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Home Buyer's Recession Survival Guide - What To Do After You're Turned Down

Updated on May 26, 2009

Just because one lender has said no, does not mean that your search for a mortgage has dashed on the rocks forever. There are many lenders and each has a very different set of lending criteria. When you get a turndown, you should ask several questions:

Is the problem with your credit history, or is there something wrong with the property?

Would increasing the down payment result in an approval? By how much?

Would a different loan program's lending criteria result in an approval? Which one?

If your mortgage professional is not giving you clear answers on these questions, then all you have to do is let your fingers do the walking through the Yellow Pages where you will find several hundred mortgage brokers and bankers just waiting to help you get your loan. Most brokers are approved to work with hundreds of lenders each, thus there are always plenty of options in case the first one to be approached turns you down.

As in every case, you should be prepared to pay a bit higher rate. If your loan is difficult to place, you might find success with a lender who is prepared to take on a bit higher risk in exchange for a bit more profit. In cases such as this, you should consider taking the deal, moving into the home, paying the monthlies on time, no matter how hard you have to tighten your belt, and then after a year of paying in full and on time, go for a refinance! That will get you into a much lower rate as you have just built up excellent credit history of paying your mortgage. In the long run, you may find that although you've paid a lot more the first year than you would normally have, the rest of the term under the refinance is way less than you expected, and you could actually end up ahead!

The FHA has come into the 21st century and is now using an Automated Underwriting software which determines loan eligibility simply based on your credit score and a few extra factors. The problem with this software is that it will immediately knock out any applicants that fall even one iota short of its standards.

You do not have to accept the computer's turndown, as there is an option if you can't quite squeak by the FHA software's standards that many people are not aware of. You can go for the traditional or manual underwriting standard. This is the way that the FHA did business before their newfangled software.

The advantage of manual underwriting is that you can actually reason with the underwriter. Where the computer is going to look at a chargeoff five years ago and blow the application out of the water, if there is a rational explanation for it, and the underwriter can be made to understand that it was an isolated instance not likely to recur, then that is not going to have much impact at all on the decision. Manual underwriting places a very low emphasis on conventional credit scores and that is superlative news for the applicants with less than sterling credit.

What manual underwriters want to see first and foremost is your consistency in making your mortgage or rent payments, your most recent history of dealing with credit, and the percentage of your income you can legitimately commit to the loan. If those aspects can be either shown to be satisfactory, even if an explanation or two has to be entered into the file, then your application should be well on the way to approval!

Computers may be excellent tools, but when it comes to reasoning with one, you're always better off with a flesh and blood real person!

Read The Entire Survival Guide

Home Buyer's Recession Survival Guide - The Subprime Meltdown
Home Buyer's Recession Survival Guide - The Advantage Of Renting Over Buying
Home Buyer's Recession Survival Guide - Why Rent? Why Not?
Home Buyer's Recession Survival Guide - Five Common Mistakes House Buyers Make
Home Buyer's Recession Survival Guide - Get Your Home Sold Quickly & At Your Asking Price
Home Buyer's Recession Survival Guide - Improve Your Home's Value And Sell It For More!
Home Buyer's Recession Survival Guide - Learn The Value Of Curb Appeal
Home Buyer's Recession Survival Guide - Home Staging: Valid Selling Technique Or Fraud?
Home Buyer's Recession Survival Guide - Before You Go House Shopping
Home Buyer's Recession Survival Guide - The Home Condition Checklist
Home Buyer's Recession Survival Guide - Getting A Mortgage From Different Types Of Lenders
Home Buyer's Recession Survival Guide - What To Do After You're Turned Down
Home Buyer's Recession Survival Guide - New Initiatives To Help Get You Approved
Home Buyer's Recession Survival Guide - Isn't HUD An Old Paul Newman Movie?
Home Buyer's Recession Survival Guide - Jumbo Isn't As Huge As He Once Was
Home Buyer's Recession Survival Guide - FHA Q&A
Home Buyer's Recession Survival Guide - The FHA's Credit Requirements Vs. The Bank's
Home Buyer's Recession Survival Guide - Your Credit Score And Your Mortgage
Home Buyer's Recession Survival Guide - Credit Score Confusion
Home Buyer's Recession Survival Guide - Keeping That Credit Score Nice & High
Home Buyer's Recession Survival Guide - Minimize The Interest Payable
Home Buyer's Recession Survival Guide - What Is PMI & Why Do I Care?
Home Buyer's Recession Survival Guide - The LIBOR-COFI-COSI Alphabet Soup
Home Buyer's Recession Survival Guide - REO: Get Rich Quick Or Just Waste Time?
Home Buyer's Recession Survival Guide - Obtaining Flipping Money
Home Buyer's Recession Survival Guide - Consider The Additional Costs
Home Buyer's Recession Survival Guide - What Is Escrow?
Home Buyer's Recession Survival Guide - Tips To Avoid Foreclosure
Home Buyer's Recession Survival Guide - The Changing Value Of Your Mortgage Dollar
Home Buyer's Recession Survival Guide - How To Ride The Interest Rate Spikes
Home Buyer's Recession Survival Guide - Can't Get A Mortgage? What A PITI!
Home Buyer's Recession Survival Guide - Calculating Your Closing Costs
Home Buyer's Recession Survival Guide - Mortgage Broker or Mortgage Banker?
Home Buyer's Recession Survival Guide - The Magic Of A Down Payment
Home Buyer's Recession Survival Guide - A Refinance Checklist
Home Buyer's Recession Survival Guide - Refinancing With Bad Credit
Home Buyer's Recession Survival Guide - The Self-Employed Mortgage Maze
Home Buyer's Recession Survival Guide - VA Loans
Home Buyer's Recession Survival Guide - Offset & Reverse Mortgages
Home Buyer's Recession Survival Guide - The Reasons To Not Buy An Offshore Retirement House
Home Buyer's Recession Survival Guide - How To Pay Less Than $500 A Month
Home Buyer's Recession Survival Guide - Five Easy And Cheap Tips To Save Big $ On Energy

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