Borrowers qualifying for mortgages today are paying for the excesses of yesterday. During the go-go years leading to the crisis, underwriting rules became incredibly lax, and now they are excessively restrictive. Mortgage underwriting rules have become increasingly detailed and rigid, with much less room for the discretionary judgment of underwriters.
To help borrowers deal with this problem, I am developing a program for my website that will show potential borrowers whether they qualify, the type of mortgage for which they qualify if they do, and exactly where they fall short if they don’t.
But people using the program who do not qualify invariably ask what they can do about it? To confront this question, with help from Jack Pritchard, I have developed a set of qualification repair articles, focusing on the major areas that may need repair: down payment, income and credit score. The underlying theme is that committed borrowers can repair their own credentials. This is the first of three.
What is the down payment?
On home purchases: The down payment is the difference between the sale price and the loan amount, provided that the property appraisal comes in at or above the sales price. If the appraisal is lower, the down payment in dollars is higher.