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Mortgage Lenders Can Adjust Risk Elements 1 and 2, but They Can't Adjust Element 3.

You can find your perfect dream home, but if it doesn't fit the plan, it's not going to work. Even if your debt ratios are well within lending guidelines and you have great credit, if your property isn't quite like the rest of the neighborhood, you're going to have major problems that even your excellent credit with no nonpayments can't overcome.

Lenders don't like to make loans on odd eggs. Loans are made based upon both the individual and the property. Both of them have to work. If one doesn't, the deal's dead.

Lenders evaluate properties based upon the appraisal. A typical property appraisal will examine the subject property, then look at a minimum of three other similar properties in the area to see if they "match."

If a borrower buys a house in a subdivision, chances are that the builder has built homes that are similar in design. A builder will typically construct "like" properties, then add some upscale ones later on down the road. Or maybe she'll build some upscale ones first, then some that are less so later on. In other words, there will be a good mix of houses, yet they won't be too different from one another in terms of design and utility. Builders know that if they get too eccentric with their properties, buyers may have a hard time finding financing.

Lending requirements demand that the appraisal identify similar properties in the neighborhood—a minimum of three—that have sold within the previous 12 months. In addition to finding properties that have recently sold, they also have to find homes that are currently listed. Sound tough? Well, it really should be. Lenders don't want their houses back. They're not in the real estate business. They're in the lending business. Unlike Realtors, when lenders sell property, it usually means that they're losing their tails. When Realtors sell property, they're making money.

 
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