Beginning mid-June 2012, certain current, FHA-backed homeowners will be able to refinance their existing FHA mortgage into a new one, without having to pay the government-backed group's new, costly mortgage insurance premium schedule.
Simply stated, compensating factors for mortgage loans are strengths specific to your loan application that can help underwriters decide to approve your mortgage loan. In many cases, compensating factors can be the difference between getting approved or getting denied. If you’re currently in the market for a mortgage loan in Seattle, knowing the various compensating factors, and how they can positively influence your profile for lending institutions, is good information to have on your side.
Of course, keeping tabs on which variables are most influential in the current mortgage loan environment can be daunting which is a big reason why many seek the counsel of a mortgage loan expert. Working with an insider in the industry will ensure you present the absolute best profile to lending institutions which will, in turn, secure the best mortgage loan rate available.
Who Needs Compensating Factors to Get Approved?
Rarely does a mortgage loan application come in with A+ grades across the board. Many applicants have a lower than optimal credit score, or less money to put down than they’d wish, or a shorter employment history than some, or any of a number of other circumstances that may cause a lender to “downgrade” your application. In reality, home mortgage loans address so many factors in the approval process, that compensating factors come into play on almost every home loan that gets underwritten.
Mortgage Loan Compensating Factors
Here are a few of the compensating factors considered in the mortgage loan approval process:
- Contributing a larger down payment (10% or more).
- Recently demonstrating (over the past 1-2 years) the ability to successfully pay housing expenses equal to or greater than the expenses of the new home loan.
- Having an outstanding credit score.
- Having a proven track record of accumulating savings.
- Displaying a conservative attitude toward the use of credit.
- Being able to document compensation or income that impacts the ability to pay the mortgage, like public benefits.
- Having accumulated the down payment through savings rather than as a gift.
- No recent derogatory accounts (12 months) or proving that previous derogatory accounts were due to extenuating circumstances.
- Taking a homebuyer education class.
- Having cash reserves (3 months or more) after closing.
- There is only a minimal increase in the borrower’s housing expense.
- Showing an expected increase in earnings due to job training or additional education in the borrower’s profession.
- Having a second earner’s prospects for work increase due to the new location.
Every Seattle home loan situation is unique and no list of mortgage loan compensating factors can include every variable considered in every situation. The best way to know the strengths and weaknesses of your “borrowing profile” is to consult with a mortgage loan expert at Sammamish Mortgage. You can depend on the experience Sammamish Mortgage professionals bring to every loan consultation in the Seattle market to ensure you get the best home loan available.