You might think that it’s a challenge to qualify for the biggest of the mortgage loans, jumbo loans of $500,000, $1 million, $2 million or more. But here’s a surprise: It can be just as challenging to get a mortgage lender to approve you for a tinier mortgage loan.
Try asking for a mortgage of $70,000 or less. Many mortgage lenders will balk. Why? Because originating a mortgage takes time and costs money.
Lenders must make sure you are qualified and that you’re likely to pay your loan on time. They must verify your employment history and income. They need to determine how much debt you face each month.
And they need to make a profit after doing all this. The problem with small payday loans in IN loans is that they require a lot of work for little payoff. Borrowers generally pay from 2 percent to 5 percent of their loan amount in closing costs. Lenders make a lot less money, then, when borrowers are paying 2 percent of a $75,000 loan than they do when clients are paying the same percentage for a loan of $250,000.
Because of this, it’s not always easy to convince mortgage lenders to originate smaller loans.
You’ll have to search when going small
Jonathan Faccone, founder of Halo Homebuyers, a real estate development and investment company based in Bridgewater, New Jersey, said that borrowers who are interested in a mortgage under $75,000 will have to search a bit harder to find a mortgage lender that specializes in smaller amounts.
“In my experience, a conventional lender’s cutoff is $75,000 for a total loan amount because it’s simply not worth the energy and work to them otherwise,” Faccone said. Read more