FHA Loan Received Refer-Eligible - How to Get to Approve Eligible

[Anonymous]

Hey everyone! So I'm in the process of trying to get financing for a piece of property that I'm already set on. It's been a long struggle already and I've hit another hurdle.

I first applied to my lender for an FHA backed loan about a month ago, submitted all of the necessesary documents, etc. At the time, my middle credit score was right at 600. I had 5 credit cards each around 50% or so, 4 student loans in deferrment, and 3 collections to a total of about $1800.

The AUS returned a Refer Eligible result, and my loan officer determined that I would need to sell my current property as a condition on approval. Also, because of the 40% DTI cap on a manually underwritten loan, I could only get approved for $190K. He recommended I begin negotiations with the sellers.

After a few back and forth offers, we settled on $206k, and they cover closing costs, as well as several upgrades to the septic and well necessesary to be in compliance with FHA regulations. Obviously $206k is over the $190k I was pre-qualified for.

So now the question is, what can I do to pass the AUS checks? A $206k loan will put me under the 43% threshold for FHA under a 630 credit score.

As of this past week, I have paid off all of my credit cards to zero, have paid off all but one of my collections which is medical and exempt from FHA DTI calculations, and my 4 student loans have been paid in full and reconsolidated into 2 loans. Obviously I will be submitting proof of the new balances to my lender for credit supplements, but he seems to believe this will still not be enough to pass the AUS checks. I do have a few old disputes still hanging on my credit reports, would clearing these help me pass? Or is there something else I could to to help?

[NC_Mtg_Loaner]

Get your LO the paperwork showing the 'paying down' of the credit cards to their current level.   

Reducing your utilization ratios to below 10% from the current 50%+ range is optimal for a score improvement based upon the information you've provided and my experience with RAPID RESCORE results.   Although I would be concerned about having consolidated those student loans, but the RAPID RESCORE process should result in boosting two of your 3 scores above 620 which really ought to get you the Approve/Eligible you are looking to obtain. 

[me12345]

So many questions...

Why was the AUS showing "Refer" in the fist place?

What "Property"?

What is the disposition of the property now?

What is your DTI after paying everything off?

What is your FICO score after paying everything off?

What did your LO say about the disputes on the report?

Has the LO run the AUS again?

Have you talked to your LO about any of this?

You should be fine now, but without knowing what the "Refer" issues were it hard to say.

Thanks,

[Anonymous]

Why was the AUS showing "Refer" in the first place?

I do not know specifically WHY I got a Refer originally. The LO i'm working with has been less than helpful, and just said my only option is a manual underwrite.

What "Property"?

The property is a 32 acre parcel with a single-family house. Nothing particularly unusual. It's MLS #: 17077260 if you want to take a look.

What is the disposition of the property now?

It is privately owned with no liens.

What is your DTI after paying everything off?

Just over 14%.

What is your FICO score after paying everything off?

Not sure yet, the reports haven't updated and frankly I don't have time. The sellers have accepted our offer, so I was hoping to push through a rescore to get the show on the road.

What did your LO say about the disputes on the report?

He hasn't mentioned them, and basically refuses to entertain the possibility of ever passing the AUS.

Has the LO run the AUS again?

No

Have you talked to your LO about any of this?

Multiple times. I was essentially told there is no way to avoid the manual underwrite.

[Anonymous]

Another thought I just had;

The two collections that I just paid, the only thing the collections agencies would give me was a reference number for my payment, but no receipt. How am I suppose to request a rescore without any other proof of them being paid in full?

Thanks

[VALoanMaster]

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@Anonymous wrote:

Hey everyone! So I'm in the process of trying to get financing for a piece of property that I'm already set on. It's been a long struggle already and I've hit another hurdle.

I first applied to my lender for an FHA backed loan about a month ago, submitted all of the necessesary documents, etc. At the time, my middle credit score was right at 600. I had 5 credit cards each around 50% or so, 4 student loans in deferrment, and 3 collections to a total of about $1800.

The AUS returned a Refer Eligible result, and my loan officer determined that I would need to sell my current property as a condition on approval. Also, because of the 40% DTI cap on a manually underwritten loan, I could only get approved for $190K. He recommended I begin negotiations with the sellers.

After a few back and forth offers, we settled on $206k, and they cover closing costs, as well as several upgrades to the septic and well necessesary to be in compliance with FHA regulations. Obviously $206k is over the $190k I was pre-qualified for.

So now the question is, what can I do to pass the AUS checks? A $206k loan will put me under the 43% threshold for FHA under a 630 credit score.

As of this past week, I have paid off all of my credit cards to zero, have paid off all but one of my collections which is medical and exempt from FHA DTI calculations, and my 4 student loans have been paid in full and reconsolidated into 2 loans. Obviously I will be submitting proof of the new balances to my lender for credit supplements, but he seems to believe this will still not be enough to pass the AUS checks. I do have a few old disputes still hanging on my credit reports, would clearing these help me pass? Or is there something else I could to to help?

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Hi Gokussj5okazu,

Unfortunately a lot of loan officers are order takers & not problem solvers.

In your scenario, the difference in the monthly payment between 206K & 190K is about $86.00.

I brings this up because you should be able to "make up" the $86 difference now that all of your credit cards are paid off & the student loans have been consolidated. 

As far as getting your file approved through an AUS, there are multiple "tricks" we can use to either get an approval or at the very least figure out where the issue is. For example: I will increase your income or lower the debt to see if the ratios are the problem or I'll add more money to your reserves to see if that fixes the problem. If these things fail to generate an Approve/Eligible decision from the AUS then we know it's something in the credit history that's causing the problem. There are other tricks as well but my main point is I will do everything I can to get a loan approved through an AUS.

What type of mortgage do you have on your current home? Is it FHA as well? This maybe what's driving the requirement to sell your current home first or it could be part of the DTI issue.

If I were your loan officer, I would do a rapid re-score on all of the credit cards ASAP if for no other reason then the higher score will improve the interest rate which will also help the DTI. Credit supplements won't help with the AUS decision.

You may want to try another lender.

[Anonymous]

Thanks for the suggestions.

Unfortunately my lender refuses to do a rapid rescore, and instead suggested I rent out my current property. BUT, they still want to push for a manual underwrite, which required reserves I don't have. So again obviously, I need to get through the AUS.

My current property has no mortgage, I own it free and clear.

I am looking into another lender, but the sellers just accepted our offer so now we have a purchase contract, and need to move fast. It's also difficult because I need to use Missouri's cash assistance program, and only a few lenders participate in this.

[VALoanMaster]

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@Anonymous wrote:

Thanks for the suggestions.

Unfortunately my lender refuses to do a rapid rescore, and instead suggested I rent out my current property. BUT, they still want to push for a manual underwrite, which required reserves I don't have. So again obviously, I need to get through the AUS.

My current property has no mortgage, I own it free and clear.

I am looking into another lender, but the sellers just accepted our offer so now we have a purchase contract, and need to move fast. It's also difficult because I need to use Missouri's cash assistance program, and only a few lenders participate in this.

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I'm 99.9999% sure that you do not qualify for down payment assistance because you already own a home.

[Anonymous]

I actually already have pre-approval from the state for the cash assistance. It's called the Next Step program, and does apply to current homeowners. 4% total CAL.