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This is an FHA loan - first time homebuyer purchase. My friend gave a $4500 cash advance check from her credit card to his boyfriend to help with the downpayment. The check was deposited into his account & now the underwriter is asking for a copy of the check. AFAIK, the LO & underwriter arent aware they used a cash advance check. The question now is:
1. will this become an issue for the loan not to go thru?
2. what can they do to rectify the situation if cash advance is indeed not allowed? The guy's mom is willing to gift another $2000 (amount they need) & my friend said she has some more $$s in the bank so they can still meet the downpayment requirement. Should they put the monies in now? It will take about a week to get a copy of the cancelled check. The underwriter already has the latest bank statement showing the deposit made so they will need to send in a new one if that is even possible.
Are the friend and her boyfriend buying the house together?
If so, it is most probable to become an issue as it a substantial $ amount that might change the debt to income ratio if they carry a lot of consumer debt.
Unless FHA loan parameters have recently changed, the back ratio for FHA loans is 41%, which means that all their consumer debt (credit cards, auto loans, etc.) cannot be more than 41% of their income before taxes.
If they are already close to that ceiling, this credit card cash advance might bring them over the 41% limit. This may result in the loan being denied by the underwriter.
It might be prudent to go with full disclosure for the family loans asap.
What does the loan officer say?
no, it's just the boyfriend buying the house so the advance wont really have an effect on the DTI in the loan since it's her credit. What happened was the guy was approved for a certain amount (forgot what) but the house they were buying was I think $5k more so they needed extra $$ for down payment & so the cash advance.
Hmmm, if the underwriter says he cant use the cash advance will the loan be denied immediately or will he get the chance to come with the difference?
no, it's just the boyfriend buying the house so the advance wont really have an effect on the DTI in the loan since it's her credit. What happened was the guy was approved for a certain amount (forgot what) but the house they were buying was I think $5k more so they needed extra $$ for down payment & so the cash advance.
Hmmm, if the underwriter says he cant use the cash advance will the loan be denied immediately or will he get the chance to come with the difference?
Thanks again!
First of all, I stand corrected: the unsecured debt ratio is the front one, which for FHA is 29%.
Since the girlfriend is not a borrower on the mortgage loan, I can't really say if the source of her monetary gift is relevant to the underwriter. The loan officer is the one to provide further direction.
However, in the aftermath of the banking crises, the approval process is justifiably much more rigurous now. I personally believe that honesty is the best policy.
Your friend and her boyfriend may otherwise run the risk to have the loan denied.
It's probable that the underwriter will give them a chance to come up with the difference provided that it is well documented; the closing might be delayed though.
Last edited by learningCA; 01-14-2010 at 09:27 PM..
Also, I thought FHA down payment gifts are not allowed for non-relatives.
Edit: Apparently, gifts can also come from "...a close friend with a clearly defined and documented interest in the borrower", so a girlfriend should qualify.
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