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22 April 2014

Should Banks Loosen Standards?

During the mortgage meltdown, banks stopped lending.  The pendulum swung extremely far to the other side.  It was a much needed correction but they went too far and it became very difficult to get a mortgage loan.  Furthermore the new QM (qualified mortgage) rules came out and it is even more difficult to get a […]

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During the mortgage meltdown, banks stopped lending.  The pendulum swung extremely far to the other side.  It was a much needed correction but they went too far and it became very difficult to get a mortgage loan.  Furthermore the new QM (qualified mortgage) rules came out and it is even more difficult to get a traditional Fannie Mae or Freddie Mac loan.  Luckily now we are seeing portfolio lenders coming out with new alternate programs to meet the needs of many homeowners and homebuyers who have scenarios that are slightly out of the box.  For instance, if you happen to write off too much on your income taxes or have 2106 expenses, you may not be able to get a loan that you normally would qualify for.  You know you can afford it, however the bank is penalizing you for your income write-offs.  The new QM rules say you are not allowed to have a debt to income ratio over 43% and they are enforcing that very strictly.   Still many Americans believe that a foreclosure, bankruptcy or short sale will keep you from buying a home for many years.  The truth is that is not the case.  FHA has a strict 3 year rule and if you are lucky enough to fit exactly into the FHA Back to work program, then you may even qualify for a FHA loan just after 1 year.  The FHA back to work program is very difficult to qualify for and many lenders have abandoned that program before it even got off the ground.  Where does that leave us?  That leaves us with portfolio lenders who have been testing the waters with 1 day out of foreclosure programs.  It looks like they are happy with the results because they are starting to expand the criteria on these loans.  For example, when the 1 day out of foreclosure program launched, they required a 680 credit score.  Now they only require 660 and will even make an exception down to 620 if you have compensating factors.  This is good news for people who have gone through foreclosure but are back on their feet again.  Of course these programs require skin in the game and at least a 20% down payment.  To find out more about these programs, call one of our program specialists at the number above.   Also you can email us at info@afterforeclosure.com  Happy house hunting!

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