topic Re: Bounced checks hurt my approval in Mortgage Loans

Bounced checks hurt my approval

Anonymous — Tue, 29 Jan 2013 20:23:21 GMT

I have worked very hard to raise my credit score. I operate my checking account with such vagueness. This has resulted in Overdrafts. I was told today that I would n't qualifiy for a FHA home loan (or Con) because of the overdrafts on my checking acount. He said over two overdrafts is a big red flag. Seriously... are there other big red flags that I don't know about.

My three scores are all above 700. I guess its time to work on a big down payment and not bouncing any checks. I wanted to move out in the summer to my own home. How come no one talked about this?

I wonder how many times I sabatogue myself. Today is the first day going forward.

Re: Bounced checks hurt my approval

Anonymous — Tue, 29 Jan 2013 20:29:52 GMT

Bouncing checjks and check overdrafts can cause set backs.

Bounced checks are considered negative payments even if you pay tge creditor late.

Overdraft protection is not as bad and usially can be explained.

When you have multiple of either it shows poor financial planning. This causes a damper when applying for mortgage.

Anyone applying for mortgage generally does all they can not to cause anything negative to happen within the last year before applying.

If you had bounced checks you probably will have to wait at least a year. If they were overdrafts you may want to try a different lender.

Re: Bounced checks hurt my approval

Anonymous — Tue, 29 Jan 2013 20:42:36 GMT

+1, unfortunately on what JM-AM said. I don't have a spreadsheet nor do I balance my checking account. It is all in my head. Most charges are put on credit and I pay the balance in full every month. I know when all the auto debits are clearing and I have a general amount needed plus cushion in my checking account to cover those charges. I also have mobile banking and I check my account everyday (sometimes multiple times per day) to see if I missed something that should have been accounted for. If I did, I transfer funds to checking from savings manually before the credit union does. I have no overdraft protection. I don't think I have bounced a check in 10 years. I would check your account more frequently and make notes of things that are clearing that you think you will forget about.

Re: Bounced checks hurt my approval

Anonymous — Tue, 29 Jan 2013 22:32:02 GMT

Did he give a time frame? Is it that you had so many in a certain amount of time or was it the fact that you had them period. (I really hoped it's the time frame thing). I am hoping to buy a house this time or later next year. I have a couple of bounced checks here and there. I am going to start working on improving my credit/finances once we sell our home (hopefully this month). I plan on staying on top of everything and getting things low and debt reduced. I am hoping for no bounced checks in this time frame seeing that I will be living with my parents which will eliminate many of my bills. I know things happen so I am really hoping it was time frame thing and not bounced checks period. I mean things happen and you have to do what you have to do to make sure you can get what you need.

Re: Bounced checks hurt my approval

Anonymous — Tue, 29 Jan 2013 22:42:34 GMT

@Anonymous wrote:
I have worked very hard to raise my credit score. I operate my checking account with such vagueness. This has resulted in Overdrafts. I was told today that I would n't qualifiy for a FHA home loan (or Con) because of the overdrafts on my checking acount. He said over two overdrafts is a big red flag. Seriously... are there other big red flags that I don't know about.

My three scores are all above 700. I guess its time to work on a big down payment and not bouncing any checks. I wanted to move out in the summer to my own home. How come no one talked about this?

I wonder how many times I sabatogue myself. Today is the first day going forward.

How many did you have and over what period?

Most poeple do not know that this is something they look at but it certainly is. If there is a clear explination of why it happened, and it's a mistake/very rare occurance, it's usually not a problem.

Normally you only have to show two bank statements so if you want two months and apply again, it may be ok, though some bank statements show on on-going year to date record of how many you've had (Chase does this).

Re: Bounced checks hurt my approval

StartingOver10 — Tue, 29 Jan 2013 22:59:17 GMT

MovingForward's system seems very complex.

If you look at it from the u/w POV, then it would make sense that NSF's and OD's show a financial hardship rather than financial stability. But keeping a running balance in your head is ripe for error. It is much easier to just keep a register or log. It takes a few minutes and once you have it set up you know where you stand always. Naturally reconciling against the bank balance takes a few minutes, but not long if you take about 10 minutes a day to do it. Then you never have to worry about NSF's or OD's. It certainly keeps the stress off by having a accurate ledger.

Re: Bounced checks hurt my approval

Anonymous — Tue, 29 Jan 2013 23:09:42 GMT

Are you talking multiple overdrafts in the last few months? We provided 2 months of bank statements, which were free of any overdraft charges but we did have an incident earlier in the year that resulted in an overdraft. It was not on the statement provided, nor were we ever asked if we had any overdrafts/bounced checks in any given timeframe.

Re: Bounced checks hurt my approval

tooleman694 — Tue, 29 Jan 2013 23:22:55 GMT

I get overdrafts from time to time just from being lazy.

6 figure income, a ton of cash in savings.. but sometimes I let it go on cruise control and whoops.

We are going back into underwriting here very soon, so iv made sure everything is perfect and stopped being lazy lol.

Re: Bounced checks hurt my approval

bobebob — Tue, 29 Jan 2013 23:29:11 GMT

I hadn't even thought about it. But I'm in the middle of a refinance now and technically I've had two bounced checks this year.

i say technically because Amex took out full payment of my bill after I had already made the payment manually on their website. The double payment of my full statement amount was too much and their automatic payment bounced. I called them and they weren't sympathetic pointing out that it says in my statement that the autopayment can't be changed two days before its scheduled. Sure enough I found it buried on page three.

Worse, the next day after I called them the autopayment attempted to post again and of course bounced. Livid, I called Amex again and they said "sorry it's an automated system and we can't change it". They said it would resubmit the payment twice. Which meant I would have a third bounced check in as many days.

Fortunately, BOFA was sympathetic. They reversed the two overdraft charges and did a stop check to prevent the third from posting. Needless to say, I don't use the autopayment feature from Amex anymore. And I was actually impressed by BOFA's willingness to refund the fees and not even charge me for the stop payment on the check.

I don't think that the bounced checks were left in the system to report anywhere since my lender already pulled my credit and I haven't heard anything about them. I hadn't even thought about them possibly being a problem until I read this thread. I think the explanation would be straight forward if it did come up. But I'm just as glad it didn't.

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 00:38:51 GMT

A bounced check isn't going to appear on your credit report. The lender would only know about it if they ask you for bank statements and they notice them on there.

It shouldn't be a problem in your situation, that is a pefect example of writing a letter to explain what happened and it shows it's not a regular occurance.

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 00:47:49 GMT

A bounced check is considered a crime in many states. A bounced check can be reported and at times they are (not always). You failed to pay your debt in a timely fashion and that can be reported. For example, dont pay your electric bill, or bounce a check with them (especially several times), then tell me its not reported on your credit reports.

A check with overdraft protection is not considered a bounced check in the same sense as being a crime.

Im sure the OP didnt volunteer to her LO or Broker she bounced many checks.

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 00:51:26 GMT

Hmm, I never knew that. I guess it would make sense if you wrote the check, it bounced, and you didn't end up making a new check or pay the debt some other way.

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 01:08:25 GMT

LOL! @ StartingOver

It seems complex but there is nothing new under Sun, meaning that the same things are clearing every month and I use my credit cards for almost everything so basically the full amount of my paychecks are always sitting in Checking. I transfer a small amount over to savings every week so the chance for a bounced check is pretty small.

When I get ready to fire off a round of bills to my credit card, etc. I do a quick tally of the minuses and say that is my ending balance for the week and I plop that number into my head (I am an Engineer so I am really good with numbers). I don't keep a spreadsheet projected 6 months in the future, no. I used to and it got me in trouble so now I exercise my brain and I always underestimate how much money I have. My checking account gets low about once a month, and when it is low, I rundown memory lane to see if anything is scheduled to clear and if yes, if I need savings to cover it, I pull it over. If not, I just keep a close eye on it and it works like a charm.

Do I recommend my method, no. It is always better to know where you stand to the penny. For me, the behavior of watching my accounts and paying the same ole bills has built an internal rhythm and that rhythm is memorized. :-)

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 01:28:00 GMT

I also agree with what tooleman said. I have a ton of cash floating between checking and savings as I get about $1300 a week deposited in my checking account from my job and with everything going to credit card, I let my checking account go into auto mode. As tooleman said, I also got caught a couple of times and the credit union snatched money from savings and I hate when they do that because they only transfer the amount for the charge and I only get 8 transfer a month. If it happens, I usually transfer over the amount needed plus cushion before the next incoming charge hits. But I have been super lucky a couple of times I saw this because the charge was still pending so I hurried up and made the transfer myself before it was fully processed.

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 01:35:33 GMT

I haven't had an NSF or a Overdraft fee since I was 16. With mobile banking, online banking, and telephone banking this should be a thing of the past. Plain and simple if you dont have a surplus to cover something dont buy it. Always have a surplus in your checking account. I know that savings draws interest...but you wipe out a month of interest or more when they charge you 33 dollars for not having the funds to cover a purchase.

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 04:31:25 GMT

Just to clarify my terminology. I mean overdrafts. The bank has always covered the check/debit. I have never had to go pick up a check or anything. The bank pays and then charges me to the hilt. I went in to the bank today and turned off the where they would approve me going into the negative on my debit card. When I get paid again I will put money into a coushin for my checking account so this doesn't happen again.

IThe persoon who told me I couldn't get approved with over 2 overdrafts within a year was with Quicken Loans. I have heard it depends on the Underwriter. Is this true?

I also was working with someone at PNC. Maybe they are looking at me closer because I am self employed.

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 04:34:40 GMT

Are bounced checks different from overdrafts? in the way the lender looks at them?

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 04:36:00 GMT

Which lender did you use?

Re: Bounced checks hurt my approval

StartingOver10 — Wed, 30 Jan 2013 12:52:51 GMT

@Anonymous wrote:
Are bounced checks different from overdrafts? in the way the lender looks at them?

Bounced checks are the same as overdrafts as far as the u/w is concerned. The funds weren't there when the check/debit/ACH etc was presented.

Your file will be reviewed much more carefully because you are self employed. It is also typical for some underwriters to ask for more than two months of bank statements if you are self employed. They will probably want both your business account and your personal account bank statements as well as business tax returns and personal tax returns. If you are self employed you go through a more riguous approval process.

Re: Bounced checks hurt my approval

Anonymous — Wed, 30 Jan 2013 13:24:28 GMT

Quicken Loans?!? You are taking the tough route by going to these industry giants for a loan. I would go see a local broker as they may let them slide.

I don't have overdraft protection and a long long time ago, I bounced a check. The bank was kind enough to cover the check for me when they didn't have to. I got an NSF fee and the check was considered bounced. With overdraft protection, they give you a line of credit to cover bounced checks. But, the check is unfortunately still considered bounced if you don't have savings to draw from to cover it. Excessive use of an overdraft line of credit looks like financial mismanagement by a lender. It is only there to protect you if you make a mistake and not for convenience as it shows lenders you are living beyond your means. I know you never had anyone go after you for a bounced check because the bank paid it but it is still considered bounced as you get charged a NSF fee. The only difference is, when the bank pays, that the payee doesn't get a fee on their end. If the bank doesn't pay, your check bounces in their account as well and then the merchant/payee will come after you for the original amount plus the bounced check fee. If you cash a check from a friend that doesn't have funds in their account, you will get a bounced check fee and any checks or debits you charged dependent on that person's check, will also bounce and you can rack up a ton of NSF fees there, which also looks bad to lenders as it shows too much financial trust in the wrong people. So it is always best to call your friends bank and verify sufficient funds before cashing their check.