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FHA Manual Underwriting When In Middle of Lease

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Ougaouga
Member

FHA Manual Underwriting When In Middle of Lease

Hi all,

 

        I am in the process of being verified preapproved for a new construction spec home by the builder's approved lender. I was upfront with the loan officer that I had a foreclosure that was transferred out of my name on March 9th, 2020 so I am just shy of three weeks from the three year waiting period for FHA and asked her if we should gather the required documents to have everything ready to run through AUS on March 10th and she said we didn't need to wait and could run it through now and just set closing for after March 10th. Well it came back Eligible/Refer because the waiting period is not fully up yet. She said that is the only reason for the finding and there are no other issues. I have a mortgage score above 680, three year plus perfect payment history, low utilization, no collections or judgements and ratios are 28/42, so no compensating factors are required. She said she is very confident on receiving an approval from manual underwriting and I wrote my letters of explanation and she performed the employment verification and verification of rent with my landlord and now the file is with the underwriter for review. 

The thing that is making me nervous is that I'm halfway through a one year lease and the rent verification will clearly show that I've only been renting there for six months. They also got verification from my previous landlord for a full 12 month payment history. I have never been late on a rent payment. I'm planning to negotiate with my landlord on getting him a replacement tenant to get out of my lease early if I end up being approved to purchase the house before the lease is up. I haven't approached him about it yet because I wanted to see if I can even be approved first. But now that the mortgage company obtained the verification of rent he obviously knows I'm trying to get a mortgage. He emailed me letting me know he returned the VOR to the lender and wished me good luck on getting the loan, so doesn't seem to be too worried about it. My concern is that the six month rental period is going to raise a red flag with the underwriter and they will check on my lease and want to add the remaining period to my DTI and I won't qualify. Is that a thing mortgage underwriters do? I also don't want them calling my landlord with a bunch of questions and straining my relationship with him in case I end up needing to stay a while. Is that something they do? It's a private individual landlord and not a management company. It seems like if rental leases aren't considered or checked on or cared about when an approval is obtained through AUS they shouldn't be asked about in manual underwriting either but I really don't know how it works. Have any mortgage pros on here ever seen this be an issue? 

I wish we would of just waited the couple of weeks to run it through to get an approval after the waiting period but my loan officer seems very eager to get me approved and closed as fast as possible. She almost seems more invested in getting this loan approved than I am. I guess business is slow.

Thank you in advance for any advice! 

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ShanetheMortgageMan
Super Contributor

Re: FHA Manual Underwriting When In Middle of Lease


@Ougaouga wrote:

My concern is that the six month rental period is going to raise a red flag with the underwriter and they will check on my lease and want to add the remaining period to my DTI and I won't qualify. Is that a thing mortgage underwriters do? I also don't want them calling my landlord with a bunch of questions and straining my relationship with him in case I end up needing to stay a while. Is that something they do?


In my opinion it'd be extremely rare for a lender to do that when buying a primary residence, I haven't personally run into a situation like that in the 22 years I've been doing mortgages.  Lenders assume that you'll move out of your rental and will end the lease at that time.   

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