In the mid 1990’s, the mortgage industry saw the credit score and its predictive power to assess a borrower’s ability to repay a mortgage step into the limelight as one of the most indicative factors for loan approval. After conducting statistical test after statistical test, Fannie, Freddie and Ginnie, the 3 big lending institutions, mandated that the credit score should be used in conjunction with manual underwriting to assess loan approval. Not too long after, automated underwriting systems (AUS) were developed that expedited and streamlined the underwriting process even further for lenders. A loan officer today simply inputs a borrower’s key information into the preferred underwriting automatic engine, such as his/her credit score, income, amount being borrowed, cash reserves, employment and housing history, and the value of the property. A response is returned by the underwriting engine recommending approval or denial for the loan.

If your loan receives a denial from an AUS, the buck doesn’t necessarily stop there. Life happens to people, and oftentimes it’s going to take a real live person understanding the nuances of a file to make an underwriting decision. That’s when your lender may suggest submitting your file to underwriting for a manual review. After all, not everything in life can be automatic, right?

A perfect scenario for a manually underwritten file would be someone who has no credit scores. No credit scores? Yes, it is possible. I’ve had customers who, being old school and always having paid for everything in cash, had never established traditional credit lines that reported to credit reporting bureaus. In a case such as this one, I had to submit non-traditional lines of credit to underwriting, something a machine can’t assess. This means I had my customer bring in bills he had paid on time for the past year to create a credit history. Typical ones used are car insurance, utility bills, cell phone bills and cable bills. You can expect to have to provide 3-4 different trade lines if you haven’t established a traditional credit history and score.

“The most typical reason we see a file submitted to us for manual underwriting is for either no credit score or an error reported on a credit report,” reflects Patricia Haynes, onsite Government Underwriter at Mortgage Investors Group. “For instance a judgement that doesn’t really belong to the borrower. Maybe it’s really Dad’s judgement reflected on the son’s report because Junior and Dad have the same name. That’s when I can overwrite an AUS decision because I have the documentation to support my decision to do so in front of me.”

Another very common reason to submit a loan for a manual underwrite is when your customer’s credit score is below 620 and gets an AUS denial. If this is the case with your loan, be prepared to provide more than average documentation about your credit history, as well as written explanations as to why your credit score has suffered recently. Maybe two years ago you had a financial meltdown due to a medical illness, but in the last twelve months, you can prove you are back on your game and have been repaying debt. However, your credit scores haven’t exactly caught up with your actions. An underwriter is going to piece together the different aspects of your file and see if it makes sense. Your home lender should be able to review your file and guide you as to what documentation an underwriter will want from you to grant you loan approval.

Naturally, if your credit score is really low and you have very little explanation for your state of credit affairs other than you failed to pay your bills on time, don’t hold your breath for loan approval. An underwriter can see through smoke and mirrors. After looking at files as long as they have, they can basically sniff out a loan that has merit from the ones that are too risky.

So, even as our world gets more and more automated every day, it’s nice to know that you can’t replace genuine common sense, even in the mortgage industry. And it’s nice to know that you can plead your case for credit worthiness to a real live human being.

Just like many things in this world, not all mortgage loans are created equal. In fact, there are numerous loan offers that you might find scouring the Internet or by visiting with multiple mortgage loan consultants. The question is: How do you determine which mortgage loans are great mortgages? Well, as the saying goes, great things come in threes…or in this case, in three steps.

The first step to finding a great mortgage loan is to hire a quality mortgage consultant. In the real estate business, that means having a mortgage loan consultant who operates with transparency so you’ll know every fee that you’ll be assessed and the amount of each fee. A transparent mortgage loan consultant will also explain everything—even the things you don’t ask but need to know—in plain language so that you fully understand everything related to obtaining a mortgage.

The second step to finding a great mortgage loan is to find an appropriate mortgage loan. What does “appropriate” mean? It means that the mortgage consultant you’ve chosen to work with has located a mortgage loan that has a feasible interest rate for the payments you can afford; the lower the mortgage rate, the better. There is a catch: Mortgage loan consultants in Florida, California, New York, or anywhere else in the US can only offer you the mortgage loans that you are eligible for, which is based on the current  market rates and your credit score. Therefore, be sure to keep tabs on both.

The third step is to put on a pair of mortgage loan blinders. By that, I mean you need to narrow the scope of the types of loans you’ll entertain; only consider loans that are 100% buyer-friendly. Ideal buyer-friendly loans give you, not the lender or the mortgage broker the advantage. Buyer-friendly loans have flexible loan terms. For instance, the loan may be available as a one to ten year loan; it may be available as an open, closed, variable, or convertible mortgage. Another key sign of a buyer-friendly mortgage loan is that the mortgage allows you to have some control over the interest rate. If a mortgage loan consultant says that “points” is an option, it’s an offer worth considering. Mortgage loan points, in case you don’t know, allow you to decrease the interest rate on a given loan. Though buying points will increase your initial mortgage loan costs, it’ll save you money in the long run. That’s why it’s a great option to have, regardless of whether you utilize it.

If you follow the steps above as you begin hunting for your perfect mortgage loan, you won’t have any problems finding a loan that you can live with. Keep in mind that finding such a loan does take time. Be patient, plan ahead, and most importantly, find the right mortgage consultant or firm to help you along the way first!

Jumbo mortgages are not so different from standard mortgages but there are a few key things that are worth looking in to.

Jumbo Mortgage Loans

A jumbo mortgage loan is a loan taken for property that is high-priced.. In Colorado, as in most of the U.S., a jumbo mortgage loan is any mortgage that exceeds $417,000 – the limit set by Fannie Mae and Freddie Mac for conforming loans.

Fannie Mae and Freddie Mac, the two agencies that buy the majority of real estate mortgages, will not finance loans greater than $417,000 in most states; however Alaska, Hawaii, and a couple others are exceptions. Therefore, the large jumbo mortgage loans are sold to other investments, often banks and insurance companies, and so a jumbo mortgage loan falls into a different category. Rates for a jumbo mortgage are also higher than conforming loans because there is more risk involved.

What This Means for Jumbo Mortgage Interest

The size of a jumbo mortgage loan means there is more to lose. The size, coupled with other factors, results in somewhat higher jumbo mortgage rates than those carried by conforming loans. Since percentage points on jumbo mortgage rages can mean sizable payment differences, buyers should shop around for a good lender when applying for a jumbo mortgage loan in order to find the best rate. Buyers should shop around for a good lender when applying for a jumbo mortgage loan in order to find the best rate.

In truth, jumbo mortgage interest rates are only one thing to consider when shopping for a jumbo mortgage. There are additional fees and closing costs to be considered that could even out the difference in jumbo mortgage rates. Sometimes, the company with the jumbo mortgage rates is actually the cheapest, all things considered.

Also, buyers shopping for good jumbo mortgage interest rates need to consider their goals, plans, and all of their options. Like conforming mortgages, jumbo mortgages are offered in a variety product lines. Buyers have the option of taking out loans with adjustable jumbo mortgage rates with 3 or 5 year locked rates that adjust after that period, or 15 or 30 year fixed jumbo mortgage rates that never change.

Deciding which type of product (variable or fixed jumbo mortgage interest rate) is better for you depends on whether you plan to stay in the home for more than that locked 3-5 year period, or whether you will refinance the loan within 3-5 years anyway.

Buyers should not be scared off from higher jumbo mortgage rates; jumbo mortgage rates are higher only by a quarter of a point or so for well qualified buyers. What’s more, jumbo mortgages are the only option for home buyers in many parts of the country because $417,000 really isn’t that high a price in today’s housing market. As a matter of fact, jumbo mortgage loans are the only type available in many areas. The best way to find a good jumbo mortgage loan is the find a reputable and experienced lender with good rates. A great mortgage lender will take the time to understand your needs so they can help you select an appropriate product.