Help..I feel Deflated because of my Underwriter!

[UpAndComing74]

Please anyone with any advice.  I have been utilizing myfico forums for advice on building and fixing my credit.  I finally got my ficos up enough to obtain an AUTOMATIC TIER 2 approovla with B of A.  My loan officer, my loan processor, and my realtor are all happy for me.  This is my fist home and it is being built set to be finished 5/30/2010.  BUT, I get notice today that the underwriter has DENIED the loan, not because of credit, but she feels that I live outside of my means.  WHAT???  My last two months bank statements show a payday loan, that I used to pay off collections.  I have 3 NSF's out of miscalculations. Another reason is that she thinks that my rent is not paid out of my account cause she doenst see it.  It's there!!!  She's wrong, wrong, wrong!!! What can I do?  SHould I seek another lender? How can she deny it based on her opinion that I live outside my means.  36 year old male I am...ready to CRY!!!

[Anonymous]

Maybe write a letter for the file explaining the issues that she is questioning to add to the file.   Include any additional docs you have to support your situation.  We're having to do this to explain an overdraft from December and January when we had to pay a $2200 car repair bill.

[Homebuyer24]

I think if you explain the NSF then they can forgive those--and explain why you had a payday loan and how your rent is being taken from your bank account.  I had 3 NSF hit my bank account in late February and no one has mentioned any of this in terms of my loan.  It's tough because I have 4 bank accounts with Chase--which took over Wamu and they sent me new debit cards at different intervals (which is confusing) which I didn't switch over at the same time so I now have two debit cards that have been deactivated because they're old Wamu cards and I don't know where the new ones are so I got confused on which card was on which account etc . . .  anyway, I called Chase and they refunded me back 2.5 NSF fees--I had setup my old Wamu debit cards with stickers on them to differentiate but not with the Chase so it has been a mess. 

[UpAndComing74]

Thanks guys!!  I plan on pouring out my heart to explain my cause and sending it to them.   I hope the FHA God's shine on me.  

[ShanetheMortgageMan]

Automated approval just don't mean what they used to.  You got good advice, address each concern the underwriter has in a nice, polite letter (don't be too emotional, underwriters confuse that with being irrational) and provide supporting documentation (such as cancelled checks for rent, account activity statement showing the balance was positive when the NSF's hit, etc.).

[Anonymous]

The bottom line is that the combination of a payday loan and 3 NSF in roughly a month's time immediately preceeding a home purchase is very strong reason for an UW to deny.  Using a payday loan due to an emergency, or getting a NSF due to an emergency or a mistake may be explained.  But, getting a payday loan to pay off collections accounts shows a lack of planning.  This is even more true if paying the collections was a condition of the loan or was recommended.  You can write letters, but you are going to need a good (and fully documentable/verifiable) reason anf I doubt paying off a collection will cut it.  Same with the NSF.  Bottom line is that the UW feels that if you were running low enough on funds that  you needed a payday loan to pay a small debt, and NSF on your account 3 times in a month, that either your money management skills are poor, or you are living beyond your means. 

[MattH]

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@Anonymous wrote:

The bottom line is that the combination of a payday loan and 3 NSF in roughly a month's time immediately preceeding a home purchase is very strong reason for an UW to deny.  Using a payday loan due to an emergency, or getting a NSF due to an emergency or a mistake may be explained.  But, getting a payday loan to pay off collections accounts shows a lack of planning.  This is even more true if paying the collections was a condition of the loan or was recommended.  You can write letters, but you are going to need a good (and fully documentable/verifiable) reason anf I doubt paying off a collection will cut it.  Same with the NSF.  Bottom line is that the UW feels that if you were running low enough on funds that  you needed a payday loan to pay a small debt, and NSF on your account 3 times in a month, that either your money management skills are poor, or you are living beyond your means. 

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Actually I would agree with this underwriter: original poster is probably not ready for home ownership and should do some hard thinking with the help of a trustworthy fee-only financial advisor. My wife and I put nearly all our cash into the downpayment when we bought our current residence in 2002 (because I wanted to make sure there was no risk of us being upside down on the mortgage should the market drop). Most of the rest of our cash went to things like furniture, so when the A/C compressor died we had to take out a loan for it. We paid that loan off as quickly as possible then started saving, so when the furnace died we didn't have to borrow. Now we have enough in our emergency fund that we could pay off the mortgage right now if we chose, but that would deplete our emergency funds so we choose not to pay off the mortgage. Fortunately for us, when cash was tight we had excellent credit so had no difficulty getting that loan for the A/C compressor, but that experience scared us into saving and put us into a good place when the recession came.

[kai_1103]

I feel for you!  This is a tough one, and hopefully you can take a step back and look honestly at the decisions.  Did you know most payday loans run around 200-300% APR?  Most states cap the rate around 300%.  An underwriter knows this, and knows a payday loan is not a sound financial decision unless there were dire circumstances, and there weren't. 

This is a great opportunity for you to learn the importance of planning and become a better planner, financially speaking.

Take everyone's advice about the letters and vow to continue improving on managing your finances, including keeping a cushion in your account to avoid NSF fees and payday loans.

Good luck!!!

[Mark_in_Pasadena]

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@MattH wrote:

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@Anonymous wrote:

The bottom line is that the combination of a payday loan and 3 NSF in roughly a month's time immediately preceeding a home purchase is very strong reason for an UW to deny.  Using a payday loan due to an emergency, or getting a NSF due to an emergency or a mistake may be explained.  But, getting a payday loan to pay off collections accounts shows a lack of planning.  This is even more true if paying the collections was a condition of the loan or was recommended.  You can write letters, but you are going to need a good (and fully documentable/verifiable) reason anf I doubt paying off a collection will cut it.  Same with the NSF.  Bottom line is that the UW feels that if you were running low enough on funds that  you needed a payday loan to pay a small debt, and NSF on your account 3 times in a month, that either your money management skills are poor, or you are living beyond your means. 

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Actually I would agree with this underwriter: original poster is probably not ready for home ownership and should do some hard thinking with the help of a trustworthy fee-only financial advisor. My wife and I put nearly all our cash into the downpayment when we bought our current residence in 2002 (because I wanted to make sure there was no risk of us being upside down on the mortgage should the market drop). Most of the rest of our cash went to things like furniture, so when the A/C compressor died we had to take out a loan for it. We paid that loan off as quickly as possible then started saving, so when the furnace died we didn't have to borrow. Now we have enough in our emergency fund that we could pay off the mortgage right now if we chose, but that would deplete our emergency funds so we choose not to pay off the mortgage. Fortunately for us, when cash was tight we had excellent credit so had no difficulty getting that loan for the A/C compressor, but that experience scared us into saving and put us into a good place when the recession came.

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+1

Be rational...would you lend someone who just had 3 NSFs and got a payday loan in the same month even $1,000?  I doubt it.  So why would you expect a bank to lend you hundreds of thousands?  The #1 predictor of future behavior is past behavior.  Your past behavior wasn't exemplary for the 2 little months that you knew your bank statements would be under the microscope, why would it be any better when you're not?