topic Re: Anyone have luck with a Loan Verification Letter in Mortgage Loans

Anyone have luck with a Loan Verification Letter

ucibaqt — Mon, 18 Jan 2016 23:07:06 GMT

Hello All. I'm interested in getting prequalified for a conventional loan. I spoke with a mortgage broker and since I have deferred student loans, she mentioned 5% of the loan total would be calculated into my DTI. She suggested I pull my loans out of deferment, consolidate them, and then have them report with a payment on my CR. Well I've been doing some research and it seems as though her percertage was off for a conventional loan and if I consolidate my loans I will have to start repayment immediately. I looked online and saw that I could get download a loan verification letter with my estimated monthly payment for each loan when they are no longer defered. I just wanted to know if any used such a letter recently and if it would work with a LO or UW?

Re: Anyone have luck with a Loan Verification Letter

Anonymous — Tue, 19 Jan 2016 02:37:35 GMT

@ucibaqt wrote:
Hello All. I'm interested in getting prequalified for a conventional loan. I spoke with a mortgage broker and since I have deferred student loans, she mentioned 5% of the loan total would be calculated into my DTI. She suggested I pull my loans out of deferment, consolidate them, and then have them report with a payment on my CR. Well I've been doing some research and it seems as though her percertage was off for a conventional loan and if I consolidate my loans I will have to start repayment immediately. I looked online and saw that I could get download a loan verification letter with my estimated monthly payment for each loan when they are no longer defered. I just wanted to know if any used such a letter recently and if it would work with a LO or UW?

5% is a lie and that broker doesn't know what they're talking about. Even in deferment, the largest percentage that it will count against you is 2% for FHA/VA loans and 1% conventional loans.

Re: Anyone have luck with a Loan Verification Letter

iv — Tue, 19 Jan 2016 02:49:01 GMT

Sounds like the broker is, at best, confused.

There IS a mention of 5% in the FHA docs, but only for deferred general installment debt, NOT student loans (which are only 2%).

For conventional, for deferred general installment debt, you do need a letter or a copy of the agreement, so that the actual payment amount after deferment can be used. Deferred student loans with conventional are 1%.

The FHA rules are here: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

Calculation of Monthly Obligation

The Mortgagee must use the actual monthly payment to be paid on a deferred liability, whenever available.

If the actual monthly payment is not available for installment debt, the Mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment.

For a student loan, if the actual monthly payment is zero or is not available, the Mortgagee must utilize 2 percent of the outstanding balance to establish the monthly payment.

The conventional Fannie Mae rules are here: https://www.fanniemae.com/content/guide/selling/b3/6/05.html

Deferred Installment Debt

Deferred installment debts must be included as part of the borrower’s recurring monthly debt obligations. For deferred installment debts other than student loans, if the borrower’s credit report does not indicate the monthly amount that will be payable at the end of the deferment period, the lender must obtain copies of the borrower’s payment letters or forbearance agreements so that a monthly payment amount can be determined and used in calculating the borrower’s total monthly obligations.

For information about deferred student loans, see Student Loans below.

Student Loans

For all student loans, whether deferred, in forbearance, or in repayment (not deferred), the lender must use the greater of the following to determine the monthly payment to be used as the borrower’s recurring monthly debt obligation:

1% of the outstanding balance; or
the actual documented payment (documented in the credit report, in documentation obtained from the student loan lender, or in documentation supplied by the borrower).

If the payment currently being made cannot be documented or verified, 1% of the outstanding balance must be used.

Exception: If the actual documented payment is less than 1% of the outstanding balance and it will fully amortize the loan with no payment adjustments, the lender may use the lower, fully-amortizing monthly payment to qualify the borrower.

Re: Anyone have luck with a Loan Verification Letter

Anonymous — Tue, 19 Jan 2016 16:50:35 GMT

Both of the above posters are correct. The 5% rule is for deferred NON-student installment loans. The largest number you'd get hit with is 2%, and that is only if you cannot prove what the future monthly payment will be after deferment.

Remember, if you pull out of deferment, FHA will typically take any payment on the credit report. Conventional loans will take the higher of 1% or the actual monthly payment on the credit report unless you can prove that the sub-1% payment will fully amortize the loan without any payment adjustments. Basically, if you choose a graduated repayment method, conventional loans may still hit you with the 1%.

Re: Anyone have luck with a Loan Verification Letter

DallasLoanGuy — Tue, 19 Jan 2016 17:38:51 GMT

sounds like you have gotten some good solid advice here