Healthy and consistent income, healthy down payment and high credit score mean getting a loan is much easier for you. Banks and other lenders can process your application relatively quickly. A computerized loan underwriting process is likely to reject your application if you have unstable earnings, bad credit and thin credit. This does not mean that you have no other option. You can request the lender to process your application manually. Or, you can work with a lender using the most advanced LOS system.
In the manual loan underwriting process, the lender manually evaluates your ability to make loan payments.
A bank has to process applications for many loan products. Automated loan underwriting process saves a lot of time by automating decision-making. The automated system uses specific criteria for loan approval. This system can evaluate debt-to-income, credit score and other factors. However, income calculation can be a little tricky. The following important factors can affect the chances of your loan application approval:
- Debt-free lifestyle
- No credit profile
- Recent financial problems
- Debt-to-income ratio
Getting Your Application Approved
To get your application approved, you must have a standard income profile. You need to show every single source of income to give the borrower confidence that you can repay the loan. You also need to have sufficient assets. Manual loan underwriting process is frustrating and time-consuming.
Manually go through the entire loan origination process before you apply for a loan application. You need to analyze the following:
- Your payment history
- Healthy down payment
- Debt-to-income ratio
- Cash reserves
Compensating Factors
There are some factors that can make your loan application more attractive. Lenders or loan programs define some specific guidelines that can improve your chances. Try to satisfy the following requirements:
Reserves
Make sure that you have liquid assets to cover your payments for three months. If you want to buy a property with three to four units, make sure that you have liquid assets for at least six months. A loan or money as a gift is not counted as reserves.
Expenses
Consider your monthly expenses. Financial emergencies can arise anytime. Bank will consider this information before approving your loan application.
No Discretionary Debt
You have a credit card and you are making timely payments. However, this is not a debt. A debt-free lifestyle does not help.
Additional Income
You have seasonal incomes. You also work overtime. Many LOS systems ignore these incomes. However, there are some LOS systems that consider such pieces of information in loan underwriting.
Tips for the Process
This process is slow and time-consuming. You need to go through every document requested by the bank. You need the understand of the following:
- You need to do a lot of paperwork.
- Learn about the homebuying process.
- Explore other alternatives available to you.
Most loan origination systems are unable to process some pieces of information that can help in getting your loan application approved. Some banks and lenders use highly advanced loan origination systems that can consider this information as well. Find a bank or lender using the best loan origination system.
