Loan In Suspension PLZ ADVISE

Jessierjohns · ‎12-01-2012

So I worked on my credit for a few months, and I was pre-approved for a mortgage with Wells Fargo. My original down payment was $3000 on a 142k purchase plus renovation (FHA 203K). Loan was sent to underwriting, they collected a $631 appraisal fee from me and my loan was suspended pending more documents. The underwriter wanted my birth certificate, more bank statements, and rental payment history. The underwriter put my loan as a "Government based plus 2", on borderline denial, due to lack of funds. I have almost $7k for dp with seller originally paying 6% closing costs but rejected offer for 3% due to it being a shortsale. My loan originator is now pressuring me to ask family members to gift me the $4500 the uw is looking for. I am getting extremely stressed and pressured, am I able to back out of it with my earnest deposit and return of appraisal money? My file was sent UW while negotiations was still in the works with the short sale lender, so no appraisal was performed yet. Also, my loan officer never told me until today that my deposits needed to be documented. My boyfriend and I share an apartment, how am I going to document him giving me cash for bills? How am I suppose to document a refund for school? This is beginning to be a disaster.

germaine47 · ‎12-01-2012

The funds may be considered as gifts, go to your Loan Officer with help with documentation. I printed out my bankstatements and went line by line and wrote explanation besides each deposit my banker helped with that portion. Ask Loan officer if they can be explained by letter of explanation as gifted funds and what information the boyfreind may provide. With the school ask them for print out of your refund and provide that as statement of proof.

Good Luck

Fico September 2012; TU 681, EX 674, EQ 652
Fako October 2012: TU 706, EX 641,

Jessierjohns · ‎12-02-2012

Thanks for your reply germaine47, ill be sure to go line by line. Do you think I;m over reacting, or am I able to get through this? My family does not have an extra $4500.

StartingOver10 · ‎12-02-2012

The min required down payment (only down payment not closing costs) is 3.5% of the purchase price for an FHA loan - even if its the FHA 203k the minimum is 3.5%.

According to your post, you don't have the money for the down payment. You would have to have a minimum of $4970 plus your closing costs and pre-paid expenses.

FHA allows gift funds but not borrowed funds. Your "refund" from school is considered borrowed funds if you got the refund through a school loan.

If your boyfriend has the funds, then talk to your loan officer about a gift letter.

As to the added expenses for closing costs and pre-paid expenses, did your LO give you a GFE to show you how much additional you will need to bring to closing? It is different everywhere because of tax and insurance escrows but you can do a rough estimate of an additional 4% of the purchase price toward closing costs and pre-paid items. Your GFE will show you how much and break down the expenses for you.

Most short sale lenders/short sale sellers will only allow a maximum contribution of 3% from the seller - so if your closing costs are 4%, you need to find those additional funds. Not all short sale lenders will approve the deal and even if you get it approved, they may not accept your offered price (even if it was listed at that price). So you probably need to figure out how you can close even if you didn't get the seller's concession. If you need the seller's concession in order to close, then you may need to find another property. FHA will allow a seller to contribute up to 6% in a seller's concession according to their guidelines - so you might consider looking at homes that are not short sale offerings (nor bank owned).

I do a lot of short sales. Each negotiation is different depending upon the lender, the negotiator and the number of mortgages. Completing a short sale with a FHA 203k renovation loan (even the streamline version) is off the charts difficult. The short sale lenders generally will only allow 45 days to close an FHA loan and it usually takes about 60 to close a FHA 203k loan (at best) - so you already have to go back in for at least one extension from the short sale lender. The short sale lender is the one that can make or break your deal. I wish you all the luck and I hope you are able to resolve your issues. Remember, there is a home out there for you!

Jessierjohns · ‎12-02-2012

Thank you StartingOver10 for your thorough response. My originial GFE stated "Cash from Borrower $3XXX". It may be due to a $15,000 grant that I have from Wells Fargo's City Lift Program. Now that the concessions from the seller has changed, they are asking to see an additional $4500. I can not come up with that amount of money in a couple days, but maybe in 60. It's the holiday season and I am not going to be a burden on my family asking them to gift me money. I was originally working with a broker, but his companies were not on the list of approved lenders for the grant, so I decided to go with Wells. The seller has agreed to 3% concession for closing costs, with cost being 6% of sales price in Illinois. My refund for school was only to be used for stuff I needed for school, I had no intentions to include that in my mortgage stuff, but are they automatically including it? Can they give me time to save for the additional closing costs, and am I able to pull out so that I can continue to save? Originally I wasn't going to get a mortgage until 2013, but that CITY Lift grant only allows you 60 days to find one, and I didn't want to let that grant go (There isnt many assistance programs in Chicago.)

StartingOver10 · ‎12-02-2012

Your LO will tell you if they will approve you subject to your saving up the funds. But IME, they want to see the funds and the source of funds to get the loan approved through underwriting.

I didn't know you had a grant of $15k as well.

There are overlays for the grant - your LO will know how all of the criteria work for you. Be honest with your LO, tell them your plan to save funds and see what their process is given your specific situation. Remember, the LO is on your side too...

Jessierjohns · ‎12-02-2012

Thanks for your quick response Startingover10. According to my LO, the grant can only be used to bring the purchase price down, but not to assist with down payment or closing costs. I went to a workshop after I received the grant, and there were people saying that they were using it for their closing costs, so I guess it depends on the Lender. My LO stated that FHA does not allow the grant to be used toward closing, and the only way I could use it toward closing costs would be to go conventional. I qualify credit score wise for conventional, but not in other ways according to LO. IDK I am confused.

About my LO..He was great in the beginning, but now that it is getting tough he's just beginning to tell me things I feel like should have been said in the beginning. He knew how much money I had saved because I told him the exact amount. I also told him that my family does not have much money, I'm sorry I don't have any wealthy family members and my mom and father is tight. If there was concern with reserves, I would have continued to save not embark on the mortgage journey if there was some uncertainty on their part with funds. Also, he should have told me about proper documentation of deposits here on out, he did not disclose that to me so I am losing faith with his integrity.

StartingOver10 · ‎12-02-2012

It sounds like your LO is not all that familiar with the grant program you are using.

I am in Fl so the grant programs may be a little different, but from my experience the grant programs ARE used for down payment and closing cost assistance.

There are usually income requirements/restrictions and you usually have to take a first time homebuyers course. Some of the grant programs are restricted to certain zip codes (for example, if the grant is issued by a City they want the property to actually be in that City..LOL). Naturally, I am not familiar with your specific program so speak to the people that are handing the grant to get accurate info.

Working with a grant program can be difficult for the lender as it has to be coordinated for the grant process. Maybe he/she hasn't done one and that is why they can't answer your questions all that well.

You may want to get back in touch with the grant program and see which lenders and LO's they work with on a regular basis because they will be familiar with the process.

As to reserves, FHA doesn't have a reserve requirement but conventional loans do. The underwriting criteria for FHA loans and Conventional loans is completely different - more than just down payment and score requirements.

Jessierjohns · ‎12-03-2012

Hi StartingOver10, again I appreciate your replies. My LO is not fully educated on that grant program, which is funny because its a Wells Fargo grant. I have taken the first time home buyers class, and the grant is restricted to Chicago only. When I attended that class that where others were stating how their LO was allowing them to use the grant for their closing costs, but mine is not. Also speaking on FHA and Conventional, after reading the FHA guidelines I feel like the UW is holding my loan to a conventional standard in her responses on the things that I need. I just emailed my LO asking to pull out, they're asking for too much.

StartingOver10 · ‎12-03-2012

@Jessierjohns wrote:
Hi StartingOver10, again I appreciate your replies. My LO is not fully educated on that grant program, which is funny because its a Wells Fargo grant. I have taken the first time home buyers class, and the grant is restricted to Chicago only. When I attended that class that where others were stating how their LO was allowing them to use the grant for their closing costs, but mine is not. Also speaking on FHA and Conventional, after reading the FHA guidelines I feel like the UW is holding my loan to a conventional standard in her responses on the things that I need. I just emailed my LO asking to pull out, they're asking for too much.

As a Realtor, I run into this all the time, especially with the "big box banks" where they just haven't trained their LO's properly so don't feel alone. To me it seems absurd to have a program and not train the LO's but it is much more common than you would imagine. If you are still up for it, get the name of one of the LO's from someone in the class where they are allowed to use the funds for DP and CC's. that way you at least have a good chance of getting the right info! Good luck in your decision.