Our investigation into home loans and mortgage refinance approval using people with less than perfect credit reveals that the key lies with the mortgage broker or banker. For example, many people visited conventional banks or credit unions to apply for a home loan or mortgage refinance but were declined. These same people could immediately apply with another mortgage broker, and be approved for an "A" mortgage.
The reason seems to be that banks and credit unions have specific underwriting guidelines and specific home loan and mortgage refinance programs. If the borrower does not match the conventional bank or credit union's underwriting guidelines, they did not qualify for the home loan or mortgage refinance program offered. Sometimes the conventional bank or credit union would approve the borrower but at a much higher rate and/or adding several points to the closing costs.
This seems to present a stumbling block for many seeking new home loans or to refinance their existing mortgage. Many people stopped trying to get approved for a home loan or mortgage refinance after being rejected, interpreting the conventional bank or credit union's rejection to mean they did not qualify for a home loan, period.
We found the existence of, literally, thousands of home loan and mortgage refinance programs and underwriting guidelines. For consumers with less then perfect, or bad credit, higher debt to income ratios, and/or hard to document income (self-employed or commission sales) we found that banks are not competitive. In fact, conventional banking institutions declined home loans and mortgage refinance application even minor difficulty.
We found mortgage brokers and specialized lenders that represent dozens, if not hundreds of banks and could offer hundreds of programs with a wide variety approval guidelines based on an individual's unique situation. Loans that were declined by conventional banks and credit unions were regularly approved through brokers at interest rates similar (within 0.025) to the conventional bank or credit union's "A" paper rates.
