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Old 08-06-2008, 12:06 PM
 
2 posts, read 5,578 times
Reputation: 10

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Hopefully an experienced lender can help me with this situation..

We are working with a lender and were planning on going FHA due to the lower down payment requirements and less expensive PMI. We found the PERFECT house and quickly moved to make an offer. This is a home in an older historical area, built in 1935. It is in incredibly good condition, but the sellers are concerned that an FHA appraisal will be difficult to fulfill since it is an older home in an area known for wet basements. (Very common in Wichita, Ks) So they are reluctant to accept our FHA offer.

Which brings me to my actual predictament..

We decided we could easily go with a conventional loan, since the home is very affordable. When applying for this loan, our lender came back and said that since my husband had a 60 days past due bill to the Federal government (student loan) at one point a long time ago, (5 years) that we could not qualify for a conventional loan and that the 'system' wouldn't let him process it. So my question is- is it worth asking other lenders? Or will all of them say the same thing. Our lender said that it would not matter who we went to, that we would not qualify for a conventional because of that one late payment.

Now we won't be able to get our perfect little house because of that one stupid stupid thing. Any ideas?

Here is our loan situation:
Income: 130k
Home Price: 170k
Down Payment: Flexible, up to 15k (Less is better)
Credit Score: 720
30 year fixed rate

HELP!!!
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Old 08-06-2008, 12:30 PM
 
Location: Cary, NC
1,036 posts, read 3,628,866 times
Reputation: 503
Ask a mortgage broker in your state. Do you have friends, family or co-workers that recently bought or refinanced a home that could refer you to someone reputable?

Default on a federal debt (like government subsidized student loans) can be a big problem, much like bankruptcy or foreclosure. Even though the score is high, these things are considered seperately. However, it being 5 years ago and the other factors looking good it should not be an automatic denial. If it was a 1 time thing, a letter of explanation and the other compensating factors should be enough for many underwriters.
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Old 08-06-2008, 01:21 PM
 
Location: Kansas City, MO
5,758 posts, read 9,493,585 times
Reputation: 2791
Government conventional loans go through an automated underwriting system. Everyone uses the same system and they will all get the same answer as long as the information on your application is the same.

You can try another lender but you are going to get the same answer when it comes to convential loans. The entire process is automated. There is no gray area, it is all black and white.
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Old 08-06-2008, 01:23 PM
 
Location: Kansas City, MO
5,758 posts, read 9,493,585 times
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Quote:
Originally Posted by rcarrillo View Post
If it was a 1 time thing, a letter of explanation and the other compensating factors should be enough for many underwriters.

As I said in my previous post, conventional loans are underwritten by an automated system. The physical underwriter has no decision making power. Their only role is to verify that all info on the application is correct by reviewing the supporting documents. i.e. paystubs, credit report, proof of insurance, etc.
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Old 08-06-2008, 03:06 PM
 
Location: Cary, NC
1,036 posts, read 3,628,866 times
Reputation: 503
Quote:
Originally Posted by RjRobb2 View Post
As I said in my previous post, conventional loans are underwritten by an automated system. The physical underwriter has no decision making power. Their only role is to verify that all info on the application is correct by reviewing the supporting documents. i.e. paystubs, credit report, proof of insurance, etc.

The result is the same ONLY if the input is exactly the same. A bad loan officer might miss things like IRAs, 401ks or other items on an application that could turn a denied loan into an approved loan. It is important for customers to offer full disclosures and for lenders to take complete applications.

So while it is true that the AUS system is the same at all lenders, just like 1+1=2... the problem is some loan officers are sloppy and put 1+0 instead... so they while their answer is "correct", they used the wrong data.

Also, there is a lot of room for interpretation of AUS findings. A good underwriter can ask for several different documents to meet the conditions stated on an approval. In many cases the results themselves have multiple options where you can use A, B or C to satisfy a condition. A bad loan officer looks at it and asks for A, whereas someone else might inform you of the options available and make the process easier. For instance in many cases you can use a VOE with income from your employer, a tax return, IRS transcript OR a W2. A loan officer might tell you to get a tax return (that you lost or mis-filed) whereas they could have explained your alternatives had they read the details.

All lenders are not the same and underwriters do have leeway. They do make judgement calls as to whether things conform to the AUS findings or not. It is not black or white, there is a grey area in how you inpur data and how you interpret results. It is always worth making a second attempt (what does it cost anyways, you should get an pre-approval for free) than to give up or go to a higher cost portfolio or sub-prime loan. Many of the problems that happened the last few years with borrowers pushed to sub-prime loans instead of FHA/Fannie Mae were ignorant loan officers that did not understand AUS rules pushing borrowers into these loans. Borrowers could have gotten lower cost, fixed rate loans but because of their loan officer ended up in a high-cost ARM.
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Old 08-07-2008, 07:11 AM
 
Location: Richardson, TX
10,148 posts, read 16,735,602 times
Reputation: 24756
Quote:
Originally Posted by RjRobb2 View Post
As I said in my previous post, conventional loans are underwritten by an automated system. The physical underwriter has no decision making power. Their only role is to verify that all info on the application is correct by reviewing the supporting documents. i.e. paystubs, credit report, proof of insurance, etc.
Not at all true where I work.
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