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Compensating Factors for
Conventional Home Loans
When
a borrower's payment or combined monthly debt payments is/are higher
than the limits prescribe by a conventional loan , the loan may be approved with
compensating factors. The following are several compensating
factors to support borderline loan files:
-
Energy
efficient dwelling
-
Less
than 10% increase from old rent/house payment to the new
housing expense
-
A
borrower's excellent savings ability (as shown by savings
accounts, IRA's, etc.)
-
3
or months cash reserves (house payments after closing) that
are not part of a gift
-
Limited
use of credit
-
Borrower
has potential for increased earnings
-
Borrower
has income that cannot be used as qualifying income
-
Larger
than minimum down payment
Good
credit, steady income and residual income are not compensating
factors.
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