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Old 01-31-2008, 08:40 PM
 
8 posts, read 67,979 times
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Hi,

Young and dumb here. So I'm in the process of buying my first condo. I have my lawyer look over documents, sign all the paper work, do the walk through, and three days before closing the mortgage company calls me and says that I am not qualified for the mortgage. "WHAT!!!!!" was my reply, i got my good faith estimate, started the paper work and thought I was good. But I sent her my bank statements a few weeks ago and now, 3 days before closing she says I don't have enough cash reserve......... me being young and dumb I didn't know I needed any, wasn't told i needed any and now don't know what to do. I live pretty much paycheck to paycheck, but my mortgage is the same amount i was paying toward my rent. so i can make the payments. I am learning about investing and working on ways to increase my cash flow, but I don't understand why I need cash reserve. after reading a few articles this evening I understand the concept now.

My question is, is there any way i can get around this and close on my closing day?
Any advice at all?

thanks
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Old 01-31-2008, 08:46 PM
 
Location: Charlotte, North Carolina
5,137 posts, read 15,093,116 times
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depends....FHA doesnt require reserves.
You need reserves in case you lose your job...how do you expect to pay the mortgage then?

Not sure what product would be appropriate for you until these questions are answered.
Purchase price? down payment? credit score? Debt to income ratio? Income? County/State?
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Old 02-01-2008, 06:58 AM
 
1,408 posts, read 7,254,878 times
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renrig is right you need reserves in case of an emergency. you mentioned your mortgage is the same as your rent but did you factor in insurance and taxes? Your actual mortgage payment may be the same as your rent but if you have not included taxes and insurance and you're living paycheck to paycheck how are you going to pay for these two VERY IMPORTANT items.
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Old 02-01-2008, 07:00 AM
 
Location: Durham, NC
1,364 posts, read 5,446,722 times
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Does having $$ in a 401K count as "cash reserve" for bank purposes? Obviously wouldn't plan on using that, but minus penalties, is it considered? (for those of us who are scraping thin to come up with 20% down)
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Old 02-01-2008, 07:34 AM
 
Location: NC
1,264 posts, read 2,119,205 times
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I've run across this before. Contact your bank and see if you can use gift funds as reserves. And if so, and if you have a relative who you can get the money from, problem solved. But definition of relative is usu. phrased to mean immediate family.

Good luck...
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Old 02-01-2008, 07:52 AM
 
Location: Oz
2,238 posts, read 8,695,129 times
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Quote:
Originally Posted by ChipL View Post
I've run across this before. Contact your bank and see if you can use gift funds as reserves. And if so, and if you have a relative who you can get the money from, problem solved. But definition of relative is usu. phrased to mean immediate family.

Good luck...
And they will have to provide a notarized letter stating that the funds are indeed a GIFT and not a personal loan.
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Old 02-01-2008, 08:17 AM
 
Location: Charlotte, North Carolina
5,137 posts, read 15,093,116 times
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Not a notarized letter...just a simple letter stating their name...your name...your relationship together...the amount their giving...

FNMA has a letter for this that can be given by the lender.

Quote:
Originally Posted by RoaminRed View Post
And they will have to provide a notarized letter stating that the funds are indeed a GIFT and not a personal loan.
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Old 02-01-2008, 08:19 AM
 
Location: Charlotte, North Carolina
5,137 posts, read 15,093,116 times
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Yes. Only 70% of the vested balance can be used..minus any loans on it

Quote:
Originally Posted by sneezecake View Post
Does having $$ in a 401K count as "cash reserve" for bank purposes? Obviously wouldn't plan on using that, but minus penalties, is it considered? (for those of us who are scraping thin to come up with 20% down)
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Old 02-01-2008, 08:26 AM
 
Location: NC
1,264 posts, read 2,119,205 times
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Quote:
Originally Posted by sneezecake View Post
Does having $$ in a 401K count as "cash reserve" for bank purposes? Obviously wouldn't plan on using that, but minus penalties, is it considered? (for those of us who are scraping thin to come up with 20% down)
Sneezecake -

The answer to your question is yes. For reserves purposes, you can count up to 70% of your 401k, 403b, IRA or other retirement account.

But don't get that confused, with using 401k money for down payment. Different ballgame. That's up to your 401k plan and whether or not you can take out a loan against your 401k for that purpose. If you are able to go that route then your 401k loan debt would be included in your monthly DTI for mortgage approval purposes.
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Old 02-01-2008, 12:04 PM
 
Location: New York City
1,836 posts, read 2,832,990 times
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Quote:
Originally Posted by ChipL View Post
Sneezecake -

The answer to your question is yes. For reserves purposes, you can count up to 70% of your 401k, 403b, IRA or other retirement account.

But don't get that confused, with using 401k money for down payment. Different ballgame. That's up to your 401k plan and whether or not you can take out a loan against your 401k for that purpose. If you are able to go that route then your 401k loan debt would be included in your monthly DTI for mortgage approval purposes.
question about 401K

Under my plan i can use up to 50% of my 401k as a LOAN for the purpose of purchasing a primary residence.

Any further distributions would be in the form of a "hardship withdrawal" with such withdrawl only approved under certain circumstances- one being the prevention of eviction or foreclosure of primary residence.

Do lenders differentiate between available Loans or Hardship Withdrawals when used for post-closing reserves?
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