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Become a VIP Broker with RAC


Send us 5+ loans monthly to become a VIP broker with RAC and receive the best service in the industry! We provide pricing incentives, lightning fast turn times, personalized flyer designs, and social media assistance!

Help Your Low Credit Score Borrowers Get A Mortgage

How To:

Help Your Low Credit Score Borrowers Get A Mortgage

For some borrowers with less than stellar credit or no credit at all, automated underwriting may leave them out in the cold with nothing more than a declined loan application. Sadly for these borrowers, the automated systems are formula-driven and do not allow for judgment calls. They either fit the formula or they are declined. However, loans declined by automated systems may have a second chance… with manual underwriting.

Manual underwriting allows a lender to take into account other proofs of a borrower’s ability to make steady payments. If a borrower experienced a negative life event which affected their credit, manual underwriters can assist in verifying the applicant’s payment history that was in place before the negative event.

Our manual underwriters work hard to accommodate those with low or no credit scores. At Residential Acceptance Corporation (RAC), each low-credit or no-credit file is reviewed on its own merits. Whether your borrower had their credit score crushed by a life event, chose not to use formal credit, or they were possibly a veteran serving our country on multiple tours without the need or time to establish credit, RAC manually underwrites loans and can offer borrowers second chance. We do this because we understand financial hardships and prefer to make common-sense decisions about borrowers.

  • 2+ years employment history
  • Stricter ratios may apply (29/41 for USDA & 31/43 for FHA)
  • No unpaid collections
  • Verification Of Rent (VOR) showing 12-month history with no late payments
  • No 30 day late payments in last 12 months
  • 1 or 2 months of reserves
  • 3 historical trade lines (including VOR) showing 12-month history with no late payments or 1 active trade line + 2 historical trade lines with 12 months no late payments (standard or alternative trades)
  • No score files will need to provide 3 alternative trades with 12-month history of no late payments. If no VOR we may require 3 alternative trade lines.

Finally, you will need a letter explaining: what caused the low scores and derogatory credit, what has been done to stem the problem and what assurances can be given that this credit issue will not re-occur.

Loan-to-Value (LTV) Ratios Explained


Loan-to-Value (LTV) Ratios Explained

The Basics
A big piece to the puzzle when applying for a home loan is the loan-to-value ratio or LTV. In simple terms, the LTV is the amount of money you intend to borrow as a percentage of your home’s value. This is a big piece to the puzzle to get a loan approval.

LTV = Mortgage Loan Balance / Home Value

Why LTV is Important
You may be asking: why is LTV so important, anyways? From a lender’s perspective, the LTV ratio is extremely important because the higher your borrower’s LTV, the lower his/her home equity will be. Naturally, most lenders view borrowers with low equity as having a greater risk of defaulting on their loan.

What’s a good LTV ratio?
Anything less than 80% LTV holds less risk to lenders, like RAC. As a general rule, lenders require those who take out a mortgage with an LTV greater than 80 percent to pay for private mortgage insurance. This protects them in the event a borrower defaults by ensuring that the outstanding balance of the loan will be paid off.

The sweet spot
RAC underwrites to the guidelines, with no overlays. That means less hoops to jump through! RAC allows the following LTV ratios for each loan type:

  • FHA loans allow 90% to 96.5% LTV
  • USDA and VA loans allow 100% LTV

If the LTV ratio is too high, your borrower may end up having to pay for private mortgage insurance.

The Lesson
Don’t get trapped. It’s a good idea to keep the LTV in mind when searching for a home.

Want a little secret?
Start by seeing if your borrower is pre-qualified by submitting a 1003 and credit report with Residential Acceptance Corporation. TBDs are also accepted. You’ll receive a response directly from a RAC underwriter within 24 hours. If you send it in before noon EST, we’ll have an answer for you by 6 P.M. EST. Submitting a Pre-Qual is simple, easy, and allows you to know the range of what your borrower is able to afford.

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Together We Build Dreams

A wonderful serenity has taken possession of my entire soul, like these sweet mornings of spring which I enjoy with my whole heart.