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Old 03-20-2015, 09:00 PM
 
30 posts, read 48,172 times
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in late 2013, my mother and i purchased a home in southern california with a combination of cash and a loan against her retirement accounts. i had just started a new job after working a contract job for the summer, but i could not qualify for both the new home with the mortgage payment on my home in PA still included as a debt. so, we decided to do this way and then do a cash-out later to pay off the balance of the retirement account loan. the balance i need to re-pay to my mom is $200k.

fast foward 1.5 years to today and i'm trying to get $250k cash out, to re-pay mom and cover repairs / closing costs on the PA home, and some improvements on the CA home...started a mortgage with a lender that says because of my assets and strong credit (750+), they can qualify me up to 50% DTI. i run the numbers myself and find myself at 43%...if we use some of the funds to pay off the PA mortgage. this is fine because the PA home is now under contract and closing next week...

i proceed with the app and end up getting hit with a $700+/mo "debt" because when i was working on a contract job in the summer of 2013, i stayed in a hotel for 5-6 months and deducted the lodging/meal/mileage expenses. i end up closing three cards and having them marked to be paid with the loan proceeds, and still have to lower the loan amount to $245k. the problem is that with the appraisal people dragging their feet, we had to extend the lock and not close on time. so, i had to use some open lines to pay for part of the costs for the sale on the PA home.

another amusing tidbit, the appraisal comes in ridiculously low for the area and just conveniently happens to put my LTV over 60%, costing me another $1000 in closing costs.

today, underwriting says i no longer qualify and they want me to lower my debt by an additional $244/mo (this is after i already lowered it by $180/mo) and close even more cards. i just don't understand and can't fathom how there's no procedure in place for me to dispute and have the 2106 expenses excluded, and have those five months of lodging derail 1.5 years of income. should there not be a way for me to show my credit card receipts (the same as i had to do to my accountant when we filed my taxes and deducted this stuff to begin with) to prove that they were temporary expenses? it makes me angry to a point to be hit with a $700+/mo "debt" that hasn't existed since september 2013. without this nonsense, i'd be well under 50% dti...and on top of it, i'm out the $500 for the appraisal and i've closed out three cards that were in good standing for seemingly no reason unless i follow through and close even more cards at this point.

i guess this lender might be a lost cause, but what are my options here? are there any lenders that will allow this? without closing on this loan by next week (we were supposed to be closed by march 5th) i will probably have to take additional money against open lines to pay the amount i'm going to lose on the PA home, since without having it paid off i'll have to write a check in order to sell the house.

my income is $75,000 salary, plus minimum $2,000 (up to the balance of the retirement account) that i have to take from my inherited IRA yearly. the minimum changes every year.

DTI after the three cards i've closed, including the CA home is under 40% (39.6)...if the PA home and 2106 are excluded. DTI with the PA home included (but no 2106) is 48.5%. DTI with PA home and 2106 included is 58.9%, such is the problem. as long as the 2106 are included, even after i sell the PA home, DTI is 50.04%...so slightly over even if they're allowing up to 50%.

any thoughts are welcome...or let me know of course if you need further details.
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Old 03-20-2015, 09:11 PM
 
Location: Austin
7,077 posts, read 16,893,484 times
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You shouldn't be closing credit cards. That's lowering your credit score and also lowering your credit worthiness.

Why don't you go ahead and do your taxes for 2014 to show that expense is no longer there? You haven't mentioned if you turned in 2014 taxes or just 2012 & 2013.
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Old 03-20-2015, 09:42 PM
 
30 posts, read 48,172 times
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Quote:
Originally Posted by FalconheadWest View Post
You shouldn't be closing credit cards. That's lowering your credit score and also lowering your credit worthiness.

Why don't you go ahead and do your taxes for 2014 to show that expense is no longer there? You haven't mentioned if you turned in 2014 taxes or just 2012 & 2013.
that was an option i considered (actually the first option), but i was still waiting for a schedule k-1 from my aunt's estate (i had approx. $5000 in income from there, a late arriving annuity from her passing in 2012). i just got the k-1 yesterday. on top of that, the lender wouldn't accept that unless i waited 30-60 days until after filing so they could get a transcript. by then the rate lock would have expired...i locked 3.5% at less than 1 full points in mid-january. the two returns i submitted were '12 and '13.

i didn't want to close the cards, but that was the only option they gave me for getting my DTI within range since they're counting the ridiculous 2106 expenses against me. the other option would have been to lower the loan amount to $205k, which wouldn't be enough to pay my mom back and cover the expenses related to selling the house in PA, let alone do the improvements i want to do on the CA house. they're giving me the same option now, but lowering it even more (to $195k)...

i'm more than a little pissed that i closed them out and now am still getting screwed...
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Old 03-21-2015, 12:10 AM
 
30 posts, read 48,172 times
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another quick note: the DTI numbers i calculated include $15,000 / yr income from the inherited IRA (which is the amount i took in 2014 - i took $5,000 in 2013). total balance right now is just over $100k. not sure how they count that...but even with just my salary, i'm under 45% DTI with the three cards closed out if you don't count the non-existent business expenses (once the house in PA is sold - 46.7% if you count just taxes/insurance on the PA house but no mortgage).
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Old 03-21-2015, 12:33 AM
 
16,493 posts, read 17,525,712 times
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With 45% DTI you're just very borderline. Can you wait till the PA house is off the books. At that point you'll wipe out payment, Can you talk to mom and see if she can take a bulk payment and once the ripples calm you can bulk pay the remaining owed money?
Put off the improvements to the CA house. Wipe out the PA house instead. Take a lesser loan amount oay mom back and then set money aside for the improvements.

You might be able to send a explanation on the expenses. Can you show a reimbursement check that covered the CC debt!
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Old 03-21-2015, 09:30 AM
 
30 posts, read 48,172 times
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That's the problem...at the lesser loan amount they want me to take, I don't even borrow enough to pay her back let alone cover the amount I'm losing on selling the PA house (remember, I'm going to have to write a check to close on that house plus I have repairs that need to be done).

There is no reimbursement check, they were in unreimbursed expenses. That's what 2106 are.

Also like I said, if you count the retirement account income I'm under 40% once the PA house is paid off. Basically I feel like they pulled a huge bait and switch in saying they would approve me up to 50% and now throwing all these other conditions into the mix...
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Old 03-21-2015, 10:33 AM
 
16,493 posts, read 17,525,712 times
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Quote:
Originally Posted by crackers8199 View Post
my income is $75,000 salary, plus minimum $2,000 (up to the balance of the retirement account) that i have to take from my inherited IRA yearly. the minimum changes every year.

DTI after the three cards i've closed, including the CA home is under 40% (39.6)...if the PA home and 2106 are excluded. DTI with the PA home included (but no 2106) is 48.5%. DTI with PA home and 2106 included is 58.9%, such is the problem. as long as the 2106 are included, even after i sell the PA home, DTI is 50.04%...so slightly over even if they're allowing up to 50%.

any thoughts are welcome...or let me know of course if you need further details.

Quote:
Originally Posted by crackers8199 View Post
That's the problem...at the lesser loan amount they want me to take, I don't even borrow enough to pay her back let alone cover the amount I'm losing on selling the PA house (remember, I'm going to have to write a check to close on that house plus I have repairs that need to be done).

There is no reimbursement check, they were in unreimbursed expenses. That's what 2106 are.

Also like I said, if you count the retirement account income I'm under 40% once the PA house is paid off. Basically I feel like they pulled a huge bait and switch in saying they would approve me up to 50% and now throwing all these other conditions into the mix...
The problem is the underwriters won't let it go through once the PA and 2106 are added in. What you can do is write out WHY you had to do the 2106 expenses, and that it was a one time contract deal. They may buy it.

Ok
Can you talk to the underwriters and say direct x amount of the cash out to whomever lender your PA house is attached to. This way you're saying as soon as you loan the money wont even hit my account it gets to wipe out x% of debt.


Can you swing covering the PA home out of pocket costs to close and walk? If you can you may want to do that. Then wait a bit to clear the 2106 then go refi to cover your moms money?
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Old 03-21-2015, 10:43 AM
 
30 posts, read 48,172 times
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Quote:
Originally Posted by Electrician4you View Post
The problem is the underwriters won't let it go through once the PA and 2106 are added in. What you can do is write out WHY you had to do the 2106 expenses, and that it was a one time contract deal. They may buy it.

Ok
Can you talk to the underwriters and say direct x amount of the cash out to whomever lender your PA house is attached to. This way you're saying as soon as you loan the money wont even hit my account it gets to wipe out x% of debt.


Can you swing covering the PA home out of pocket costs to close and walk? If you can you may want to do that. Then wait a bit to clear the 2106 then go refi to cover your moms money?
we were already doing that (paying off the PA house)...the cash out from the CA home was going to pay off the house in PA, and then when that house settled i would take that money and re-pay mom. that was the plan. the problem is that the 2106 expenses are such a ridiculous amount that they kill my DTI no matter what i do unless i basically close every card i have, which would be stupid. i use credit for everything and pay the cards off in full every month! such is the problem, i pay them after the statement cuts so they're each reporting a balance...

i can cover the costs out of pocket, but they'd have to come out of the inherited IRA (i don't have enough in straight savings to cover it)...which is what i was trying to avoid since once the money is taken out of the inherited IRA it can't be put back in. would be better off leaving it there to continue growing tax free until i need to take my minimum distribution for this year.

my problem is that the loan officers say there is absolutely no procedure for me to have the 2106 excluded. no way i can write a letter and show them the proof (which i could do in about two seconds, literally) that they were temporary expenses that no longer exist...so, they continue to count $783/mo against my income for a debt that doesn't exist and completely blows up my DTI.

that was more the purpose of my question - are there lenders out there who will allow it? i know i've read that there should be a procedure in place, it just seems i picked a BS lender who has no way to exclude them...the other issue of course that i locked such a low rate and if i wait a while until the PA house settles, there's probably no way i'm getting 3.5% at less than one point again.
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Old 03-21-2015, 12:59 PM
 
16,493 posts, read 17,525,712 times
Reputation: 23556
Quote:
Originally Posted by crackers8199 View Post
we were already doing that (paying off the PA house)...the cash out from the CA home was going to pay off the house in PA, and then when that house settled i would take that money and re-pay mom. that was the plan. the problem is that the 2106 expenses are such a ridiculous amount that they kill my DTI no matter what i do unless i basically close every card i have, which would be stupid. i use credit for everything and pay the cards off in full every month! such is the problem, i pay them after the statement cuts so they're each reporting a balance...

i can cover the costs out of pocket, but they'd have to come out of the inherited IRA (i don't have enough in straight savings to cover it)...which is what i was trying to avoid since once the money is taken out of the inherited IRA it can't be put back in. would be better off leaving it there to continue growing tax free until i need to take my minimum distribution for this year.

my problem is that the loan officers say there is absolutely no procedure for me to have the 2106 excluded. no way i can write a letter and show them the proof (which i could do in about two seconds, literally) that they were temporary expenses that no longer exist...so, they continue to count $783/mo against my income for a debt that doesn't exist and completely blows up my DTI.

that was more the purpose of my question - are there lenders out there who will allow it? i know i've read that there should be a procedure in place, it just seems i picked a BS lender who has no way to exclude them...the other issue of course that i locked such a low rate and if i wait a while until the PA house settles, there's probably no way i'm getting 3.5% at less than one point again.

Yeah I undrestand what your battle is. I don't know of any lenders but there may be some lenders that may loan in situations such as yours. Who recommended this lender? The agent?
A lender/bank can lend however they want as much as they want on whatever terms they want. The reason they don't is if they want the loan federally backed or bought they have to stay with fed guidelines. If they stray, and you default they get to eat the loan. They simply want the liability n someone else.

Some of the loan/investment guys might have some ideas.
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Old 03-23-2015, 08:05 AM
 
Location: Southern California
4,350 posts, read 4,933,884 times
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I don't think 3.5% for a portfolio product is realistic. If you want to work outside of the standard box, expect to pay more, which is common for investors. Are there lenders that will do it, probably, but it could take some time. I didn't look at all the details of the transaction because there will always be something else missing. I've accepted I'm not a best rate advertised borrower, but it hasn't stopped me from moving on. If I need to get a 4,5, or 6% loan, I just build it into my calculations and decide from there, other people get stuck on rate and say if I can't get a 3.875, then I'm not going to get a loan and buy a property. DM me if you want to discuss more.
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