In FHA underwriting and freaking out

[Anonymous]

Hey all, this is my very first post here and I've got some questions. Thanx in advance!

My hubby and I are 2 weeks and 4 days from closing and my file just went to the automated underwriting today. We had to use only my credit for the loan as when we applied for the loan my husbands score had dropped over 130 points from a mistake in reporting a credit card four months late. He's corrected it since and it's been removed, but by then it was too late to get him on the loan if we wanted to make closing.

So here's our story...
We are selling our first home and buying our "upgade" and although you might think we're pros, the entire industry is vastly diff from when we bought our home in 2006. You know the story, 80/20 loan, no down payment, no closing out of pocket. We re-fi'd in 2008 to get a fixed rate and cashed out quite a bit. Fast forward to 2013 and we are bursting at the seams in our home with two new kiddos. The cash out left us in a position where we have zero equity so we are paying $11000 just to sell ( realtor fees and 3% closing for the buyer).

Our new home is under contract and our FHA down payment is $8700. So our funds needed to close total $ 19700-ish. We had planned to use 401k monies for all of it, but a part of the withdrawal didn't come thru in time so I had to get gifted $8000 from my sister. She has agreed to give the money to us at closing via cashiers check.

My DTI is good from what I've been told, I'm guessing about 35-40% since they are not counting my student loans (More on that below). My FICO scores from the lender were 748/757/773. Nothing on credit report is delinquent or in collections. I have been in the same industry since 2006 and earn $86400 with a variable bonus. Our current mortgage has never been late nor have any of my other revolving credit. My student loan debt is truly another mortgage (college+grad school). Fortunately, I'm in school again, though so according to my LO, they are deferred for long enough not to be included in my DTI. Our current mortgage is an FHA so we have to close on it first, so we've scheduled both closings for the same day back to back.

I think overall I'm in good shape but I worry about a few things.
First, there are two cash deposits in our account(one for $500 and one for $525). We have submitted a LOE with the file, they are from self- employment income my husband earns as a musician. We have a income statement from the church where he plays for supporting docs.
Second, one of the bank statements submitted (Jan14-Feb15) shows we incurred $450 worth of NSF fees that month. We submitted an LOE for that too, my mom was I'll and we had to travel suddenly, missing some of my husbands income, and also out of routine for checking the account.
Third, we must close March 26 or else we will be homeless for however long past that date we close.

What's my likelihood for things going smoothly? Am I likely to have any conditions? Will the fact that I need a gift to close hurt me? Will those darn NSF fees be the end if it all? I have seriously bitten my nails to the quick worrying about what can go wrong! My LO says not to worry but really, that's just impossible!


*sorry for typos, I'm on an iPad!*

[Sunshine85]

I don't think the gift funds will be an issue, but the NSF charges are another story. Given the amount of fees, and the fact that they're recent, I would definitely expect the UW to be concerned and ask for additional information. 

Not trying to scare you, but that's just my humble opinion. 

[Anonymous]

What else could they possibly want to know? I pointed out the debits on my bank statement from the hospital in my hometown proving I was out of town in a hospital. I feel like my credit score ought to give me a pass. I mean, so what I got some fees...my creditors always get paid in the end, on time.

Does anyone have any idea how long this could take?

[Sunshine85]

They could ask for additional documentation to support the explanation in your letter. OD fees typically range from $30-40 per occurence, so that means that you had more than 10 overdrafts in less than a month's time, all occuring within one month of applying for a mortgage. It will not be a 'so what' for the underwriter. There are people who've been declined because of *one* NSF/overdraft. Regardless of your score, I would not expect an UW to let this pass on an LOE alone.

[Anonymous]

You know, what really sucks is that the overdrafts totaled about $70 and were all these small charges like $3.56 from the gas station because they paid the larger debits first and left the smaller ones to give me fees for. It's a totally off topic rant, but it really grates.

[Anonymous]

Would the other details in my file give me more support for an approval?

[Sunshine85]

How long have you been with your bank? Would it be possible for them to write a letter stating prior to Jan-Feb, you maintained the account well and did not incur NSF fees? I think it would add credibility to the fact that the only reason you were overdrawn was because your mom was ill and you had to travel suddenly. 

[Anonymous]

I've been with my bank since college (1997 or so). We also have our current mortgage with them. I suppose it's worth a shot. Really hoping it won't be a sticking point. I wouldn't think my file is weak, in general, so maybe my documentation will be sufficient. Wishful thinking. The bank statement shows the hospital charges and also the income statement from church shows the missing income.

Thanks for your input, greatly appreciated.

[JM-AM]

Okay take a deep breath...

The good is it is still an approvable loan, pending everything else goes smoothly such as the sale of your present home as an example. Your OD fees can cause you issues to the point of a denial. But once again breathe...

Since you are hoping to close towards the end of the month, that actually may help for limited expense if you were denied. So your game plan should be to figure out what you would be able to do for where you would live if things didnt work out for about 30 days. Rent a hotel room by the week? Possibly stay with friends and or family for a very short period of time? Figure out what you can do, and what you will have to do if for some reason you are denied.

You should be thinking about this anyway, since you have to sell your home first and would be committed to a contract with a buyer. So even if your loan is denied, what do you do tell the buyer your not selling? Im no lawyer, but I would think their is some repercushion.

Okay back on topic...

If you can find a place for about a month (if denied), and just reapply with a new Broker or LO come very beginning of April, most Brokers and LO's only require your last 2 months of statements, so your OD fees wouldnt be in the statements and since your home is already sold you would close in a fairly quick turnaround of 10-15 days.

Your biggest set back for yourself, is trying to have a plan B for a place to stay if things do not work as planned.

[Anonymous]

I hear you. I pray that won't be the case as we dont have family here and have two small children, living in a hotel for 30 days would be awful for them and us. I never would have thought they could play that much of a role in all of this. Ive seen people with a much less favorable overall file get thru so I thought it wouldn't matter so much. Gosh, I feel like I've worked so hard for nothing.