Mortgage Creativity

You find the house of your dreams and need to get a home loan. You have great credit, almost no debt and have been employed for five years with the same company. You apply for a loan and are stunned when you are turned down. The reason? The lender says you have insufficient yearly income to justify the loan amount.

What the lender is really telling you is it doesn't think you can afford the monthly payments for the mortgage. Before you go ballistic, you should sit down and seriously review your financial situation. Getting a home loan is fine and all, but not if you are unable to make the monthly payments. Try to be realistic in your evaluation. It will save you many sleepless nights. But, what if you can afford the payment?

The first creative solution you may want to consider is an increase in the amount of the down payment. By increasing your down payment, you will reduce the amount to be borrowed which can make all the difference in qualifying. If you can bump the down payment up to 25% of the total value of the property, many lenders will relax the qualification requirements.

A second creative solution involves alternative loan sources. Initially, good old mom and dad may be able to help you out. In fact, this is one of the traditional down payment funding sources for most first time homebuyers.

A less known alternative, however, is your 401k retirement account. Under federal law, you can borrow up to 50% of your 401k balance. The repayments have to be made in five years, so analyze how this option will impact your finances. If you can pull it off, you will be in the advantageous situation of paying yourself interest instead of a bank.

Regardless of the approach you take, insufficient income need not be the end of your home buying prospects. Get creative and you can find a solution.
About the Author

Dan Lewis is with http://www.gwhomeloans.com - A San Diego mortgage company providing home equity loan, refinance and mortgages to San Diego home owners.

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