TSP, Reserves & Closing Costs, O my!

[Anonymous]

Okay, some dumbo questions!

We've gotten DH's FICOs up to the ones in my siggie -- right now, FICO says our mid-score is 628 (EX). Theoretically, we could qualify, I assume. The most recent "severe" late we have is a 30 day in April on our car note -- the rest will be clean as far back as Dec '07. We're waiting for the updates to happen and FICO simulator puts EQ (our lowest) at roughly 670 after the updates.

We have $20K (from our TSP -- taking it as a residential loan, so we're borrowing from ourselves) to put down as down payment and for appraisals, inspections, etc (TSP loans can't be used for loan origination fees or points).

We have like $1500 in reserves (yuck).

We have another $30K in TSP/401(k).

We're hoping to find a home in the $200-225K range (want "enough" house, but not too much) and are hoping to negotiate seller paying all closing costs.

So, my questions:

1. How badly will lack of high reserves hurt us considering that we're putting down $20K (more than 3%)?
   
2. IF the seller pays closing, does that include points as well?
   
3. How bad does it look to be using a TSP loan for the down payment? Is that seen as a high risk or red flag?
   
4. How badly will the mortgage lender/real estate agent want to kill us for having them have to work with the TSP? TSP requires documentation (contract, settlement paperwork, etc) prior to releasing the funds (which will take approximately a week to disburse). Will using TSP make us a pariah??
   
5. And the biggie: IF we pass automated WITH a Dec '07 late, will we get spanked in manual UW for the late? How does that work?
   

Thanks so much in advance!!

[DallasLoanGuy]

1. they are all factors. think of it like a teeter totter. low reserves on one side, but big down payment on the other. and keep stacking stuff. 

2. yes

3. it is viewed the same as taking it from savings. it is YOUR money

4.  all loans have fleas.... some, more than others. 

5. no. if automated accepts, the underwriter wont care in most cases. some may ask for a letter of explanation, but you wont be using a lender like that, right?!?!? 

[Anonymous]

Kudo's....all loans do have fleas!

[Anonymous]

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@DallasLoanGuy wrote:

1. they are all factors. think of it like a teeter totter. low reserves on one side, but big down payment on the other. and keep stacking stuff.

But in the case of our TSP, there won't be any stacking, if I understand you correctly. From what the TSP rep's told us, we have to enter into a contract, THEN provide that documentation for the loan to TSP ... from there, they'll disburse the amount to US, from which we pay it out.

I guess what I'm saying is that we have to provide documentation stating "$20K -> down payment" and can't slip any of that to the side to act as reserves.

Or are you saying (and if I'm wrong, PLEASE forgive me) that the LO will just move the numbers around as needed to get us approved? If that's the case, will that be binding when time comes to fund the DP?

Would $20K be considered a big down payment on a $200-225K home?  

We have discussed going VA (since DH qualifies) ... since no DP is needed in that case, would that be a better way to go in order to make our tiny (in my mind) DP LOOK bigger and be a better factor? 

2. yes

3. it is viewed the same as taking it from savings. it is YOUR money

4. all loans have fleas.... some, more than others.

5. no. if automated accepts, the underwriter wont care in most cases. some may ask for a letter of explanation, but you wont be using a lender like that, right?!?!?

Dallas, if I didn't think that I've driven you nutso with my stupid questions, what I'd REALLY love to do is ask you if you'd be our LO!!

You've always been honest, up-front, no nonsense and SO knowledgeable!! You are AWESOME!!! 

As always, THANK YOU!!!  

And I think in light of the recent crap our economy's gone through, this is ESPECIALLY important to say: Thank you, Dallas (and Missus Dallas for sharing), for taking the time and the effort  to help so many people have a home the SMART way, the HONEST way and the KIND way!! Hugs to you!!

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[DallasLoanGuy]

yes, we have a way in the software to do a lot of 'what ifs' and see what works out best for the client. more down pmt? more reserves? doesnt really matter to me how it gets done, as long as it gets done.

but, dont think of a lack of reserves as a deal killer.... fha doesnt require reserves. they help flimsy files, but they aren't needed.

you need to have someone run your file for both fha and va.... just remember, if you want to use the va again, that the funding fee goes up. a lot of people opt to save their va for their next(and hopefully bigger) home.