Mortgage gurus, i need help

Alright, to start:

I don't need, nor am i interested in hearing any input on my personal life or any sentiments of "Well, that just sounds like a bad idea."

Moving on!

We (as in the girlfriend and i) are trying to buy a house. We were not planning on buying a house at this point in time, but a deal has fallen into our lap. The current owner is on the verge of declaring bankruptcy and/or having the house repo'd.

As a result of this, he just wants to get out of it for what he owes. $70k.

Problems:

1) My credit sucks. I'm 20 points off of being able to get an FHA loan. I have approximately 4x the income necessary to obtain said loan based on debt/income ratio
2) Her credit is great. Her income is low, but enough to get her prequalified.

We are going forward with just her income/credit.

We have 10% downpayment ready.

Now here we go:

The first denial finally came after 4 weeks of not hearing anything from underwriting, saying that debt/income ratio was not sufficient. After checking into it (Why would it not be sufficient when we deliberately lowballed her income for the pre-qual?), it turns out that they only ran her income off of her last two years W2s. These are low. She received a substantial raise and more hours starting in February of this year, and also obtained a letter from her employer stating minimum hours and wage going forward.

Back off to underwriting we go with more documentation.

Came back yesterday. Denied. The income is there, but they NOW require 4 paystubs from her showing that she gets 40 hours a week. Mortgage officer says that they won't loan as long as she can be considered part time employee by the bank. WTF?!?!?! THIS DUDE RAN THE NUMBERS ON THE PRE-QUAL AT 32 HOURS A WEEK. The paystubs that were sent to UW showed an average of 35-37 hours a week.

We don't have time to wait 2 months for those paystubs. The current owner will likely lose the house at that point. This helps nobody. He loses his house, has to declare bankruptcy. We lose the house. Bank loses money on the house, Mortgage officer doesn't get his comission. This makes no sense at all.

The loan in question is/was an FHA loan. The man we've been working with has never mentioned any other type of loan. After doing research, it seems that the FHA is for people with bruised credit and seems to go mainly on the premise of a rock-steady job. It also seems that someone like her with a very high credit score would have an easier time getting a conventional fixed loan, but the lender hasn't mentioned that at any point throughout the entire ordeal.

What do i do?

I just called Wells Fargo, and they don't care at all if the applicant is part time or full time, they just go off of debt/income ratio, which is fine in her case. That was conventional loan.

Do i go at the guy we've been dealing with and tell him to try for conventional?

How much time does initiating a short sell buy? The seller is eligible for short sell, and offered to sell us the house for $50k if that helps anything. (It does financially obviously) He's mainly trying to just use that to buy time long enough for her to get the 4 40hr paystubs.

Sorry if this is confusing, but my brain hurts.

halp!

FHA loans are a serious pain the the butt. Also the length of time it can take to fund among other things means that even if you have a accepted offer it might go back to the bank anyway due to the delay.

If its what you want go get a traditional loan. 70K should be easy even in today markets if the LTV is good and the income meets the banks requirements.

Also whats your back end ratio on the deal on the income that you are declaring.

wearymicrobe wrote: FHA loans are a serious pain the the butt. Also the length of time it can take to fund among other things means that even if you have a accepted offer it might go back to the bank anyway due to the delay. If its what you want go get a traditional loan. 70K should be easy even in today markets if the LTV is good and the income meets the banks requirements. Also whats your back end ratio on the deal on the income that you are declaring.

I REALLY wish this dude had told me how much of a pain in the ass FHA loans were before we started. We TOLD him that we were on a time crunch to get this done.

Debt:income ratio is fine. We were told that even when we lowballed her income as an estimate that it wouldn't be a problem.

Arg.

This bank would want 20% down on a conventional loan right now, and i don't have the time to start this whole process over through another lender.

At least they clarified that they needed 4 weeks of 40hour work weeks, and not 4 pay periods. So that's good.

But yet another month's delay.

Guess we're going to stick with the FHA.

Banks don't really care to work for your business. If you happen to fit into a perfect box where they have no risk and will get lots of your money they are glad to give you a loan. They sit back and profit off of the fact that everyone trusts a bank. Mortgage brokers are like a used car dealer who is on your side. While you are sitting in their office they will call 17 different lenders and negotiate until you have a loan. Better credit/ratios gets you a better deal, worse credit/ratios gets you a worse deal. Pack up all your info and head to a mortgage broker. You will walk out with a loan.

I'd still try to see how much you can scrape together while trying to get the FHA thing through.

I'd also seriously try to talk to a couple of mortgage brokers, some of them might have an idea. Also, have you by any chance approached the current owner's lender, maybe together with the current owner to see if they're willing to work a deal?

Given the situation you describe, have you done a title search (or whatever you have to do to find if there is a lien on the house or anything else)? You don't want to get the mortgage approved only to find out that the current owner has a "forgotten" second mortgage on the house.

When I bought my house in the UK, someone screwed up and the previous owner's second mortgage got left on the house "accidentally". As you might have guessed, that was fun to straighten out when this little problem came to light a couple of years later.

Ben,

While they are not for everyone, look at Quicken Loans. They have a faster "system" to process you through and get the money out. 30-45 days is pretty common. Remember none of these companies are really throwing money out the door like they used to.

I'd go talk to the current owner's lender. Maybe by having a pow-wow with you and the owner they can realize the savings from having him foreclose into profiting on your purchase.

BoxheadTim wrote: I'd still try to see how much you can scrape together while trying to get the FHA thing through. I'd also seriously try to talk to a couple of mortgage brokers, some of them might have an idea. Also, have you by any chance approached the current owner's lender, maybe together with the current owner to see if they're willing to work a deal? Given the situation you describe, have you done a title search (or whatever you have to do to find if there is a lien on the house or anything else)? You don't want to get the mortgage approved only to find out that the current owner has a "forgotten" second mortgage on the house. When I bought my house in the UK, someone screwed up and the previous owner's second mortgage got left on the house "accidentally". As you might have guessed, that was fun to straighten out when this little problem came to light a couple of years later.

We've gotten everything done except for the inspection.

Already got the title, and there is a second mortgage, but we knew that from the get-go, and have already gotten around that. Appraisal was done, etc etc etc. The only thing left is the inspection, which we didn't want to do until the loan went through, and then the disbursement.

I'm going to try to see if i can get an appointment to talk to the current lender today. Unfortunately, i'm going out of town for 10 days tomorrow night, so everything will come to a screeching halt for a little bit.

I nailed down the guy i've been working with last night, and asked him to tell me point blank if this loan will go through if we provide the 40 hour paystubs underwriting was requesting, and he said yes. I requested that he talk to underwriting and make sure that they didn't come up with anything else that would be a problem. To his credit, this guy has been working with us for 2 months now, and he's got some hours invested in this. He said that he gets over 50 applications a week for loans, and he doesn't waste his time beating around the bush if someone isn't going to get the loan. So, at this point, i kindof have to trust him.

In the interest of time, it seems that the best way to proceed would be to talk to the current lender, and then go ahead and wait out the 4 weeks of 40 hour paychecks and then hit it again. Yeah, it's a delay, but still probably faster, less work, and cheaper than starting all over again with another lender.

If it REALLY comes down to it, (I'm NOT going to miss out on this house, dammit.) we'll "loan" the money to the current owner to catch up on his loan, which is about $4500, and then we'll rent the house for a few months until my credit rises the remaining 20 points, and then i'll run through everything myself, because i will not have the employment hour/history issues.

From everything i was told last night, it really seems that it's simply just a full-time/part-time issue.

Javelin wrote: I'd go talk to the current owner's lender. Maybe by having a pow-wow with you and the owner they can realize the savings from having him foreclose into profiting on your purchase.

That's what I was going to suggest. It will save the lender beaucoup. But, they don't always think the way you might think.

I'm not real high on mortgage brokers right now. My wife and I, with excellent credit and good income had the devil of a time buying a house for my daughter to live in. They had every excuse on earth why it was taking so long, but it was an eye opener.

93celicaGT2 wrote: If it REALLY comes down to it, (I'm NOT going to miss out on this house, dammit.) we'll "loan" the money to the current owner to catch up on his loan, which is about $4500, and then we'll rent the house for a few months until my credit rises the remaining 20 points, and then i'll run through everything myself, because i will not have the employment hour/history issues.

Uh-oh.

As someone who's screwed up financially more than once, this triggers a few red warning lights:

• You've fallen in love with the house. That might or might not be a good idea (there are other houses out there, y'know?) and while every house purchase seems to be complicated, in a situation like this with a bankruptcy or repo looming the complications might cost you a bunch of money with no visible outcome.
• If you are lending the money to the current owner, how do you ensure that it gets applied to the mortgage and what do you do if the deal falls through? You can pretty much kiss the money goodbye at this point and you'll become just another unsecured creditor. Worst case scenario would be you're out of $4.5k plus the rent when the sheriff evicts you...
• If there is a bankruptcy looming, the house might be pulled from underneath you and there might be issues if the current owner goes bankrupt shortly after selling the house if it's sold way under market value. Have you discussed this with a lawyer that you hire to ensure you're not going to get any sort of problem in that scenario?

You've got a whole lot of risk associated with this deal that might just eat up your savings and leave you with nothing. Been there, done that, pawned the T-shirt and I'd hate to see someone else fall into that trap.

I agree with Boxhead Tim. I would let it go.

Highly agreed. Giving $4,500 to the owner does no insure that the house will not be forclosed on.

I know you feel rushed but even if you miss buying the place before the forclosure, you can then still buy the place, maybe even cheaper at the sheriff's auction.

If i were to give the $4500 to the "seller" i should have clarified that it would have been in the form of partial downpayment up front to the lender. It was mentioned yesterday, and i'm still trying to unravel how that works. I worded what i meant terribly.

It may very well be a bad idea.

For the moment, i'm just sitting tight and trying to get ahold of the seller's lender.

I haven't really fallen in love with the house, it's just one of those deals that i'll kick myself later if i let it go, but i'm also not in any hurry to put myself in a terrible situation trying to get it. My "dream house" has never been an 85 year old ranch within city limits.

We (as in the girlfriend and i) are trying to buy a house.

That sounds like a bad idea...

Moving along!

Honestly, I'd pass if a bank is (or is about to be) involved on the existing property unless you have a really good real estate lawyer lined up. Better to wait a little bit, shore up your credit rating, figure out if you're going to get married, etc. I really wouldn't recommend buying a house with someone that you're not married to, as it can make things very messy if things go south. Not trying to put your relationship under the microscope (every one is different), but I'd just be careful.

I personally believe that the real estate market as a whole is going to get a lworse before it gets better, and there will be deals out there if you're patient.

HiTempguy wrote:

We (as in the girlfriend and i) are trying to buy a house.

That sounds like a bad idea... Moving along!

Yeah, I wouldn't get a dog with a girlfriend, much less a house!

Different strokes.

Osterkraut wrote:

HiTempguy wrote:

We (as in the girlfriend and i) are trying to buy a house.

That sounds like a bad idea... Moving along!

Yeah, I wouldn't get a dog with a girlfriend, much less a house! Different strokes.

I understand that viewpoint for sure. But keep in mind that only one person is actually going on the loan. So yes, IF something bad happens (and it won't), it'll be messy, but not much more messy than if a breakup happened while living in an apartment, and we've already lived together for going on 3 years now.

If it was both parties on the mortgage, then i am in complete agreeance with what you guys are saying.

Keep this in mind:

"The deal-of-the-century comes along about once a week."

Don't worry about loosing this one. You'll find one you like better eventually anyway. Statistically, you won't be in the house very long, either.

Here are the facts I hear: You want to buy a house because it's a good deal. You're having a hard time obtaining a loan. You've worked with one lender.

All the rest of the facts don't matter. It doesn't matter that there is time pressure due to looming foreclosure. While it is an ACTUAL motivating factor on your part...it's not a good one.

Talk to other banks...talk to them now. I don't like mortgage brokers, but they can get the job done. The hard part is finding one who will treat you right. A good mortgage guy, be it at a bank or a broker, can tell you after 5 minutes of conversation whether they can help you or not (that's a good way to know if they're a good mortgage guy).

One thing to keep in mind: It is (or at least used to be) very difficult to get a loan for $50,000. The value is too low, the lender doesn't want it. You may find that $70,000 is difficult.

What you need to do is talk to a local bank (talk to all the local banks)...preferably one that is actually OWNED locally, or at least in the region. Talk to the mortgage department and ask this question: Do you have mortgage loans that you hold in-house?

The ones that they hold in-house (IE, not sold immediately after closing) they have a lot more leeway with as far as terms and underwriting. Granted...it'll probably be and ARM...but if that's what you have to do, it will buy you three years of credit building and equity building.

I have done the above (in-house loan with a local bank) twice now. The first time, we went from initiating the request to closing in a little over a week (IIRC...it was quick, anyway).

What you've learned so far (and will learn more) is that borrowing money SUCKS. I hate it...

Something to think about that may help you get into trouble...er, I mean..borrow money: A cosigner can help (a benevolent elder, perhaps).

Keep in mind, it's the Bank's money...they're not going to loan it to you unless they're pretty darn sure they're going to get it back with interest. That's how they do business.

Hope that helps a bit,
Clem

I've got a little bit of time, house won't be forclosed on until late november.... i didn't think of the locally owned banks for whatever reason. I'll look into them when i get back, i appreciate that insight.

I'm cool with an ARM for the time being if that's what's gotta be done.

As for the buying with a girlfriend. I admit, I did it. Not so much that I bought it with her but bought it with plans to get married and for her to live there.
Well...5 years...rough for about 3 years and we never did marry. The split was okay but I was clear from the beginning.
I bought the house in only my name and I had a canceled check for every month that showed that I paid for the house. Our deal was that she paid the utilities each month.
I am not sure if this would hold up in court since I never had to go that route and things vary from state to state. When she left money got tight and I cut everything I could like cable. I was considering a roommate. This encouraged me to find a better job and all was good! I lived there for another 4 years after that.
Oh yeah, we had two dogs together as well. They stayed with me (and the house.)

10 years ago I bought a house with a girlfriend too. That wasn't the mistake...the mistake ended up being marrying her.

Ok...I keed... But seriously, getting divorced is MUCH easier when you don't ever get married.

So...yeah, you won't hear a bunch of preaching from me.

As long as you don't live in a "Community Property" state you'll be fine.

93celicaGT2 wrote: I understand that viewpoint for sure. But keep in mind that only one person is actually going on the loan. So yes, IF something bad happens (and it won't), it'll be messy, but not much more messy than if a breakup happened while living in an apartment, and we've already lived together for going on 3 years now. If it was both parties on the mortgage, then i am in complete agreeance with what you guys are saying.

I missed the part where you said who's name is on the mortgage, but it really doesn't matter.

As a business deal, this isn't so good.

Let's say it is her name...she's making a financial commitment that in some way is dependent on a guy whose credit sucks. If there are ever relationship issues, she'll either be carrying you financially, or tied to a house she can't leave with a lot of bad memories.

If it's your name, she's putting her credit on the line for a guy with all of the above issues.

Please don't take offense- I'm just looking at what you have said.

While I mean no offense, and I am definitely not preaching, you are not offering her a good business deal. She is risking everything- HER income, HER credit, HER job. What are you bringing to the table?

If I were you, I'd press the pause button. Show her how much you respect her by getting your own financial house in order so that the 2 of you can make a better team of it at a later date.

As others have said, there WILL be other deals.

No offense taken...

As for what i'm bringing to the table? I'm bringing the ability for her to live "on her own" and not have to move back in with her parents.

Credit score aside, i'm much more financially stable than she is. I've been the one paying the rent and bills for the last 3 years we've been together.

I understand the point, and it's valid. But quite honestly, it'll never really be the "team effort." She doesn't and won't make enough money for that.