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Old 12-05-2012, 03:47 PM
 
132 posts, read 1,257,901 times
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I applied for a mortgage and had a mid-credit score of 690, which was a good score and was initially given a interest rate of 3.25%. Due to income purposes, they need to add a co-borrower and the co-borrower has a lower score of 640.

I figured they would still base the rate off of my credit score along but I see that the mid-credit score now shows 665, which is the average of the two scores.

This is an FHA loan and the score should still be ok, but I think 680 is the cutoff for the best rate and now I've fallen out of it. Kind of bummed.
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Old 12-05-2012, 10:45 PM
 
Location: Farmington Hills, MI
19 posts, read 39,906 times
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What's the difference between the initial rate, and your new rate? If the difference is fairly significant, I can share an argument that I often draft on behalf of borrowers via LOX (letter of explanation)--it succeeds the majority of the time, so you might be able to rely on it.
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Old 12-05-2012, 11:05 PM
 
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Don't know if the rate has even changes, just assumed that it probably will since it's dropped below 680.

However, on another forum, I was told that for FHA, the score doesn't matter as long as it's above 640...it's the same rate for everyone whether it's 640 or 850. Is that true?
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Old 12-05-2012, 11:32 PM
 
Location: Farmington Hills, MI
19 posts, read 39,906 times
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Sounds like a myth to me. Based on your loan circumstances (665 score, AZ, 304k purchase price) and the product offered by the bank I represent, my rate sheet calculated that you qualify for a 3.25% with 101.625 points paid by my lender, essentially providing you a credit of $2520.38 to apply to your closing costs.

However, if you had an 800 credit score, my lender would be willing to fork over 102.250 points which amounts to $3489.75 in credits applied to your closing costs, along with a rate of 3.25%.

In a nutshell, the rates remained the same, but the credits changed substantially. Another option is to trade up for a higher interest rate in exchange for a greater credit, which could then be used to eliminate the ridiculous amount of closing costs associated with your loan. Trust me, if you end up adding at least 6k in closing costs onto your loan amount, the amount of interest you'll pay on the closing costs over 30 years will significantly outweigh the savings produced by a lower interest rate.

In the long run, it wouldn't make financial sense to tack such a large number of fees onto your loan, because you'll ironically end up paying more in the end--even with the lower interest rate.
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Old 12-06-2012, 09:03 AM
 
132 posts, read 1,257,901 times
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Ah crap, I mistyped the interest rate, it's actually 3.375, not 3.25.

The builder is paying a lot of the closing cost, or at least that is what they said but it does show up on the spreadsheet. We basically just have to pay the down payment at closing from how I understood it.
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Old 12-06-2012, 08:32 PM
 
Location: Farmington Hills, MI
19 posts, read 39,906 times
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Quote:
Originally Posted by SelfEmployed75 View Post
Ah crap, I mistyped the interest rate, it's actually 3.375, not 3.25.

The builder is paying a lot of the closing cost, or at least that is what they said but it does show up on the spreadsheet. We basically just have to pay the down payment at closing from how I understood it.
Based on the sheet you provided, the costs seem more significant than you might think. Request a GFE (good faith estimate) from the lender if you want to be sure. After getting a copy, tell them you are actually shopping around while your loan is being processed, but give them the freedom to revise the initial GFE sent to you at any point they wish (better rates, prices).

Play the game hard. Your mortgage will be the biggest chunk of cash you'll ever spend in your life. Make them aware they'd be fools to sucker you into a worse deal.
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Old 12-06-2012, 09:32 PM
 
Location: MID ATLANTIC
8,458 posts, read 21,873,699 times
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If it's new construction, when is the home going to be ready? Are you actually closing within a time frame that can be locked? If not, its all fluff and nothing really counts until you are ready to close (and lock).

A large part of my business is new construction. Even though the rate is 3.25%, I will submit my buyers for loan approval at 3.50% or even 3.75%, if delivery is way out (say 9 mos)......it does no one any good if the buyer is approved at 3.25% and the rate goes up 95 days after construction started and you have another 10 days before you can lock. In order for me to submit the buyer at 3.5%, that is where the loan app is written. A whole lot of trust must be built to show the buyer I am doing it for their benefit, to protect their option money and to protect the builder's investment in the home he is building. When it comes time to lock the buyer in for delivery on their new home, I can prove I am providing a competitive rate, making the choice of going with the builder's preferred lender well worth their while. They are locked at the best rate available at the time they lock in.......but during construction, they have peace of mind their approval isn't going to get yanked due to a bump in rates. I do not work at a major builder's mortgage company, but an independent portfolio lender with correspondent access to all investors, as well as, direct Fannie and GSA retained lending.

My point, there may be more to the estimate in your hands than meets the eye. Know exactly where you are in the process and be vigilant. But its quite possible your lender is trying to watch your tail, not trying to have it. You can't put a price on a good night's sleep.
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Old 12-06-2012, 10:31 PM
 
132 posts, read 1,257,901 times
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It is for new construction and the home isn't scheduled to be ready until June so the interest rate they gave us would be to just give us an idea if we were to close in the next 30 days.

I do have a GFE, the numbers are the same as in the other post I made. The total settlement charges are $14,483 but that includes things like property tax, Up-Front MI, appraisal fee and other stuff like that. The builder is paying the origination fee, underwriting fee, processing fee, title services and title insurance and some other items. In total, we have to come out of pocket with $12,176 of which $10,150 is the 3.5% down payment.

Honestly at this point though I'm starting to get a bad feeling about it going through. I was very hopeful at first but it's been 3 weeks now and no answer yet. The loan officer has asked for a few items, lately if we know how soon we will file our 2012 taxes. Seems they need those because 2010 + 2011 average is too low for the DTI and 2012 has been better. I think we could pay down some debt to fee up some funds but they haven't even suggested us doing that.
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Old 12-07-2012, 05:44 AM
 
Location: MID ATLANTIC
8,458 posts, read 21,873,699 times
Reputation: 10034
Quote:
Originally Posted by SelfEmployed75 View Post
It is for new construction and the home isn't scheduled to be ready until June so the interest rate they gave us would be to just give us an idea if we were to close in the next 30 days.

I do have a GFE, the numbers are the same as in the other post I made. The total settlement charges are $14,483 but that includes things like property tax, Up-Front MI, appraisal fee and other stuff like that. The builder is paying the origination fee, underwriting fee, processing fee, title services and title insurance and some other items. In total, we have to come out of pocket with $12,176 of which $10,150 is the 3.5% down payment.

Honestly at this point though I'm starting to get a bad feeling about it going through. I was very hopeful at first but it's been 3 weeks now and no answer yet. The loan officer has asked for a few items, lately if we know how soon we will file our 2012 taxes. Seems they need those because 2010 + 2011 average is too low for the DTI and 2012 has been better. I think we could pay down some debt to fee up some funds but they haven't even suggested us doing that.
Okay, point blank questions to ask: What ratios are you getting on my file? Have you run our loan thru your automated underwriting system (DU or DO) yet? Why the last question? If they have run DU or DO, you can't pay down any revolving debt, only installment debt in order to get the ratios down. However, revolving debt paydown can be done before their system reads the credit report in underwriting. You would pay the debt down now, they would update their credit and then run their AUS (automatic underwriting system).

Until you are within range to close, I would not worry about shopping your mortgage for competitiveness, it's a futile exercise if you can't lock in and everyone can be a liar if you aren't locking.

This is the only time of the year for the self employed to control their qualifications (and tax bill). There's no law stating you must take every deduction on the business available to you, and the new taxes can be used as long as it can be verified those were the actual taxes filed. So, you may need to pay higher taxes to qualify. If the loan officer is asking, at least you have that option. But before you go down that road, they need to be a bit more forthcoming and tell you just how far off things are.

The good news - if you really want the home, most builders are willing to work with buyers to structure the approval over the time it takes.
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Old 12-07-2012, 09:25 AM
 
132 posts, read 1,257,901 times
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You know, I actually did ask point blank what our ratio is right now and also what ratio we need to be at and I did not get any concrete answers. When I asked what ratio we are at, the LO just said "It's close but we need a little more" and when I asked what ratio we need, I was told "It's not really set in stone, it depends on each buyer and I've seen some ratios that I didn't think would go through still get approved." Very vague answers and I'm a bit surprised. It may be because the lender is the same company as the loan officer and the loan processor, so they are watching out for the lender (themselves) more than a 3rd party LO would but I had talked to a diffferent loan office in the past and they were a lot more open about the process and had more suggestions of what we can do to qualify (ideas like paying down a car loan).

About payind down debt, so credit cards (revolving accounts) do not count? Or they count only if the run AUS again? Is it a big deal/hassle for them to run AUS again normally? We only had $100/month in credit card debt (about $2000 total) and I paid that off. We could clear up another $100/mo. by paying off a furniture store account and $450/mo. by paying off a car loan.

We certainly could take less deductions, like you said, there is no law stating we have to take any specific deductions. The down side would be that we have to pay higher income tax but you can't have it all, somewhere you have to pay.
I'm actually quite confused on what figures they are even using for our "income". I submitted 2010 and 2011 taxes, which show the income pretty clearly, but I've read that some things can be added back in. I asked the loan officer directly what income figure are they using and she said she wasn't sure and would ask underwriting. Was a bit surprised by that, figured she would have that information in the system where it could be accessed easily. In my latest email, I directly asked "How much are we off by?" Waiting on an answer on that now.

Last edited by SelfEmployed75; 12-07-2012 at 10:11 AM..
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