topic Re: Underwriting, should I be worried? in Mortgage Loans

Underwriting, should I be worried?

Anonymous — Tue, 29 Dec 2020 01:35:04 GMT

Hello,

I'm writing this to see if I should be as anxious as I am right now. Every one tells me no but its just the way I am, feel like I can't help it. Me and the wife are currently in underwriting. I'm 26, she 25. Both first time home buyers. I've worked as customer service rep at my company for 6 yrs now. My gross income is about 39k close to 40k. My wife has been a teacher for about a year and a half. Her gross income is about 55k close to 56k. My credit score is 762, hers is 741.The purchase price of the home is 257,290. We were pre-approved at a rate of 2.625, 30 yr fixed FHA loan. She has absolutely no debt, thank god. My total debt is 7,752. My monthly payments are 680. The monthly house payment will be around 2k. Our monthly gross income combined is 7,965.67. Our DTI is good. We have a good amount saved, more then the minimum 3.5 down payment. Our loan officer and the builder seem confident. So does every other expert we know. The process so far has been smooth. Should I be worried about my file even a little bit?

What keeps me up at night is I was denied a car loan earlier in the year. At the time I was anywhere between 15-17k in debt. Thats when me and the wife went ahead and decided to pay off around half my debt and since then I've paid off a couple of thousand.

Re: Underwriting, should I be worried?

sxa001 — Tue, 29 Dec 2020 01:41:44 GMT

I am no expert but your profile sounds in good shape. If those are your mortgage scores you are in the range to get the best rates with many lenders.

Do you recall the reason codes at the start of the year? Paying down the debt has helped your DTI and probably helped your scores so I wouldn't equate the dinial with any issues in underwriting.

I know it will be hard until you have keys in hand as freak things can happen. Just try to occupy your mind and be responsive to any requests from the underwriters and you should be fine.

Re: Underwriting, should I be worried?

ShanetheMortgageMan — Tue, 29 Dec 2020 01:45:14 GMT

With your credit scores, did you guys discuss using conventional financing over FHA? The interest rate is a little bit higher but the mortgage insurance portion of the payment should be quite a bit less, making the overall payment lower with conventional especially if you put 5% down with conventional vs. 3% down (you said you had more than the 3.5% down FHA required).

Your debt to income ratio is low, your scores are excellent, good employment history and more than the minimum down... numbers look excellent, I'd be surprised if you didn't get approved.

Re: Underwriting, should I be worried?

Anonymous — Tue, 29 Dec 2020 01:52:03 GMT

The reason I was denied earlier in the year was my total debt amount was too high and at the time had been increasing for months since I and the wife mostly paid for our wedding and honeymoon through my credit cards. My credit score at the time was in the low 700's (still in the 7's I guess because I've always been a responsible borrower, always paid stuff on time and quickly). Once I got denied we decided to pay a good chunk of it off and now I owe less than half of what I used to. Add to the mix that my wife has a pretty good job, good salary, great credit and no debt, I think were good but I'm an anxious dude I can't help it. Thanks for your response. Maybe I'm just on here looking for as many "dudes you'll be fine" as possible to put my mind at ease. I hope to be a bit more experienced in a couple of months in my new home trying to calm someone like me down, lol.

Re: Underwriting, should I be worried?

Anonymous — Tue, 29 Dec 2020 01:57:00 GMT

We did discuss this. Every one we spoke to said FHA over conventional (even some expert friends we have in the field). The only one to say conventional over FHA was the LO. I think about it everyday now wondering when we get approved will I regret the type of loan choice. The rate we were offered at convential was 3.25.

Re: Underwriting, should I be worried?

sxa001 — Tue, 29 Dec 2020 02:08:21 GMT

@Anonymous wrote:
We did discuss this. Every one we spoke to said FHA over conventional (even some expert friends we have in the field). The only one to say conventional over FHA was the LO. I think about it everyday now wondering when we get approved will I regret the type of loan choice. The rate we were offered at convential was 3.25.

I think people who bought with FHA in the past when it made more sense tend to push it but these days with 5% conventional loans and the low interest rates conventional can work out better if you qualify for the good rates and have the cash to make it happen.

Re: Underwriting, should I be worried?

Anonymous — Tue, 29 Dec 2020 02:20:04 GMT

Makes sense. Idk, we ended up with FHA because of the rate really. Thats really the only reason why we chose it and the montlhly payments were slightly cheaper. Down payment and stuff we weren't really worried about since we have the money saved and we don't even qualify for any assistance programs because our financial situation is deemed too good. Even with all the experts saying I should and will be good I still get anxious even though I know our profile is pretty solid. I act like I'm trying to get approved on my own is what people tell me LOL.

Re: Underwriting, should I be worried?

ShanetheMortgageMan — Tue, 29 Dec 2020 02:28:10 GMT

The interest rates you mentioned are on the higher side, but I assume it's because it's the builder's lender and maybe some sales incentives are tied to you using them. Regardless, for both a 3% down and 5% down option ask your loan officer what the conventional interest rate and total monthly payment is if you pay 1.75% discount points, because that is the amount of upfront mortgage insurance that FHA requires you to pay at closing (even though most people just finance it into their new loan amount). You'll have a more apples to apples comparison then, other than having to actually pay the 1.75% discount points out of pocket. Another item to consider is that the monthly PMI on conventional will go away after your loan balance reaches a certain point (the options are listed here), whereas with FHA it'll be for the life of the loan if you put less than 10% down.

Re: Underwriting, should I be worried?

brk1971 — Wed, 30 Dec 2020 17:12:01 GMT

Another point - earlier in the year, your total debts caused your denial including your housing payment (rent). The mortgage payment replaces that rent in the calculation, so your DTI for the mortgage may be only nominally different than it was for your auto application, swapping out whatever your rent is for the new payment. And the DTI ratio for an auto loan is vastly different (and can vary significantly lender to lender) than the ratio allowable for a mortgage.

When you're comparing the FHA down payment vs. the conventional 5% option, don't forget to include the following factors:

FHA has an upfront MIP premium and a monthly amount (the upfront fee will be added to your loan balance).

Dropping MIP from an FHA based on improved loan to value will require a refinance (hello new closing costs) as opposed to simply a new appraisal with a conventional.