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Frustrated with LO

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Anonymous
Not applicable

Frustrated with LO

So when is it time to switch mortgage companies? 

We received a preapproval after we submitted bank accounts, tax docs, and pay stubs. Use that preapproval to make an offer on a home. Because we are going USDA, time is of the essence.  Anyways, we submitted the copy of the earnest money check and purchase agreement last Tuesday.  

 

First Issue:

Today, we receive a call stating that my husband's student loans are messing over our DTI. He has $60k in debt. All except $8k are deferred until 2019 bc he is still in school. LO is telling us that our credit report is reporting his monthly payment as $120 on at least 8 separately listed student loans. 

 

What can we do about his student loans. We applied for debt to income repayment but we don't know if the letter would be back in time as Navient said it will be about 3 weeks before the application can be processed. ugh

 

Second Issue:

 

My husband's income is $1411 a month and mine is $4055.  his currently monthly obligations are $466 and mine are $330.00. This figure does not include his student loans. Combined: $5466 monthly income and $796.00. 

 

We are trying to qualify for $155k.  We are looking at $180 a month for taxes and insurance.  About 

 

We have about 6 credit cards and store credit cards with zero balance at the time of applying they had small balances. LO is telling us that we have to close them out to have them not counted in our debt ratio.  Is this true?

 

What should we do? I've frustrated because our Student loan info was on the credit report before the preapproval was issued. I just want to give up and start over. Any advice?

 

Message 1 of 10
9 REPLIES 9
redbeard
Frequent Contributor

Re: Frustrated with LO

Switching mortgage companies isn't going to solve the DTI issue.  It will just delay things.

 

Ask your loan officer what changed between the pre-approval and now.  He will probably tell you, though likely he will tell you what you told us, its pending the Navient decision.  Yes, if this is the case, he should have been more articulate about it.

 

Dan

 

Just trying to get my scores to rise from the dead......

Wait.... I think I just heard a heartbeat!

Message 2 of 10
Anonymous
Not applicable

Re: Frustrated with LO

Thanks Dan. What about cancelling all of our cards?  wouldn't that sink our credit score?

Message 3 of 10
StartingOver10
Moderator Emerita

Re: Frustrated with LO


@Anonymous wrote:

Thanks Dan. What about cancelling all of our cards?  wouldn't that sink our credit score?


Yes.  I don't think that is the answer. Let me see if Shane or Dallas can answer your question.

Message 4 of 10
twall06
Frequent Contributor

Re: Frustrated with LO

I am under contract to buy my first house. I got my pre approval through one lender but after being under contract he could not give me what I wanted. I asked around and switched to a lender that could give me what I wanted and was not nearly as pushy as the first one. I called around and got quotes telling the lenders what my scores where from the first lender then picked the one I wanted to apply with.

 Depending where you are located you could just apply for the loan in your name only. My wife is not on our loan because her credit is not quite where it needs to be . I would not close my cards without seeing what other lenders say.

Message 5 of 10
Anonymous
Not applicable

Re: Frustrated with LO

We are Louisiana. It's a community property state so I'm not sure if applying for the mortgage in my name only is an option. :/

Message 6 of 10
ShanetheMortgageMan
Super Contributor

Re: Frustrated with LO

Student loans (deferred or not) always have their payments included in the debt ratio for a USDA mortgage.  VA & FHA are the only two types of financing that will exclude them if they are deferred for at least 12 months from the closing date, conventional & USDA will always include them.

 

With  student loans USDA will either use the fixed payment, or if that amount isn't available then they'll use 1% of the loan balance as the monthly payment. Income Based Repayment (IBR) plans, graduated plans, adjustable rates, interest only and deferred plans are examples of repayment plans that will require a calculation of 1% of the loan as these plan types do not represent a fixed payment.

 

USDA doesn't require revolving accounts to be closed in order to exclude their payments from the debt ratio, however some lenders may have overlays which require them to be.

 

With USDA (FHA & VA too) applying without your husband wouldn't make a difference as Louisiana is a community property state, and as such all of his debts would be included in what you could qualify for even if you just apply on your own.

 

The debt ratio looks to be about 32%'ish without the student loan payments.  If you have to add $960/mo in student loan payments then the debt ratio goes up to nearly 50% which won't qualify for USDA.  If the student loan payments are only $500/mo then that would put your debt ratio about 41% and shouldn't have any problem qualifying.

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Message 7 of 10
Anonymous
Not applicable

Re: Frustrated with LO


@ShanetheMortgageMan wrote:

Student loans (deferred or not) always have their payments included in the debt ratio for a USDA mortgage.  VA & FHA are the only two types of financing that will exclude them if they are deferred for at least 12 months from the closing date, conventional & USDA will always include them.

 

With  student loans USDA will either use the fixed payment, or if that amount isn't available then they'll use 1% of the loan balance as the monthly payment. Income Based Repayment (IBR) plans, graduated plans, adjustable rates, interest only and deferred plans are examples of repayment plans that will require a calculation of 1% of the loan as these plan types do not represent a fixed payment.

 

USDA doesn't require revolving accounts to be closed in order to exclude their payments from the debt ratio, however some lenders may have overlays which require them to be.

 

With USDA (FHA & VA too) applying without your husband wouldn't make a difference as Louisiana is a community property state, and as such all of his debts would be included in what you could qualify for even if you just apply on your own.

 

The debt ratio looks to be about 32%'ish without the student loan payments.  If you have to add $960/mo in student loan payments then the debt ratio goes up to nearly 50% which won't qualify for USDA.  If the student loan payments are only $500/mo then that would put your debt ratio about 41% and shouldn't have any problem qualifying.


Thank you! We have switched lenders and we are going FHA due to student loans. New LO looked at credit report and said we should have never been preapproved for USDA for exact reasons you stated. All but $12k of his loans are deferred until 2019. At least we are still getting our house. 

Message 8 of 10
madmann26
Valued Contributor

Re: Frustrated with LO

I've got 17 open CC accounts. 2 have a balance.

 

I was never asked to close any accounts and we were given the clear to close yesterday.

 

While closing accounts may help your DTI, it will most likely hurt since it will push your utilization up. Think about it. If you have 100k in available credit (10 10k cards) and 20k in used credit, your utilization is 20%.

 

Close 4 cards, you remove 40k from the 100k, giving you now 60k in available credit. But your used credit is still 20k and now your utilization is 33.3%.

 

Make sense?

Current FICO 9 Scores



Message 9 of 10
Anonymous
Not applicable

Re: Frustrated with LO

New lender didnt ask us to close any accounts. Yah!
Message 10 of 10
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