowing less again a property (typically called Loan to Value LTV ratio), and large deposit in the bank are three major compensating factors mostly seen.
High Credit Scores
The computerized underwriting system will take into consideration if you have high credit scores, typically 740 or above, with good credit history (no bankruptcy, collections, late payments, etc).
Large Savings In The Bank
If you have large amount of savings in your bank accounts, it will help to compensate your high DTI ratio. This money must be yours and must be deposited in your bank accounts for some time (at least two months).
Borrowing Less Against The Property
If you borrow less against the property, it posts lesser risk to the lender, therefore it will affect the decision in your favor as well.
Again, the computer underwriting system uses a complex algorithm to calculate the risk factors to the lenders and renders a preliminary decision on your loan application. Until we run your scenario on the system, we really don't know how your compensating factors will affect the loan decision one way or the other. The best approach is to submit your pre-qualification to us and we will run your personal scenario through the system and evaluate your qualification against other guidelines from lenders, after that, we will be able to give you an accurate answer.
|
