Loan Qualification

[HanginInThere]

I went to the local credit union in NC Friday to talk about their loan programs.  The LO was very helpful, and told me that my physical score doesn't matter, however, since I am only 1 year from 120 day lates, they may question it.  I explained my situation, and told him (the truth) that I was under the impression the credit cards were going to be on a colsidation loan, although the attorny office that did this, was really ignoring the debt, waiting 6 months, then settling with the creditor.  He talked to his superviser, and he admitted that he could really see this happening, and it may can be over looked if I can provide information and proof that during this time, I was paying something.  Well, that's no problem, my bank statement does show 4 or 5 months worth of withdrawls straight to them. 

Here is my big problem.  He stated that a lot of my income that would knock down the 40% debt/income requirement down, wouldn't be allowed.  I have 2 years worth of check stubs from a doctors office for doing computer work there, and file it on my taxes as "other income".  Well, he said since I didnt' do a 1099 with that, for 2 consecutive years, I can not claim it.  There is one loan on my report for my girlfriends car, and he said he couldn't use this, likely, although may can get by with it since her check is automatically deposited into my account.  Of course, he just wants to see that this is all true.  Since he will not take the monthly pay from this doctors office, and anything from my girlfriend (rent) into consideration, as well as a $50 per week "travel" check I get (it's not claimed on taxes, I don't think), then my debt / income is 51%.  He may can use the travel pay as it's reflected on my pay stubs, and that bumps it to 47%, and if he would take my girlfriends car payment, it's 44%.  If he were to use the doctors office, it would drop it to roughly 40%, and then 38% for "rent" from my girlfriend.  Well, I know that my girlfriend can leave me at anytime, although obviously with the pay from the doctors office, I can compensate.

Here is my problem.  The ONLY 3 loans I have are student loans ($427), they don't go into repayment until 2012, although I was told he has to add the 427 to  my ratio, even if you take into acct possible raises...my car payment, and my gf's car payment.  None of these loans I could pay off in 6 months.  My girlfriends car is paid off in about 2 years, which may help, since my student loans start then.  Currently, I pay $300 MORE per month renting, and have money going into savings, so obviously I can make the mortgage payment.

My ultimate question: 

1.  He said to submit as much info, and they can try their best to see what happens.  He told me that giving all the information,t hey would not flat out deny me because of my credit, although that's before my debt/income...If he see's that and will not use my extra pay into consideration, then he will likely deny me (better chance anyway).  Should I try anyway?

2.  Should I seek out a LO at a regular bank for a FHA loan?  What is the rule with the 3 120 lates about 13 months ago?  My debt / income will stay the same, and they want you at 40% as well....so will I have any luck with this route?

[Anonymous]

Just an opinion but maybe it's not the right time to buy a house. Those are a lot of obstacles to overcome and most lenders are really strict right now with the way the market is. DTI is a big one.

I'm pretty sure they usually are only looking at lates in the last 12 months but maybe because they're 120 day it's a bigger problem.

Personally, i just wouldn't risk it and get denied. I'd want to strengthen my file first. Put more time between you and those lates, pay down as much as possible, and save as much as possible.

[Anonymous]

they want to see no lates in 12 months, but they also don't want to see a pattern of lates within 24.  The consolidation will nto matter because you would have been recieving statements/collections calls in the meantime and it would have been your responsibility to take care of it either way.

Travel pay is re-imbursement for expenses so is not counted as added income

Someon giving you money for a expense that you are liable for is also not generally allowable as income because they could stop tommorrow with no liability to themselves.

Student loans in deferrment will still be counted into DTI so that fact that the car loan will be paid off prior to them being in repayment will mean nothing to the UW as deferrments are always conditional and can be rescinded by the bank/lending agency at any time.

Not trying to be harsh but realistic.  The 3 120 day lates is enough to disqualify you generally.  Add that to high DTI and the non 1099 income and it will be a hard push to get approval.  With some high fico scores (not likely with 3 120 day lates in recent past) and some high reserves it may be possible, but it is a very long shot. 

[HanginInThere]

Mickie,

My travel pay is not reimbursement, as I do not travel between sites or anything for that matter.  I do not have to do any documentation of millage to get this money, and it is constant reguardless to how much I drive, even if I do not at all (which in most cases, I do not).  

I do understand about the debt i'm liable for however, there is 1 problem.  Only having 3 debts, I can only pay off 1 vehicle, changing my DTI slightly.  It would be impossible to pay student loans off within 5 years of now, and it would be almost impossible to pay my car off within 4 years.  All that factored in, reguardless to if I pay things off, save, or anything for that matter, my DTI looks a lot higher physically than it is.  I have right at $800 per month income that I can't claim, and the problem I am having is this income has been 100% constant for 2 years, every month.  Again, it makes my DTI look bad, although it's not, but your'e right, lenders don't really care about that.

The credit union has openly stated they will look the other way on my 120's, although I doubt they would like the other way for DTI, and the 120's.  I asked him if I should work on something specific, or apply, and he told me that he would feel comfortable, because of my situation, to apply - however, that's before the DTI came into play.  I've not talked to him since.

As for the creditors calling me - that is not the case.  When you sign up for a loan consildation,t hey do not call you.  They SHOULD but where I had the problem, is the attorny called them all and changed the phone number and address to someone in AZ (and that does show up on my credit report).  I have never been to AZ, so I never recieved phone calls, nor letters.  It wasn't until I saw my credit report that something was fishy, not to mention they changed names 2 times in 3 months.  I told the LO that, and he told me that that's normally how it works, so just show proof that i was paying SOMETHING during that time to the attorny's office, and that would be enough proof that I was not trying to just not pay.  

But I guess, overall, what i'm getting at - it's not the thing of "is it time to apply" or not....basically because it doesn't matter if I do it now, or 5 years from now - I'm not going to have much of it paid off.  My payment for student loans will remain constant for at least 10 years.  

[Anonymous]

From what I understand, whether or not you have to track expenses or not, pays such as travel pay, car allowances, home office allowances, etc are considered reimbursement for income purposes. 

I also understand having income you can't count.  unfortunately there is not much you can do to change that.  It is what it is.  In this financial/mortgage market they are giving no leeway on proveable income.

That is horrible that yo got taken on the debt consolidation thing but it is unlikely they will be forgiving on it.  Again, it is up to you to follow through that arrangements are being follwoed through.  I do think the 120 day lates would probably be OK assuming you have some reserves and reasonable DTI, but I doubt anyone is going to clear those lates and a high DTI unless you have tons of reserves.

[Anonymous]

I also understand and share your frustration about income they won't include. To give you another view of how strict they are...

I have received child support for 13 years for my 15 1/2 year old daughter, every single week like clockwork (all documented). But that $500+ a month is not included because it won't continue for 3 or more years, she'll be 18 before then.

I guess my point is simply that these rules and restrictions wouldn't be in place if others hadn't been dishonest or pushed their financial limits in the past. It's easy to lie so i'm sure plenty of people have done so and probably ended up losing their homes.. And now, others like us will pay for their dishonesty with strict requirements.

[Anonymous]

alot of the conditions have been in place for awhile, but the rules for "compensating factors" and for exceptions had run amok.  That and there was the whole subprime loan situation who would finance anyone wiht a heartbeat as long as you were willing to pay more interest and broker fees.  Now subprime is gone and lenders are following all the rules to a T (not to say some rules have not gotten tighter as well.