I finally own a house, after barely sleeping and totally stressed out over the past few months. I want to thank everyone who gave great advices here. I've learned so much on here, even my loan officer made fun of me about how much I knew today after closing. However not only the closing almost never happened today, I nearly lost the house in the last minute. Well here's the story, Back in February my dad decided to help pay off the remaining balance on my car loan after finding out I was about to purchase a house.
He owed me some money anways and thought this will help lower my DTI and make things easier for me (even though we now found out we didnt really need it as our DTI was very low). When I applied for mortgage in June, the Tri-merge report the lender pulled still had the car loan with the balance on there. They forgot to report the account as paid off for 3 months. I mentioned this to my loan officer when I first applied in June and he just told me I will not need to provide a gift letter because it was paid off months prior to loan application and the underwriter will not care who paid off what that long ago.
He just asked me to get a letter from the lender stating its paid off in Feb. Also I need to mention it was actually difficult for me to get a gift letter by then because my parents were already overseas and it will be difficult for them to have a paper trail of funds used to pay off the car as the money also came from overseas. Anyways we moved on with everything, contract, inspections, appraisal, all going smoothly and we got a clear to close last week. Well I noticed my credit was repulled on sunday and heard no issues on Monday. This morning my loan officer called me with the final amount to bring to closing and stated everything looks to go smoothly and funding will happen by the end of closing.
Well to all of our surprise, the underwriter contacted my loan officer 1 hour before closing asking me to document how I managed to pay off my car loan. What happened was when they repulled my credit, they noticed I had a car loan with 9K balance on my credit report back in June but now it states its paid off, they reviewed my bank statements and did not see the 9K come out of my bank account and got suspicious. They firmly requested full documentation on who paid it and a paper trail on where the money came from. At that point, just 1 hour prior to closing, I knew I was in big trouble.
Even if I managed to be able to contact my dad( whos on a cruise this week by the way). There's still no way he can provide a paper trail on the money he used to pay off the loan, he was trying to help me instead it couldve killed my loan. My loan officer, knowing about this from the very beginning, really went to bat for me, he argued with the underwriter that we have proof the Loan was paid off back in Feb(without mentioning it was my dad that paid it), which is why they dont see the money go out of my bank statement last month. He also pointed out that had they counted the car loan toward my DTI, I still wouldve been approved with no problem since my DTI would only be at around 35%.
Also he really gave it to them about asking for this stuff just 1 hour before closing and that I must close today or else the seller will charge us expensive fees (which is true too). After telling the underwriter this, the underwriter stated he will have to go through this situation with his manager and will get back to us shortly. Then my loan officer just told me to pray that they dont ask for my Feb bank statements. 5 minutes prior to closing, underwriter came back and said they will let this go and not make it an issue anymore and we can go ahead and close, the loan funded by the end of closing and we got the keys. WooHoo!!!!!!
This was one of the most intense days I've ever been through. Also just another thing I wanted to share, in the last few months I seen several people asking question regarding their tax returns showing they still owe taxes. Well my 2011 tax returns still show we owe 10K in Taxes when we filed and same with 2010. Since we pay off our taxes after after filing, our Tax return transcript that they requested also show we still owe 10k in taxes even though in reality we already paid. However they never asked us to prove if we paid off all our balances due with the IRS which really surprised me. They didnt look into whether or not I paid it off or asked for an installment agreement. Anyways just thought I share for the people who's applying and showed taxes owed on tax returns.