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I am under contract for a house. I took out a general TSP loan to pay off a line of credit with an high interest rate. I told my lender, and she said it was fine, just provide a copy of the check and my bank statements once it was cleared and paid off.
I also took out a residential TSP Loan for any minor repairs or improvements once I'm settled in the house. I did not inform the lender of this because I was not going to deposit the check until after settlement. Now the information I provided is not good enough for the underwriter, and they want to see an official TSP statement.
Will this affect me negatively with the underwriter, once they see I made two withdrawals, even though one won't be deposited? BTW, a TSP is like a 401k, but it's for federal employees. Also, I have a very high credit score (above 740) and the only other debt I have is student loan of $125 per month. The first TSP payment is $85 per check, the residential one in question is $25 per check.
Thanks for any help. I'm nervous, and I don't know if I should be.
Both loan payments are lower than the previous one combined. Does that work in my favor? Again, this doesn't affect my credit in anyway. Creditors wouldn't even know. It's like a 401k.
Oh, and statements won't be available until mid-October.
Just log into your TSP online and print a current statement. You don't have to wait. Make sure to print how much is owed on the loan, not just the assets in the account.
TSP loans only count against you if a VA loan, but the problem is most likely in the reserve calculations. The 401/retirement calculation for required reserves is typically vested value (after all loans) x 60% or 70% (depends on loan type) = cash reserves. So, if you are already tying up your reserves with a loan, you could have a shortage.
Shame on your lender for not forewarning you. Shame on you for not checking with your lender before.
Wow, thank you SmartMoney. This is very helpful. However, I don't completely understand the formula. Could you help me?
Amount of loans: 1. $10,100 to pay off an open line of credit that have an 11.999% interest rate. New interest rate is 2.125%, with a payment of $82.10 per check (5years) ($164.20 per month)
2. $8,095.87 for repairs with a 2.375% interest rate, payment $24.71 per check (15 years) ($49.42 per month)
On the line of credit alone, the lender calculated my monthly payment at $244.00, although, in reality I was paying more than what was due by always giving $300 per month. Total new payment would be $213.62 paid to myself (back to TSP). Wouldn’t this make my DTI ratio lower technically?
TSP value as of 9/30/13 (statement ending day) $18,975.28 * .60 = 11,385.17
" * .70 = 13,282.70
I have over $9,000 in savings.
What do these numbers mean for me (basically, what are cash reserves)?
I talked to me lender, and she said it should be fine. The payments are lower than what I was paying before. And she said I'm paying myself back, not a creditor, so it's different. Also, the money I took out is to repair the roof, which the seller will not fix because the house is already selling way below what the price is currently in that neighborhood. She said my loan was taken out to protect the investment, not just for no reason, which would also help my case. Also, I have two written appraisals for the roof to prove that it is for that reason. I'm thinking of writing a letter with the appraisals attached to plead my case in anticipation for the worst. Thoughts, suggestions, advice? Thank you, I appreciate all responses. This process is nerve-wracking. I thought great credit and constantly making payments on time with more than what was due would help me in my life, but now I'm realizing there is so much more to this process.
Also, I have not even received the check for the second loan, so it’s not in my account. It’s for repairs after. The only issue is that it’ll show on my quarterly statements.
TSP loans only count against you if a VA loan, but the problem is most likely in the reserve calculations. The 401/retirement calculation for required reserves is typically vested value (after all loans) x 60% or 70% (depends on loan type) = cash reserves. So, if you are already tying up your reserves with a loan, you could have a shortage.
Shame on your lender for not forewarning you. Shame on you for not checking with your lender before.
Your lender said you'll be fine, it is just some math and tracing the source of funds for your TSP account.
Hopefully your 401k wasn't used for your cash on hand calculation.
They need to see the source of the funds for the check that you are getting. How soon are you expecting to close ? Ask if can show two month of statements and all transaction thorough today for that TSP plan instead of waiting for the statement.
If you didn't pay off the credit cards yet, both monthly payment will count against your liabilities. If you didn't disclose the $49 a month, payment , that too will be calculated into you liability. IF you plan to pay off your credit cards through escrow, but you still expect to keep your credit card accounts open, you better make that clear to everyone!
The fact that you "pay more per month" is not something that the UW cares about. It is hard for the UW to go on your word that the loan will be used to pay off the credit card and you will have a future lower monthly payment, they are looking at a snap shot of time , in that snap shot, they will see credit card payments and TSP payments. The balances aren't that important in your case. The balance / utilization is taken into consideration in your credit score. Your monthly payment is what they are going to calculate for DTI.
I wouldn't draw too much attention to the roof unless it has already be disclosed in the sales contract.
Thank you, thelopez. I acutally sent the lender, who then forwarded to the UW, the paid off line of credit, so I hope she does take into account that won't be an issue anymore and that I actually did use the money for that purpose. I don't believe they ever used my 401k as my cash on hand. I never disclosed that information before now. I believe they just looked at my checking and savings. Does that sound about right? Or do they look at it without you giving it to them or telling them?
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