Turned down by Wells Fargo . . . next steps

[Anonymous]

I received my letter from Wells Fargo letting me know that I was turned down for a 100K FHA 203K loan for a foreclosed property.

Here's my situation:

-2yrs on job

-40K per year

-$6K in savings

-Pd collections on CRs one in 2008 the rest over 3 yrs old.

-Late electric/cable bills (nothing over 30 days and never turned off.  Been paying before due date since Feb)

-625 EQ, 620 TR on myFico as of yesterday, not sure of Experian but it was way higher than EQ/TR when myFico still had them

-1 JCP crdt card with $800 crdt limit w/zero balance and always paid on time. No other credit card or debt.

-Rent always paid on time

-Student loan in forebearance until Aug 09 that does not appear on my credit reports b/c the original loan is very old and rehabbed.  I went into forbearance because I thought I could save money this way, but the UW at Wells Fargo didn't say it that way.  I tried to use this as an alternative line of credit and this is how it came up.  Loan payment will be 272per mo.

-Found out there's a BMG Music collections on my TR CR yesterday that just started reporting this month.

The loan officer said my debt to income and housing payment history were stellar, but the forbearance along with the late utilities were a problem.  I'm not sure if i should apply somewhere else now or get a secured credit card and pay off small amount each month and wait until next year.  I really want the first time homebuyer credit and I know I need to close before end of they year.  100K is the max I want and a house for 85K turn-key just came on the market that's not a foreclosure. Any suggestions of what I should do?

Thanks much in advance!!

Message Edited by getmyhouse2009 on 05-25-2009 09:27 PM

[Anonymous]

What month was the 2008 collection? That might be a problem as well. They're looking for 12 months clean history. Forbearance obviously is a problem, espeically when they're federal loans.

Message Edited by ladyofnight on 05-25-2009 08:10 PM

[Anonymous]

The collection began reporting after I was pre-approved.  It began reporting in 3/08 and will come off 4/11.  The forbearance doesn't show on on CRAs b/c it's like 13 y.o.  Forbearance ends 8/09 with a 272/mo. payment.  I reported the student loan as a alternative line of credit.  Should I apply elsewhere or wait 6 mos. to a year?  Any help is greatly appreciated.

Message Edited by getmyhouse2009 on 05-25-2009 09:25 PM

[DallasLoanGuy]

When denied for an FHA loan.... the lender reports this to HUD.

It would be extremely difficult for another lender to approve with th same info.  

Now, if something changed about your situation.... then it would be a lot easier. 

What did Wells say about the student loan? It is either deferred or not.

[Anonymous]

Thanks for the reply.  Yes, it's still in forbearance until Aug 08 and they believed it was in forbearance b/c i could't afford to pay.  I wrote a letter explaining why I'm in forbearnce b/c i don't qualify for deferrment and I wanted to save more for downpayment. 

What type of change would make another it easier?  Should I get a secured credit card and wait till next year?  I'm charged to get a house now, but if I can't get approved i have to do what I have to do.

[Anonymous]

Are you using the utilities for alternative credit?

I'm not sure of the area in which you live, but I would try NACA.  Their current rate is 4.375%.  Using the mortgage calculator with the default of $50 insurance, $50 NSF fee and 12% taxes, the payment would be 699/mo.  They will require you to pay $20 membership fee for the year and $10 for each of your tri-merge credit reports that they pull, but you can't beat the interest rate. Plus you can buy-down the interest rate to almost 0%.  Every 1% of the purchase price will knock off .25% interest.  They will include the student loans in forbearance in your DTI but with your income, you will still be well below their max of 40% DTI as long as you don't have any other credit card debt.  They require you to save 3-6 months payment shock (the difference between your current rent and your anticipated mortgage payment.  There is no PMI but they require $50/mo NSF (neighborhood stabilization fund).  If you lose your job, are laid off, out on leave, etc, you can apply to the NSF to have them pay your mortgage and keep you from falling behind.

No closing costs, no down payment.

You will have to attend a 4-hour workshop to learn more about the program.

There is a NACA thread on the forum where you can read all about it.

Some offices are very slow and some counselors are horrible with follow-up.  You will have to stay in constant communication with him/her to make sure you stay on track.

They will require you to fill out a budget and stick to it.  Since you have $6k in savings, that should cover pre-paids and at least one month reserved payment.

 Give it a shot.  They even allow you to rehab a property.

The program is great.  It will take a lot of patience, but they will work with you on some lates and won't just deny you.  I think you could even make it to closing in time to get the 8k tax credit.

Good luck to you.

Sorry for the long post.