That is interesting for sure. I would think they'd be somewhat concerned because this could go many ways. You already said they were taking all the tax returns. They could also choose to have paychecks garnished, which could then affect your ability to pay the mortgage. I would just be optomistic but cautious. Not sure if I've ever heard of someone getting a mortgage with a defaulted student loan. But I suppose there is a first time for everything
I am thinking they're using Fannie Mae. According to their guidelines, they're pretty lenient on charged-off accounts, even student loans (someone chime in if I am wrong!). Since I believe this is conventional they don't use CAIVRS and all they care about is what it shows on his credit report. The report only shows it as a charge off with $0 and 0 payments (weird I know) so from his response, it sounds like they only care about our base credit report?
@Jville I totally agree, actually, which is why I am still nervous. He is the VP of the mortgage department of the bank and an older gentleman, so I know this isn't his first rodeo. We live in semi-rural New Mexico and the market here is extremely slow if that makes a difference? I've read that sometimes banks are more lenient when they're in slow markets. Does anyone else know if that might be true?
As a LO and UW of nearly 30 yrs this would not fly past me. A 2014 charge off? I would request an update to the CR and likely require rehab. with reestablished on time payments or decline if applicant has other credit issues.
As an UW, a borrower who can afford to pay and does not is an issue for me. I hope you don’t run into an old school UW.
Anyone else care to comment?
As an UW, a borrower who can afford to pay and does not is an issue
You're good! I'd rather hear other peoples' insights now than go through the entire process and hit this roadblock later after the fact. No worries. I appreciate anyone's opinion, especially if you've dealt with these things firsthand.
This is the question you will be asked on your loan application.
“Are you presently delinquent or in default on any Federal debt or any other loan, mortgage, financial obligation, bond, or loan guarantee?”
For your husband the answer is Yes.
Your LO needs to immediately run this entire scenario past underwriting upfront before you go one step further. A mortgage insurance company also needs to approve your loan. The amount of your defaulted SL is what many people have in a car loan. In fact my car loan is twice as high (am I remembering something under $40,000?) only your terms are likely better.
Please insist UW clear you before you get your hopes up and cause a seller to take their home off the market. Good luck to you!
OP, you also don't want to be putting up any monies that could be lost because the financial application didn't include all the facts. Monies that could be lost is EMD, any inspections you've paid for upfront, an appraisal. Yep, this situation is kind of shaky at best, and getting out in front of it as you're doing is smart.