topic Re: Trying for mortgage approval; running into brick wall in Mortgage Loans

Trying for mortgage approval; running into brick wall

19eighty5 — Mon, 27 Apr 2020 13:34:31 GMT

The title says it all. I'm a first-time homebuyer, our realtor thinks we're extremely close to landing an approval but we're on our 4th lender in 6 weeks and still struggling to secure an approval. We're ready to throw in the towel and start over next year, however, we're open to guidance that may help close the gap. Obviously, our realtor wouldn't be as knowledgable as a lender, and COVID-19 is not making this any easier. To add on, I'll need to be on the loan by myself -- FHA is not an option due to my spouse's student loan debt. Below is my financial snapshot. Any advice is welcome.

Rebuild:

- 25 months into my rebuild -- no lates during this period

- 1 collection on Equifax/Transunion files which is paid for (2017)

- Lates from old student loans and charged-off credit cards. All paid for and accounts closed.

Loan amount requested: $342K (primary residence, single-family home)

Down payment available: up to 5%

Mortgage scores:

Equifax - 629
Experian - 635 *updated 4/27*

Transunion - 665

Employment - 14 years on the job

Base Salary: $103,182

2019 Bonus: $16,518

2018 Bonus: $8,541

Assets: ~$150K in assets -- mostly employer stocks and pensions

DTI

Credit Line	Monthly Amount	Utilization
1. AMEX GOLD - $5845 POT	$229.36	N/A
2. OVERSTOCK - $898/$3100	$45	28.00%
3. NFCU 1 - $12681/$15000	$254	84.00%
4. NFCU 2 - $6529/$10500	$133	62.00%
5. NFCU 3 - $807/$2000	$35	40.00%
6. AMEX DELTA - $0/$1000 limit	$0.00	0.00%
7. AMEX GREEN - NPSL	$0.00	N/A
8. AMEX BONVOY - $0/$3100	$0.00	0.00%
9. AMEX DELTA - $0/$1400	$0.00	0.00%
10. BOA - $0/$1500	$0.00	0.00%
11. CITI - $0/$5600	$0.00	0.00%
12. WAYFAIR - $0/$3100	$0.00	0.00%
13. W-SONOMA - $0/$250	$0.00	0.00%
14. DISCOVER - $0/$500	$0.00	0.00%
15. PENFED - $0/$500	$0.00	0.00%
16. CARECREDIT - $0/$12000	$0.00	0.00%
17. LOWES - $0/2500	$0.00	0.00%

*Installment Loans*
18. CAP1 AUTO - $43,871 BAL	$677	0% paid off
19. BBVA LOAN - $9,649 BAL	$296	3% paid off

Re: Trying for mortgage approval; running into brick wall

Jnbmom — Sun, 26 Apr 2020 20:29:49 GMT

Your Navy accounts utilization's are certainly hindering your scores Not sure how much you can pay them down.

I am not mortgage expert but with lower scores I think they like higher down payments?

I am sure a mortgage guru will chime in .

Re: Trying for mortgage approval; running into brick wall

19eighty5 — Sun, 26 Apr 2020 20:37:53 GMT

@Jnbmom wrote:
Your Navy accounts utilization's are certainly hindering your scores Not sure how much you can pay them down.

I am not mortgage expert but with lower scores I think they like higher down payments?

I am sure a mortgage guru will chime in .

Valid point. I forgot to add that I have $8K I can throw at one or more balances if this will improve our chances. My lender is recommending that I apply those funds towards the NFCU card with the $12K balance to increase my middle score.

One more add: If we wait a year, sign a new lease and rent, we'll be able to save another $18K for a down payment while chipping away at the card balances. The only reason we're still reviewing options before taking this approach is to avoid another year of renting.

Re: Trying for mortgage approval; running into brick wall

Anonymous — Sun, 26 Apr 2020 20:46:36 GMT

I am not a mortgage guru and won't speak to your DTI on a home that price because I didn't do the math but it seems if you have 8K available and boosting your middle mortgage score over 640 would help then I would pay NFCU 1 under 49%, NFCU 2 under 49%, and pay NFCU 3 to 0. I would expect a boost from that. I am going through the mortgage process and our lender is currently requiring a 640 for all loan types so that may be enough to do it for you if DTI is ok.

Re: Trying for mortgage approval; running into brick wall

19eighty5 — Sun, 26 Apr 2020 21:15:19 GMT

@Anonymous wrote:
I am not a mortgage guru and won't speak to your DTI on a home that price because I didn't do the math but it seems if you have 8K available and boosting your middle mortgage score over 640 would help then I would pay NFCU 1 under 49%, NFCU 2 under 49%, and pay NFCU 3 to 0. I would expect a boost from that. I am going through the mortgage process and our lender is currently requiring a 640 for all loan types so that may be enough to do it for you if DTI is ok.

If I'm calculating DTI correctly, it's 44% including mortgage, PMI, taxes, insurance, etc.

Re: Trying for mortgage approval; running into brick wall

Mortgage-Specialist — Sun, 26 Apr 2020 21:30:15 GMT

Everything about your current mentioned status is perfectly acceptable. The lenders you are working with seem to have significant overlays.

Re: Trying for mortgage approval; running into brick wall

Citylights18 — Sun, 26 Apr 2020 21:35:23 GMT

I'd get a CLI with NFCU while you're at it too. With your income you could have a far bigger limit.

But your scores might hinder that so if you paid down the cards with the 8k then once it hit applied for the CLI that might work best.

Re: Trying for mortgage approval; running into brick wall

chiefone4u — Sun, 26 Apr 2020 21:36:49 GMT

@19eighty5 wrote:
@Anonymous wrote:
I am not a mortgage guru and won't speak to your DTI on a home that price because I didn't do the math but it seems if you have 8K available and boosting your middle mortgage score over 640 would help then I would pay NFCU 1 under 49%, NFCU 2 under 49%, and pay NFCU 3 to 0. I would expect a boost from that. I am going through the mortgage process and our lender is currently requiring a 640 for all loan types so that may be enough to do it for you if DTI is ok.
If I'm calculating DTI correctly, it's 44% including mortgage, PMI, taxes, insurance, etc.

Before COVID-19 many lenders wanted that number below 43%. I'm no mortgage guru, things may have changed. I believe FHA and maybe VA are the only loans that allow your DTI (including new mortgage) to be above around 36% (http://www.bankrate.com/finance/mortgages/why-debt-to-income-matters-in-mortgages-1.aspx )

If you are unmarried, and have sufficient income your partner's debt doesn't matter. If you are using their income, or are married then you are correct their student loans will be an issue.

As mentioned above, getting your balances under 48.9% will give you a score bump. Ideally, you don't want any single card over 28.9% utilization and aggregate utilization needs to be 8.9% or less.

Mortgage scores also look at percentage of cards reporting $0 (want 2/3rds reporting zero).

Re: Trying for mortgage approval; running into brick wall

Mortgage-Specialist — Sun, 26 Apr 2020 21:43:26 GMT

The problem w paying off debt, there would be nothing left for down payment. 620's scores perfectly acceptable for FHA right now. Just working w the wrong lenders.

Re: Trying for mortgage approval; running into brick wall

Anonymous — Sun, 26 Apr 2020 21:56:33 GMT

@Mortgage-Specialist wrote:
The problem w paying off debt, there would be nothing left for down payment. 620's scores perfectly acceptable for FHA right now. Just working w the wrong lenders.

The lender I used I was able to get approved for 150k with a midscore of 655, 3.275 interest. Got my score up to a 701 mortgage midscore by doing AZEO and reducing my DTI. Got approved for a 205k max mortgage and 2.75% interest rate. Annual income is about 36,000 without any overtime included just base rate pay. Needed 2 years of history with my current job for them to account that into it even with W-2s. This was also for an FHA loan and first time homebuyer so maybe that helped but intitially required a 620 score then when COVID hit everything tightened up it required a 680 midscore

Re: Trying for mortgage approval; running into brick wall

chiefone4u — Sun, 26 Apr 2020 22:16:14 GMT

@Mortgage-Specialist wrote:
The problem w paying off debt, there would be nothing left for down payment. 620's scores perfectly acceptable for FHA right now. Just working w the wrong lenders.

@Mortgage-Specialist OP stated that FHA isn't an option because of spouses student loan

@19eighty5 have you and your spouse looked into rehabilitating their student loans? It doesn't get you in a house today, but I believe 6 on time payments and it's like the loan never defaulted (can set up income based payments and still qualify).

Re: Trying for mortgage approval; running into brick wall

19eighty5 — Sun, 26 Apr 2020 22:26:17 GMT

@chiefone4u wrote:
@Mortgage-Specialist wrote:
The problem w paying off debt, there would be nothing left for down payment. 620's scores perfectly acceptable for FHA right now. Just working w the wrong lenders.
@Mortgage-Specialist OP stated that FHA isn't an option because of spouses student loan

@19eighty5 have you and your spouse looked into rehabilitating their student loans? It doesn't get you in a house today, but I believe 6 on time payments and it's like the loan never defaulted (can set up income based payments and still qualify).

@chiefone4u my loans have the negative payment history on them but they are now paid off. Unfortunately, I didn't know to rehab them and instead, paid them off. My spouse's loans do not have a negative history, just large amounts from law school. FHA is not an option due to Texas being a community property state, as it drives up our DTI.

Re: Trying for mortgage approval; running into brick wall

chiefone4u — Sun, 26 Apr 2020 23:32:07 GMT

Gotcha, always something.

Is that $8k your said you have to pay down balances part of your down payment, emergency fund or fun money?

Are you talking to National banks, local banks or credit unions for your mortgage?

While with enough leg work you'd likely find an approval; for a conventional loan putting less than 10% down you'll likely find it is easier if you get your scores up more and your DTI down.

If your spouse's scores and income will support it, could have them get a loan or BT your balances to reduce your reported debt and reduce your perceived DTI.

Re: Trying for mortgage approval; running into brick wall

Revelate — Mon, 27 Apr 2020 02:07:56 GMT

Unless I did the math wrong you are at 18% DTI without the house. What priced house are you looking at?

Beyond that you have something like 75k of debt currently, a decent chunk is revolving that is bleeding cash currently if it's not on a promotional balance, and buying a home usually had after costs like appliances and furniture.

If it were me I'd be leaning towards waiting, smart money is betting a buyers market in the near future if we aren't already there and it might take a while to recover.

Re: Trying for mortgage approval; running into brick wall

19eighty5 — Mon, 27 Apr 2020 02:28:14 GMT

@Revelate wrote:
Unless I did the math wrong you are at 18% DTI without the house. What priced house are you looking at?

Beyond that you have something like 75k of debt currently, a decent chunk is revolving that is bleeding cash currently if it's not on a promotional balance, and buying a home usually had after costs like appliances and furniture.

If it were me I'd be leaning towards waiting, smart money is betting a buyers market in the near future if we aren't already there and it might take a while to recover.

@Revelate you have a point re: buyer's market. My revolving debt balance is $26,760 at the moment and the loan officer is requesting that I pay another $6,800 down. Home price is $342K.

Re: Trying for mortgage approval; running into brick wall

19eighty5 — Mon, 27 Apr 2020 03:57:10 GMT

@chiefone4u wrote:
Gotcha, always something.

Is that $8k your said you have to pay down balances part of your down payment, emergency fund or fun money?

Are you talking to National banks, local banks or credit unions for your mortgage?

While with enough leg work you'd likely find an approval; for a conventional loan putting less than 10% down you'll likely find it is easier if you get your scores up more and your DTI down.

If your spouse's scores and income will support it, could have them get a loan or BT your balances to reduce your reported debt and reduce your perceived DTI.

@chiefone4u the $8K is part of our down payment. The lender recommended that we use that amount for the debt paydown.

We've worked with 3 loan officers that shopped our file at multiple banks and one loan officer at a smaller bank. Our current loan officer has access to 140+ banks but not for sure the size or if any are credit unions.

Re: Trying for mortgage approval; running into brick wall

19eighty5 — Mon, 27 Apr 2020 13:39:34 GMT

Update: Over the weekend, I paid the CareCredit account down to $0, along with requesting a CLI to $12K, and updated my income -- all resulting in bureau updates, increasing my middle score to 635. Inching closer to a 640 middle score...

Re: Trying for mortgage approval; running into brick wall

VALoanMaster — Mon, 27 Apr 2020 19:20:32 GMT

@19eighty5 wrote:
@chiefone4u wrote:
Gotcha, always something.

Is that $8k your said you have to pay down balances part of your down payment, emergency fund or fun money?

Are you talking to National banks, local banks or credit unions for your mortgage?

While with enough leg work you'd likely find an approval; for a conventional loan putting less than 10% down you'll likely find it is easier if you get your scores up more and your DTI down.

If your spouse's scores and income will support it, could have them get a loan or BT your balances to reduce your reported debt and reduce your perceived DTI.
@chiefone4u the $8K is part of our down payment. The lender recommended that we use that amount for the debt paydown.

We've worked with 3 loan officers that shopped our file at multiple banks and one loan officer at a smaller bank. Our current loan officer has access to 140+ banks but not for sure the size or if any are credit unions.

@19eighty5

Have any of the lenders given you a specific reason why they couldn't do your loan?

My guess is they haven't been able to get your loan approved through DU/DO because it was tightened up recently making more difficult to get an approval. That would mean your file has to be manually underwritten & not many if any lenders want that kind of risk right now.

I think you need to try a mortgage banker who has a lot of experience.

Re: Trying for mortgage approval; running into brick wall

AI_JMV — Wed, 29 Apr 2020 17:58:15 GMT

I'm really sorry, and this probably isn't what you want to hear. But.... you are living and charging above your means, and I really think you need to cool off on either the house you are looking at, or where you are financially from both your DTI and new debt take-on, and your scores are reflecting that... The fact that you are still in a rebuild, and you racked up that much debt, is a testament that you haven't learned from your mistakes. I know this is difficult to hear, and maybe you aren't reading it anyway. But... I think you need some tough love, and need to reevaluate your spending habits before taking on a mortgage.

Re: Trying for mortgage approval; running into brick wall

Anonymous — Wed, 29 Apr 2020 19:19:13 GMT

I personally think you should focus on paying down your debt and hold off on the house. You have a lot of monthly commitments that are for debt (about $1500 in minimum payments).

Before you go the house route, I think you need to pay down most of the debt, get a comfortable emergency fund and set aside some money to outfit the new house.