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My sister wants to refinance and roll her HELOC and other debts into a new mortgage.
The Bad:
The resulting ratio of her new payment to her documentable income would be too high for the loan to be approved.
The Good:
Plenty of equity (even with the higher mortgage and lower appraisals of the current market, debt on the house would be under 60%)
Good credit score (700+)
Even if the Liar Loans were still out there the penalty interest rate and points would be unacceptably high. Is it possible to have a non-resident of the house who does have the documented income to 'co-sign' the new mortgage to make the debt to income ratio work without having to refi with a penalty rate and penalty points?
Would it be necessary to put the 'co-signor' on the title?
Does anyone have any other suggestion to work this problem in a way that would allow my sister to get a good interest rate and payment?
1st of all, a co-signor does not have to be in title. Speaking as an underwriter, if the lender receives and approve thru automated underwriting system, LP or DU, then there is no worry with the hight ratio. However, if a co-signor is added you may have to document your sister's income via tax returns. There are also other ways to go stated income with validation of self employment. Keep in co-signor debts are included in ratios.
You are correct 0679, I meant conforming. By the way, the loan being refinanced would be a VA loan, but given that other debts would be rolled into it, I guess it would have to be refinanced as a conventional loan. Correct?
If the refi was run with full doc, won't the person processing the loan want the income verification?
VA or gov't loans are not considered conventional mortgages.
They just raised the VA loan limit to 650k.
DU - Desktop Underwriter.
Basically a software that determines the strengths/weaknesses of a borrower by evaluating debt to income, ltv, assets, etc.
If it's a VA Loan they will most likely want to document EVERYTHING even if it doesnt call for it.
Regular conventional/conforming loans can bypass the income portion when the LTV is less than 80%..and a good credit score.
The DU/LP findings will have this written out that income can be stated..and only employment verification is required.
When I had a self employed borrower...they called the place of business...spoke to the secretary...and asked her how long the owner was an owner etc.
Quote:
Originally Posted by kettlepot
Could someone tell me what "DU" stands for?
You are correct 0679, I meant conforming. By the way, the loan being refinanced would be a VA loan, but given that other debts would be rolled into it, I guess it would have to be refinanced as a conventional loan. Correct?
If the refi was run with full doc, won't the person processing the loan want the income verification?
So, the existing VA loan will have to be converted in some way to a conventional loan, which given the 700+ credit score, and the 60% LTV seems doable. Or is taking out a conventional loan to replace a non-conventional loan require running through some extra processes? Otherwise, all that would seem to be necessary is to verify the employment, by calling the borrower's place of business and having someone verify that the borrower works there.
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