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Old 06-01-2018, 12:13 PM
 
38 posts, read 60,329 times
Reputation: 89

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We're potential first time home buyers. So far we have dealt with two different brokers. One last Oct. And one this month. Since last year, I have learned quite a bit about boosting credit scores. And we managed to get it up 100 points in 6 months. The latest broker couldn't get us approved for USDA. This prompted me to do more research as to why. I do believe he turned out to be a real DUD. Because I asked him from the start "I have concern over our credit card balances". He said "Balances are good. Don't worry". Well I thought he new something I didn't. But I am thinking he was just wanting to rush our info through for potential quick profit. Because everywhere else I read says to take care of balances FIRST. So we got denied. Their reasoning from the start was over a high DTI. Stating her student loans at 1% made it too high. Just last year, another broker stated that it only made us qualify for a lower amount. Not disqualify. But this time around, my wife reports $8000 more than last year. We're still low income. But higher income.



Anyway. My latest readings have brought all the fears about paper trails and bank bureaucracy. Maybe I am over dramatizing. But I do want to know just how "tight and secure" all ends need to be for obtaining an mortgage loan. We are considered low income buyers. My wife plans to do the mortgage in only her name. Our middle score is around 656. So we're close to qualifying for Down Payment Assistance at 660. Which is important. Because we have no savings. And with some loans you can roll the closing costs in if necessary.


But I am worried about how all this paper trail business works. Typically, my wife gets paid a check. Cashes it at her boss's bank. Because we have a Capital One 360 account which has no branches in our area. So we rarely use it for anything. She ends up with cash in hand. We put money on MY Bluebird card in which I Bill Pay our credit cards, auto loan, etc etc. The rest of the cash buys groceries, gas, etc.



So I question what a lender looks for and how they see our pay stubs, statements, etc etc compared to how WE see it. Will there be any problems? I don't keep every receipt for every purchase. So will this be like living in West Germany in the old days? Or am I being paranoid and just need to find a good lender to work with? I am trying to figure out what we need to change if anything before trying to apply again.



I appreciate any advice here.
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Old 06-01-2018, 01:44 PM
 
541 posts, read 198,572 times
Reputation: 582
Are you affiliated with a credit union?
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Old 06-01-2018, 02:01 PM
 
10,196 posts, read 6,129,840 times
Reputation: 10668
Quote:
Originally Posted by cooljoebay View Post
We're potential first time home buyers. So far we have dealt with two different brokers. One last Oct. And one this month. Since last year, I have learned quite a bit about boosting credit scores. And we managed to get it up 100 points in 6 months. The latest broker couldn't get us approved for USDA. This prompted me to do more research as to why. I do believe he turned out to be a real DUD. Because I asked him from the start "I have concern over our credit card balances". He said "Balances are good. Don't worry". Well I thought he new something I didn't. But I am thinking he was just wanting to rush our info through for potential quick profit. Because everywhere else I read says to take care of balances FIRST. So we got denied. Their reasoning from the start was over a high DTI. Stating her student loans at 1% made it too high. Just last year, another broker stated that it only made us qualify for a lower amount. Not disqualify. But this time around, my wife reports $8000 more than last year. We're still low income. But higher income.



Anyway. My latest readings have brought all the fears about paper trails and bank bureaucracy. Maybe I am over dramatizing. But I do want to know just how "tight and secure" all ends need to be for obtaining an mortgage loan. We are considered low income buyers. My wife plans to do the mortgage in only her name. Our middle score is around 656. So we're close to qualifying for Down Payment Assistance at 660. Which is important. Because we have no savings. And with some loans you can roll the closing costs in if necessary.


But I am worried about how all this paper trail business works. Typically, my wife gets paid a check. Cashes it at her boss's bank. Because we have a Capital One 360 account which has no branches in our area. So we rarely use it for anything. She ends up with cash in hand. We put money on MY Bluebird card in which I Bill Pay our credit cards, auto loan, etc etc. The rest of the cash buys groceries, gas, etc.



So I question what a lender looks for and how they see our pay stubs, statements, etc etc compared to how WE see it. Will there be any problems? I don't keep every receipt for every purchase. So will this be like living in West Germany in the old days? Or am I being paranoid and just need to find a good lender to work with? I am trying to figure out what we need to change if anything before trying to apply again.



I appreciate any advice here.
Yes your credit card balances matter as do any other outstanding monthly loan bills. The minimum of each card is taken into account. So if you have a credit card with $5000 balance your min bal say $100 is figured into your debt to income ratio. If you have a card you use for something small like ebay purchases like I do even with a small balance of $100 the minimum monthly amount is $35. So it's best to pay those off and not use them before applying. That's 135 less that you can afford on a monthly bill including your mortgage. They don't care about car insurance, or phone bills, etc. But your student loans will be part of you dti ratio.

When he said your balances are good I think he meant that your minimum payment was not so high as to create a problem with your dti ratio.

He's right that if you don't qualify for a $100K home you can qualify for a lower priced one even $90K.

They don't care if you cash your checks as long as the amount cashed comes from a paycheck or legit source. They mostly care about cash deposits that can't be explained. They don't care if you pay your bills by cash or money order, as long as you can provide proof if asked for that the accounts are paid for.

Before you try again find a local bank or credit union, they may be more helpful that an broker. Also an FHA loan while it has mortgage insurance it seems like you are going to need it anyway.

You do need to have some money to pay closing costs unless the down payment assistance pays it too. You need to show at least a few grand in your checking account. If you have a parent that can help you pay with gift funds that may help you.

One of the most important things is your earnest money deposit bank check has to come from your checking account. That they are very particular about.

If you have a good real estate agent they should know a lot of these things too and be able to answer your questions and lead you to a lender that can work with you.

You will need some money to pay for the inspection and the appraisal, but sometimes that can be paid with a credit card too.
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Old 06-01-2018, 02:41 PM
 
38 posts, read 60,329 times
Reputation: 89
Thanks for the replies. We are looking to get in a credit union asap. So it clearly looks like it would simplify everything just to use a standard checking account with a local bank. Our system of finances works well without one. But clearly, the red tape with lenders changes the game. So further straightening this out will be our next step before applying again. THANKS!
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Old 06-03-2018, 09:42 AM
 
Location: MID ATLANTIC
7,519 posts, read 17,286,639 times
Reputation: 7945
Have your wife keep all of her pay stubs.

Why are you not going on the mortgage? If it's because your income puts you over the max income, be very careful. Many of the first time buyer programs look at total household income.. This means if a spouse, or even a minor child or a parent, has income, that income is applied to the ceiling.

I strongly recommend both, you and your wife attend a first time buyers class. Greater understanding why money paper trails are required will remove the evil mask you are giving lenders. Same on the qualifying. I will take a stab and give you the Reader's Digest version of both.

Cash, money in bank - lenders are required to comply with the Anti Money Laundering Act, which is part of the Bank Secrecy Act. We are required to conclusively prove every dime in a real estate transaction belongs to the buyer (within the definitions we are provided). So when we see random large deposits that are not identified as payroll or IRS, you better believe we will ask about the source of those funds. Real estate is one of the #1 ways to launder money, with the top two reasons being drugs or terrorism.

In our government's infinite wisdom, they created a law referred to as Dodd/Frank. Simplified, this means if a lender provides you with a loan you were not qualified for and that loan is foreclosed upon, you, the borrower, may sue us for giving you a loan you are not qualified for. (Read that over and over, it sounds ludicrous, but it is very real). So, not only could you potentially wind up owning the home free and clear, but the lender and any individual involved in signing off on that loan could be penalized, as an institution and as an individual. It's called skin in the game.

So while you are lambasting a lender for nor approving a loan or giving you heartburn over deposits, remember, there are other assets besides yours are at risk. And if you have no money down and you are rolling in closing costs, what skin do you have in the game? The fines for us are large and very personal. Why should I risk $10K out of my personal pocket to give you a loan and you risk $0? Again, I admit this is an over-simplification, but it's the only way I know to get the point across.

Oh, and rolling in costs on a USDA loan? That can only happen a couple ways - the appraisal must be higher than purchase price, or your seller must agree to pay closing and most add it to the price you pay (and the property must appraise at the sales price including those costs), or you pay a higher interest rate so the lender can kick in some money. You still pay, it's just how it is done.

One little class can save you thousands and give you complete understanding about all the moving pieces.
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Old 06-05-2018, 08:41 AM
 
2,462 posts, read 1,324,113 times
Reputation: 1913
Quote:
Originally Posted by cooljoebay View Post
Anyway. My latest readings have brought all the fears about paper trails and bank bureaucracy. Maybe I am over dramatizing. But I do want to know just how "tight and secure" all ends need to be for obtaining an mortgage loan. We are considered low income buyers. My wife plans to do the mortgage in only her name. Our middle score is around 656. So we're close to qualifying for Down Payment Assistance at 660. Which is important. Because we have no savings. And with some loans you can roll the closing costs in if necessary.

FYI- even higher income buyers are scrutinized when they borrow money. With no savings, this is not surprising. I am a little concerned that you plan on buying a home without first having savings for repair expenses, etc. Why not wait until you have more set aside?



Quote:
But I am worried about how all this paper trail business works. Typically, my wife gets paid a check. Cashes it at her boss's bank. Because we have a Capital One 360 account which has no branches in our area. So we rarely use it for anything. She ends up with cash in hand. We put money on MY Bluebird card in which I Bill Pay our credit cards, auto loan, etc etc. The rest of the cash buys groceries, gas, etc.

You wouldn't necessarily need to have a local branch nearby. Why don't you simply deposit your wife's check using the Capitol One mobile banking app? It's free, secure and avoids the extra hassle of having to move it somewhere else. You could also pay bills online there too as needed. Plus, you don't have the added temptation of seeing that cash and spending it(!)
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Old 06-05-2018, 10:01 AM
 
Location: Phoenix, AZ
1,111 posts, read 417,572 times
Reputation: 2602
Quote:
Originally Posted by cooljoebay View Post


Our middle score is around 656. we have no savings.
Reality check.


You have no business buying a home with mid 600s credit scores and no savings.


Period.
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