To successfully procure mortgage loan financing you must have an equal blend of cash, credit and income. This blend of cash credit and income, also involves the examination of your ongoing reoccurring financial obligations. Here’s some ways to improve your borrowing by omitting monthly payment obligations for the purposes of qualifying for a mortgage…
Can you document it?
Above and beyond anything else -you must be able to clearly and accurately provide supporting documentation that clearly shows a paper trail. This paper trail is critical because lenders are required to document all sources of not only income, but also gifts and cash used in the transaction.
Here is a most classic example: you have a car loan showing up on your name on your credit report because you co-signed for your daughter. If the payment has been in existence for at least 12 months and your daughter for example has been making the mortgage payment since the inception of the debt and she makes the payment directly to the creditor you are green. The statement from which the loan is paid ought to have her name only listed on the account.
Obligation must be at least 12 months old, less than 12 months old will be up to an underwriter’s discretion. It must come from account only with the name of the party who you co-signed for or 12 months of cancelled checks.
If you have a co-signed obligation coming from an account with both parties’ names on it, you will be hit with the obligation in your payment to income ratio. Lenders use only the documentation you provide to them. This scenario would look on paper as if you are making the payment even though the money is coming from an account that has both parties’ names on it. If the obligation is paid in cash in any way, you’ll be hit with the payment in your debt to income ratio when trying to qualify for a mortgage.
Another common way to omit payment obligations is when you are self-employed and your business specifically pays the obligations from your personal credit report. This includes, but is not limited to a company car or company credit cards for example. You will need to be able to provide supporting documentation to the lender that specifically shows on paper that your business makes the payments on those obligations and has done so for at least the most recent last 12 months.
When possible, it is absolutely worth the extra effort time and energy to put together the needed supporting documentation to omit the debt having the biggest drain on your ability to borrow money.
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Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.