September 24, 2018
Orion’s brokers know that credit scores can be the difference between getting a good interest rate on a mortgage or in some cases even getting a mortgage at all. But what if your client doesn’t have a great credit score? Because of our place in the industry and ability to get deals done, Orion is willing to look at non-traditional ways of determining if someone is a low risk for defaulting on a loan. Being able to analyze non-traditional credit metrics is important – what are we seeing out there?
For rental income, Orion’s brokers remind clients to make sure they have a documented history of on-time payments. All else being equal, on-time rental payments are the best indicator of whether someone can ready for home ownership. Another solid indicator of someone being financially responsible is payments to an ex-spouse as well as child support. Make sure any changes to the monthly payments have a documented explanation.
Our brokers are seeing more and more “gig economy” income. A steady monthly income from a job such as driving for Lyft or delivering packages for Amazon can be almost as good as a job in from a traditional employer. Brokers have seen a large growth in applicants who make their income from these types of jobs and they often demonstrate a person who is the most responsible type of borrower because it shows they're committed to bringing money in.
Many brokers will advise borrowers that if they are stashing away money for a down payment, to set a regular amount to automatically transfer to savings on the same day each month. Make it low enough so it is feasible to accomplish each month but high enough to look like you're serious. Regular savings that a borrower doesn’t dip into shows a lender a client is ready for a mortgage.
Brokers will often advise clients to keep as many utility bills in their name as they can and pay on time every month. If a client is living with family, try to get one of the utility bills in their name so the client can accumulate a history of payments. If a potential borrower is paying for school, some lenders will look at that as a solid payment history too. Student loans do count against a borrower when it comes to debt-to-income ratio, but lenders don't frown on them as much as they do high credit card balances.
The demand from homebuyers for options such as these has skyrocketed ever since the mortgage crisis around 2008, and Orion is being proactive. Brokers with clients who rely on something other than what the three credit bureaus report should talk to an Orion AE!