Mortgage Case Scenarios Of Borrowers With Bad Credit
This BLOG On Mortgage Case Scenarios Of Borrowers With Bad Credit Was PUBLISHED On July 12th, 2019
Mortgage Case Scenarios:
- If you have followed Gustan Cho Associates blog for a while you understand that many of our clients have been turned down by their current lender
- If you are reading our articles for the first time you will soon understand what makes us different than other lenders
- In this blog, we will detail a few recent success stories Gustan Cho Associates Mortgage Group have had
In this article, we will discuss Mortgage Case Scenarios Of Borrowers With Bad Credit.
Hot Housing Market And Willing Buyers
During the Spring, the real estate market really heats up!
- Mortgage companies and real estate professionals are busier than ever
- A great sign for the economy
- With the increased volume of real estate transactions comes an increased volume of mortgage denials
- The majority of mortgage lenders have additional LENDER OVERLAYS
- Lender overlays are additional mortgage guidelines by lenders above and beyond Fannie Mae, Freddie Mac, FHA, USDA, and VA guidelines
- The good news is, GUSTAN CHO ASSOCIATES AT LOAN CABIN DOES NOT HAVE ANY OVERLAYS
- This is why we are able to help more borrowers the most mortgage companies
- We will now detail a few examples
The borrower’s names have been changed in this blog for privacy purposes.
Mortgage Included In Bankruptcy Scenarios
CONVENTIONAL CHAPTER 7 with home foreclosure:
- Brian filed a chapter 7 bankruptcy in 2011 that was discharged in February of 2012, 7 years and 5 months ago
- Brian included a home that eventually foreclosed in his Chapter 7 bankruptcy
- The home was located in Cook County Illinois and the actual foreclosure transfer date was not recorded with Cook County until September of 2014
- Brian applied for a mortgage with a different mortgage company and was denied during the process because of the foreclosure
- This particular bank had an additional overlay on foreclosure seasoning
- This is a common overlay but is not a guideline
- Per Fannie Mae guidelines, if the home that foreclosed was included in the Chapter 7 bankruptcy, the bankruptcy discharge date can be used in lieu of foreclosure recorded date
- Please see FANNIE MAE’S WEBSITE for more information on this guideline
We were able to save Brian’s loan and get him closed. We do not add any additional guidelines on all our FANNIE MAE mortgages.
VA Manual Underwriting Mortgage Case Scenarios
VA MANUAL UNDERWRITE with late mortgage payments:
Gustan Cho Associates are experts in VA financing. we are also specialists in manual underwriting.
- Mark and Sue applied for a VA loan and was told they do not qualify because there is a late payment on their current VA mortgage in April of 2019
- They are in the process of selling their property in Florida, so they can move to Texas
- Sue was transferred to San Antonio Texas for work purposes
- The mortgage company they originally contacted was not able to get an automated AUS approval due to the late payment on their mortgage
- This particular mortgage company does not allow for manual underwriting
- Late payments on a mortgage are difficult to get around
- In this case, we were able to document that Sue was hospitalized back in April when the payment was missed
- Sue is the primary wage earner in this family
- The late payment was 30-days late, but Sue had medical records to back up why she missed a payment
- We were able to put this loan in front of an underwriter early in the process and the underwriter justified the reason for being late
- As mentioned above, late payments are hard to get around on a mortgage or rent, documentation is key
The medical documents, as well as a letter of explanation, allowed the underwriter to render a decision that this was a one-time 30-day late payment and not likely to happen again in the future. We were able to get this mortgage closed.
FHA DTI Mortgage Case Scenarios
- FHA and debt to income ratio can be confusing. Many lenders have overlays where they do not allow over 50% back end debt to income ratios for any FHA mortgage
- This is very common across the industry
- Once again, this is not a guideline
- FHA AUS is called TOTAL SCORECARD, and that AUS report will tell us how high we can go on DTI
- For automated AUS approval, FHA can go up to 46.99% / 56.99% DTI
- Those figures are the maximum TOTAL SCORECARD will allow
- In this example, the loan officer originally counted overtime income and pre-approved the client at a 46% back end DTI. when the final entered underwriting the underwriter realize there is not a two-year history of receiving overtime income
- Therefore, the overtime income will not count
- With the removal of the overtime income, the debt to income ratio now went to 55.34%
- This did not fit into the lender’s overlays and was denied
- At this time the client reached out to Gustan Cho Associates and we were able to step in and save the day
- Once again, we do not have any additional guidelines on debt to income ratios
- We were able to get an automated approval with the debt to income
Since this was an FHA mortgage, the appraisal was transferred over to Loan Cabin and moved forward at a rapid pace and did not miss the closing date.
We encourage you to reach out to us directly if you feel your mortgage company is giving you the runaround. Overlays are very common in the industry and get in the way of thousands of Americans purchasing a new home or refinancing their current homes. We are available seven days a week, mornings and evenings! Our team is dedicated to being up to date on all mortgage guidelines. These are just a few examples of how we have saved the day for some recent clients!