There are
circumstances that may cause a lender to reject
your loan. You may be placed into this category
of “special-circumstances” for a variety of
reasons, such as if you are purchasing a
condominium, if you've held your job for less
than a year, if you are self-employed, if you
put less than 20 percent down, or if you have a
few late payments on your credit card. Here is
some advice with regards to some of these
special mortgage loan situations.
Buying a
condominium or town house
When you buy a
condo or town house, you get a deed to the
individual unit, but you share the common areas
(walls, grounds, fences, facilities) with the
other owners in your complex.
Before approving
your mortgage for a condo complex, a mortgage
lender will want to review the financial and
physical perspective. They will typically
provide a questionnaire to be completed by the
condominium association in order to decide
whether it is suitable collateral for the
mortgage loan.
Some of the
factors they take into consideration are how
many percentage of units are owned versus those
that are occupied by investors. An acceptable
figure is typically 60 percent owner occupied or
higher. Another important factor is whether the
project is 90 percent complete. Your loan will
most likely be approved if these two criteria
are satisfactorily met. Other possible
considerations that determine loan approval
include insurance coverage, operating budget,
the competency of the management, and the
capital reserved for repairs.
No doc or low
doc loans
Designed for the
entrepreneur, the self-employed, recent
immigrants with capital in foreign countries, or
for clients who choose not to reveal their
financial information, no-documentation or
low-documentation loans require only
down
payments and closing costs. They require no
documentation such as tax returns, W2 forms,
paychecks, or bank statements. In order to
qualify for these loans, you will need a
substantial
down payment, ranging from 20
percent to 35 percent, as well as an excellent
credit history. They also typically have a
higher interest rate, often one-half a percent
higher than the norm.
A low-doc loan
requires that you be self-employed for at least
two years, and have sufficient assets as well as
excellent credit. Those that choose to go with
these options may switch to a lower-rate, full
documentation loan later when they
refinance and
their financial status improves.
Sub-Prime B-C-D
loans
Developed for
people with past or current credit problems,
these loans provide more lenient lending
guidelines, but charge higher interest rates and
fees. This allows people with spotty credit
histories to own a home and at the same time
improve their credit ratings. Often, once the
borrower's credit and financial situations
improve, they have the option of refinancing to
take advantage of the best current market rates.
Mortgage Glossary1
