Lender Guidelines and Borrower Commitments
Lender Guidelines
- Credit. Past credit history of the borrower. If the borrower doesn’t pay anyone else, they may not pay you. We can email you a credit report. In general, the lower the credit score, the worse the credit. It is important to distinguish between GENUINE short term problems, like a divorce or being laid-off, and deadbeats who never act responsibly.
- Capacity. Does the borrower earn enough to make the payments? When you verify employment, be aware that some crafty borrowers will give a friends phone number as the number of their employer. Listen when you make the phone call. Would you expect to hear children in the background if you called, say, General Motors? You will want to see a W2, perhaps tax returns and a Verification of Employment (VOE). Download a VOE form from our site. But remember, with modern software, it’s easy to create false tax returns and W2s!
The Borrower’s Commitment
Commitment. How much does the borrower have at risk of his own money? Ask for the closing statement for when the property was bought or is going to be bought. Always insist the borrower has some of their own money at risk. Ask for a copy of the bank statement of the borrower showing where the check for the binder was drawn. You can send the bank a signed Verification of Deposit (VOD). Download a VOD form from our site.
