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New Member
royalwiz
Posts: 3
Registered: ‎04-12-2012
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Frustration in trying to close on a fha loan end of April

Hi All,

 

I've been working with a mortgage broker since the end of February. At that time my middle score was 636. She wanted me to get to a 640 for better rates but said she'd get me closed with a 636 through FHA. I was pre-approved by a lender who she says told her I could close with a 636.We had the appraisal and inspection done in March.  However due to high DTI, she had me payoff my car loan that was going to be paid off in July 2012 anyway.

 

I paid off the car loan and she anticipated that my score would go up to 640 so she held the file to submit it to the lender in April. It went up to a 639.  Now the lender told her they would not approve the loan due to payment shock. I pay $625 in rent and the mortgage would be $1380. She claims to be surprised and shocked that the underwriter did not go to bat for me. She said the bank changed its guidelines effective April 1st but that the underwriter did not inform her of the change. She claims she would have never sent my loan to that bank if she had known that the guidelines would have changed and they would deny me for payment shock.

 

 I feel like I'm getting the run around. My contract is set to close by the end of the month. To avoid a denial, she withdrew my application with that lender and submitted it to another lender that claims that they can do it and use the appraisal. All the online research I've found seems to show that lenders usually do not deny solely based on payment shock, but that's the only explanantion she's giving me. I'm becoming skeptic of the loan going through. Just wanted to know anyone's thoughts on whether I'm getting the run around and my chances of closing. Has anyone had a similar experience?

 

thanks,

Regular Contributor
wanttomove
Posts: 181
Registered: ‎03-25-2011
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Re: Frustration in trying to close on a fha loan end of April

Each bank has their own overlay guidelines and that may just be one of their specific rules. If she is willing to submit your info to another bank I say give it a try.

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JenniferinFL
Posts: 408
Registered: ‎03-16-2012
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Re: Frustration in trying to close on a fha loan end of April

[ Edited ]

My husband has a 730 and we've heard every excuse in the book. We've been getting the runaround for months now.

 

His file should just clear automatic underwriting, but it never does.

 

Lesson I've learned: Never work with a mortgage broker. Yes, you could find a good one, but most are lying car salesman. Work directly with a lender that services the type of loan you are going for. We've made that mistake twice now, though this time the broker lied and said they were a direct lender. I also think the scummier the broker the more likely that none of their files make it through automatic underwriting. My husbands really should have gone right through, instead it got flagged, I'm thinking because of the broker who submitted it.

 

More than likely the lender she submitted it to just doesn't accept scores under 640 and she doesn't want to tell you that was the only reason. Some lenders have 640 as the cutoff, but will consider for a strong file otherwise. Sub 640 plus payment shock = denial.

 

We're now supposed to close end of April too..  I'll believe it when I see it.. lol

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greekjim
Posts: 93
Registered: ‎07-29-2007
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Re: Frustration in trying to close on a fha loan end of April

I got a score of 753 Equifax, trying to get an FHA mortgage through a broker and it is such a pain. I have been in limbo for 2 months now. Suppose to close next Friday and doubt it is going to happeen.

EQ- 727 5/12/10
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Senior Contributor
drkaje
Posts: 3,492
Registered: ‎07-25-2008
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Re: Frustration in trying to close on a fha loan end of April

I'd never heard the term "Payment shock" before.

 

My guess is that some can get much better rates with a broker but the process may not always be smooth.


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How2increase
Posts: 200
Registered: ‎03-02-2012
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Re: Frustration in trying to close on a fha loan end of April

That's so frustrating urghhhh well I hope the new lender will get you approved with no problem. I'm not sure what a "payment shock" is could you please explain that. My mortgage broker wants us to pay off our car loan also.
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Senior Contributor
drkaje
Posts: 3,492
Registered: ‎07-25-2008
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Re: Frustration in trying to close on a fha loan end of April

I looked it up and "Payment shock" seems to refer to situations where your obligations increase by too much, e.g., 200%, or when interest rates change drastically with an ARM.

 

The theory makes sense but I don't know why the oh-so-sensitive "How are you gonna afford this?!" topic wouldn't come up sooner in discussions with a broker. I'd also argue that a good broker would work hard at matching borrowers to lenders suited to their situations and also let people know that credit scores are the only the beginning. House buying is a very emotional process and brokers would likely lose too much in commissions if they were the ones saying no instead of banks. :smileyhappy:

 

I remember speaking with USAA on this. They basically have a formula and don't want to help people become "house poor". They use scores but DTI, student loans, expenses, income, etc... are factored in as well.


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royalwiz
Posts: 3
Registered: ‎04-12-2012
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Re: Frustration in trying to close on a fha loan end of April

U r correct about payment shock. They were going to deny the loan because I would be paying more than double what I pay in rent. The philosophy is that since I have not been accustomed to paying so much per month, I may stop paying.

 

When I did the research on payment shock, I only found the term used for homebuyers who were underwater on their mortgage due to ARM and balloon payments that sent them into foreclosure. I can't believe banks are now trying to use individual homeowner scenarios with new home buyers who are not in an ARM, balloon payment or underwater loan. I would argue that payment shock will not apply with a 30 yr fixed mortgage at 4.25%.

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drkaje
Posts: 3,492
Registered: ‎07-25-2008
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Re: Frustration in trying to close on a fha loan end of April


royalwiz wrote:

U r correct about payment shock. They were going to deny the loan because I would be paying more than double what I pay in rent. The philosophy is that since I have not been accustomed to paying so much per month, I may stop paying.

 

When I did the research on payment shock, I only found the term used for homebuyers who were underwater on their mortgage due to ARM and balloon payments that sent them into foreclosure. I can't believe banks are now trying to use individual homeowner scenarios with new home buyers who are not in an ARM, balloon payment or underwater loan. I would argue that payment shock will not apply with a 30 yr fixed mortgage at 4.25%.


Aside from doubling the monthly payment, there's all the costs associated with home ownership to consider. Even at 0%, doubling a monthly expense would give many people, already struggling with their cash/credit, difficulty.

 

Hope things work out!


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Phitor
Posts: 120
Registered: ‎07-01-2011
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Re: Frustration in trying to close on a fha loan end of April


drkaje wrote:

The theory makes sense but I don't know why the oh-so-sensitive "How are you gonna afford this?!" topic wouldn't come up sooner in discussions with a broker.



Why should it have to come up at all? Isn't that what front and back end DTIs are for? Any applicable flags should have been raised at that point...


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