Overdraft...Applying for New Construction Home Mortgage

[cypresschef]

Good Morning,

So we talked with the builders lender, had our credit pulled and were told with our scores, income and DTI we would be great for FHA. Purchase price up to 280,000. We are only looking to spend 220-230,000, so I was very happy. We close on the sale of our home tomorrow, and once the proceeds are transferred (hopefully tmrw) we are going to the Pulte sales office to write our sales contract and submit for formal approval.

Here is the problem: This month (well really since the middle of April) has been VERY tight for us. We had to pay taxes, rent (moving to an apartment for the duration of the build) AND our last mortgage payment, all deposits for the apartment, application fees, this list goes on. Anyway, I do not normally write personal checks, but have written at least 10 in the past few weeks. I am always on top of our bank account, logging in daily (sometimes multiple times) and keeping tally of what we have. We make good money, so this usally doesn't stress me, but I have been freaking out this month knowing we would be cutting it close. When I logged in yesterday, I FREAKED! I was negative 45.65! Onced I clicked on activity, I saw the problem, I had accounted for all our checks except one. It was our application check for the apartment that we had written over 2 weeks ago. It had just totally fallen off my radar.

We have literally NEVER overdrafted our bank account, and of course it happens yesterday! To cover the overdraft, I used DD advance from Wells and covered the overdarft plus a little. I am thinking that using direct deposit advance may have compounded the problem; yay me! (sarcasm) AND to make matters even worse; my statement period ened the same day as the negative balance and so my ending balance on the 4/6-5/6 statement is NEGATIVE! I literally cried.

Is this something that is going to ruin the whole deal? Will an LOE fix this? As we are doing new construction; are they even going to need bank statements up front or will they nor "really matter" until it's time to lock and close? Any advice; MUCH APPRECIATED!

[tooleman694]

The advance will compound the issue since it now looks like you are living off credit. But I think you can explain your way out of this one given what is going on.

Gotta explain why it happened and why it will never happen again.

[ShanetheMortgageMan]

The bank statements are only important at the time it goes to underwriting.  At that time, the two most recent statements are needed and deposits/overdrafts are reviewed.  For some of my clients I gather up 4-5 months of bank statements while they are out looking for homes, and then finally when they get an accepted offer we only use the two most recent ones.  So depending on when you are going into underwriting will determine if this is something that'll even need to be explained.  Sounds like if it goes to underwriting on 7/7 or later then this wouldn't be on the radar.  If it will go to underwriting before then, then be prepared with a letter of explanation... if your debt ratio & credit scores are fine, then it'll likely be a non-issue.