Overdraft fees and Going to Underwriting

[btsilver]

Hi

I am in bit of a panic here. We are currently in the process of buying another house and selling ours. We just got an offer that we accepted for our home and put in an offer for our dream house. And this is all planned to go down at the end of October.

However I was just skimming the internet an came across some articles about people could get denied a mortgage for having overdraft fees in their bank statement. How many overdrafts would be too much if this is true? I had a couple the past few months. We have several bank accounts and the money we are using as a down payment and the initial escrow payment aren't the account that has the overdraft fee.

Our Credit is good and our DTI is good as well, so how bad is this really? I'm sweating over here.

[Anonymous]

Overdraft fees were the reason I was denied the first time around. I ended up going with another lender that didn't need to see my bank statements due to me not having any closing costs. 

[btsilver]

Was it a major bank that denied you or something smaller like a Credit Union?

[Anonymous]

It was a smaller one.

[btsilver]

So did you have a strong record otherwise and the only thing they said was because of the overdrafts?

[2b2rich]

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@btsilver wrote:

Hi

I am in bit of a panic here. We are currently in the process of buying another house and selling ours. We just got an offer that we accepted for our home and put in an offer for our dream house. And this is all planned to go down at the end of October.

However I was just skimming the internet an came across some articles about people could get denied a mortgage for having overdraft fees in their bank statement. How many overdrafts would be too much if this is true? I had a couple the past few months. We have several bank accounts and the money we are using as a down payment and the initial escrow payment aren't the account that has the overdraft fee.

Our Credit is good and our DTI is good as well, so how bad is this really? I'm sweating over here.

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I'm not sure if it's the same with all lenders, but somewhere it stated to list all bank accounts.  I'm not trying to sound like a wet blanket, just didn't know how it would be viewed if any were left off.  

On the other hand, if you have any plans of closing this particular account, now might be a good time before you apply?   Just a thought.  I recently applied for my first home loan and am learning a lot so I don't know these things for sure.  Good luck!

[btsilver]

Thanks. The problem is that is my main bank account that I get my direct deposits to. I am curious as to how bad it looks if only one account out of 5 has a couple of overdrafts.

I mean is this a definite show stopper because our old house is pending and we already sent the offer in to the other to be accepted. So we will be in a new house or homeless by the end of october.

[2b2rich]

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@btsilver wrote:

Thanks. The problem is that is my main bank account that I get my direct deposits to. I am curious as to how bad it looks if only one account out of 5 has a couple of overdrafts.

I mean is this a definite show stopper because our old house is pending and we already sent the offer in to the other to be accepted. So we will be in a new house or homeless by the end of october.

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OK.  I was looking to see if not disclosing all bank accounts was some kind of fraud or something (can't find that it is), but it's irrelevant since you will most likely have to show your direct deposits.

You said 'a couple' in the past few months.  Is that like '2'?  I don't think if every thing else is good with your application (dti, credit, etc) that it's going to be an automatic denial, but more of an Under Writer's call.   After I read this post, I googled it and read where some people only had to write LOX (good ones that would show it was not going to be an ongoing problem).

There were a few who stated they were denied due to them, but an example was a lady who said they had 3 overdrafts in the past 3 months that resulted in $1,200 in fees.  I believe that the fees are probably what sent up the biggest red flag there.  

[btsilver]

I had 2 over the past couple of months. i had a payment that I forgot I scheduled (Paying down my credit cards) and so I made a couple of small purchases that (like a soda and chipotle) that overdrew my account. And this happened one day before my direct deposit. So the bank has it as me making my big scheduled payment, and then overdrawing on a snack and a meal from chipotle. i got one fee for 35 bucks.

[lesse]

i applied for my mortgage in May of 2014 and i had One overdraft in March. The bank statement was requested in June so i provided April and May since they requested 2 months. I was actually in the clear. My understanding is that an overdraft would be an automatic denial if i was to provide them that statement. Thank goodness they didnt ask for it. I had a 630 midscore at the time of application and some negatives on my credit report so this is the reason why i had to have everything else in good standing.