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mortgage update

January 16th, 2009 at 03:07 pm

I have not been posting the last few days. Yes I lurked and commented on a few posts..but no posting of my own.

I have been embarrassed and ashamed.

It's possibly premature to even discuss now but I think we are out of the woods.

BB and I were denied our mortgage 3 days ago. Our income does not meet the lenders formula.

It happened by accident- me finding this out. I was having a mounting feelings of "uh-oh" by the lack of communication with our broker and the increasing emails from my Realtor asking "what is going on?"

So I flat out asked my broker if we were in danger of being denied the loan and he responded "yes. Two underwriters have rejected it and I will be submitting it to a third tomorrow."

This was on Tuesday. Closing is next Tuesday. We have 5 business days to get it worked out after 3 weeks of doing nothing because my original broker was avoiding my emails and phone calls.

So jumping into overdrive I contacted a bank that had previously reluctantly told us they could probably approve us- and then I bitched to my sister about everything.

Lo and behold her coworkers husband used to be a broker in Atlanta and swore up and down that his former boss is the man for the job. I called old boss in Atlanta and left a voice mail. I got a call back that evening and after talking he says "You are the perfect candidate for an FHA loan. Nothing you say has alerted me that this will be a problem. I will call you in the morning and I think we can have you approved by the end of the week."

The guy is a smooth talker and it made me nervous- but he has held up to his end of the bargain so far. He devoted a whole day to creating my application- he calls me 2 or 3x a day with info or questions and told me I was "informally approved" 2 days ago. He called last night asking if I want to escrow the taxes and insurance...that sounds pretty far along.

So I did some research on my own for this FHA loan (federal govt standard loan for first time homeowners- for everyone not familiar).

Some pros and cons. Pro is the standards are less strict with income, you only need to put 5% down, closing costs are less, and we fit the criteria. I have since learned that banks don't really offer this loan because they don't make $ off it.

Con is it is more expensive than a bank loan. I found out that I will have to pay PMI for 30yrs...and will have to pay a MPI fee that is rolled into the loan (about 1.5% of the loan amount). And I thought "uh-oh. That doesn't sound cheap."

But beggars cant be choosers and so I sat down and got to work about calculating how to minimize the damage.

BB and I decided to put 40% down. It's a luxury that most people cant do but we are very lucky I had the extra money from an inheritance sitting in a MM fund not earning much interest. With 40% down we are cutting the PMI down 35% (originally the ATL broker wanted us to put down 5%.), and we are cutting the MPI charge down 35%. As well as our interest payments over the life of the loan.

A benefit of this FHA loan is that our closing costs will much lower because our broker is charging us 1 point of the loan amount (about 1%) and the other broker was estimating closing to be about 3k...and the bank (that we are also still working with...just in case) wants 7k for closing costs. So essentially us telling the broker we want to put down 40% rather than 5% means his commission is severely cut since he is making money off the loan amount.

We were worried he would fight us on this point, but he didn't. He just said he would need an extra day to rewrite the application to reflect the new down payment amount.

Now- if you are still reading this long ass blog you are wondering why we didnt just suggest to the ORIGINAL broker we would put 40% down and we could have averted this whole mess. Well- we never told the broker we would put down 40%.

We told him we would put down 50%.

yup. That's what we needed to get "approved" in that guys mind. I never mentioned in the blogs that I was preparing to put down 50% because I would either get comments like "If you have to put down 50% then you cant afford that house"...as well as in this present economy many many people are struggling and I guess I still see it as somewhat "showy" to say I am putting down 50% when others are struggling to save up 3%.
BTW- that 50% was us scraping the bottom of the barrel to create. We were going to be left with single dollars after closing and planned to live off credit cards till our next paychecks arrived within a few days. Wasn't a good plan- I didn't like it- but it was our only option.

ANYWAYS- imagine this mortgage brokers surprise when he is talking to me initially and I tell him we cant get approved for a mortgage with 50% to put down. He was like "do you have credit card debt?" "no." What about child support, car payment, do you have another mortgage, did you have a bankruptcy?"

Then I told him the 50% was going to be really tough for us and if he could get us a mortgage where we would need to put down 48 or 45% I would be GRATEFUL.

So he comes back at me the next day and is like "I got you a mortgage and you only have to put down 5%. How wonderful is that?" And I later tell him we want to put down 40%...imagine his surprise again.

Anyways, he told me he wants to see the official rejection letter when it comes in the mail because he cant figure out why we were denied in the first place.

So things are looking up. Now that I wrote this we will probably get rejected.

24 Responses to “mortgage update ”

  1. Ima saver Says:

    Oh, I hope you get approved!!

  2. LuxLiving Says:

    Good luck!

  3. creditcardfree Says:

    Best wishes!

  4. merch Says:

    Keep the faith!!!

  5. Myrtle Says:

    Oh, you dear girl. You have been living under a lot of stress! I do hope that things work out.

  6. mom-sense Says:


    Good luck!!

  7. swimgirl Says:

    This is just such a risky time for anyone to loan money. All the lenders are getting crazy, it sounds like. Not the "easy money" they thought it was a few years ago. I hope everything works out!

  8. Caoineag Says:

    Good luck and a note on the FHA with upfront fee, the upfront fee guarantees that they will cancel insurance at 78% of loan value. If you don't have the upfront fee, you pay it for the life of the loan (I have the same FHA loan, it comes with a notes 2 months after the fact that tells you when it can and can't be cancelled.) Thought that might cheer you a bit. On the 30 year, they also said something about paying in for 5 years so you might have to wait that long even if you reach 78% sooner but still, that isn't 30 years.

  9. gamecock43 Says:

    that is good news...so PMI is dropped after yr 5 when 78% of loan value is reached. That's a bit better news!

  10. scfr Says:

    Hang in there ... Will you have the opportunity to review the application before the broker sends it in (to make sure he has represented your situation accurately)?

  11. Debtfreeme Says:

    Game cock—you might want to check on the PMI thing.

    You usually only have to pay PMI until there is an 80% loan to value of the home. As you are putting 40% you already have a large percent of equity and should not have to pay it.

    Check that with your mortgage buy because if her wanted you to put down 5% and you are putting down 40% he needs to redo his figures.

  12. Analise Says:

    Good luck. It sounds very promising and you are almost there.

  13. Debtfreeme Says:

    The real question is are you going for a 15, 20 or 30 year mortgage? It looks like if you do a 15 and are putting 40% down you should be able to not pay PMI becaues the LTV is already at 60%.

    Here is the info right from the HUD-FHA PMI pages:

    Question: When can I stop paying my monthly FHA mortgage insurance premium?

    Answer: Termination of the FHA monthly mortgage insurance premium (MIP) is based on several factors including: the loan term, loan-to-value (LTV) at loan origination and regulations in place when the loan is closed.

    Generally, loans closed prior to January 1, 2001 will not be eligible for termination of MIP, which is collected as part of your monthly mortgage payment.

    For loans closed on or after January 1, 2001, FHA's MIP will be automatically terminated under the following conditions:

    1. For mortgages with terms more than 15 years, the MIP will be terminated when the Loan to Value (LTV) ratio reaches 78%, provided the borrower has paid the MIP for at least five years. If the LTV reaches 78% and the borrower has not paid MIP for at least five years then the borrower must continue to pay MIP until the five year requirement is met.

    2. For mortgages with terms 15 years and less and with LTV ratios of 90% and greater, the MIP will be terminated when the LTV ratio reaches 78%, irrespective of the length of time the borrower has paid the MIP.

    3. Mortgages with terms 15 years and less and with LTV ratios of 89.99% and less will not be charged MIP.

    For loans closed and insured under the Hope for Homeowners Program, the annual MIP is collected monthly for the life of the loan.

    Note: The MIP cancellation provision excludes those loans not insured by the Mutual Mortgage Insurance (MMI) fund. Although the MIP will be terminated as described, the FHA insurance will remain in force for the loan's full term. This MIP termination provision only applies to loans where the borrower also paid an Up-front MIP at closing. FHA will determine when a borrower has reached the 78% LTV ratio based on the lesser of the sales price or appraised value at loan origination. For example, if the lesser of the sales price or the appraised value at origination was $100,000, when the loan amount reaches $78,000, HUD will no longer collect MIP on the loan.

    FHA's regulations do not permit a borrower to submit a new appraisal to reach the threshold for termination of MIP. Termination of MIP will normally be based on the scheduled amortization of the loan. However, borrowers may reach the 78% threshold in advance of the scheduled amortization because of prepayments of loan principal. A borrower whose loan reaches the 78% LTV threshold sooner than projected because of prepayment may have the MIP terminated (but not sooner than five years from loan closing for loans with terms greater than 15 years) if the borrower has not been more than 30 days delinquent in paying the mortgage payments during the previous 12 months. The borrower must submit a termination request to the lender and the lender must provide the borrower's request and supporting documentation with respect to the mortgage payments during the last 12 months to FHA for such termination. If you have questions regarding the termination of MIP, go to the following HUD website: http://www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm or call the FHA National Servicing Center directly at 1-888-297-8685.


    Reference
    FHA Mortgagee Letters 00-38 and 00-46, 08-29

  14. gamecock43 Says:

    We are doing a 30yr loan. So we will be able to cancel the PMI when we reach 78% of the loan value. A long way off but it will be a fun benchmark to hit! Thank you Debtfreeme for the information- every time I read those regulations it becomes a little clearer in my head.

  15. Koppur Says:

    Oh Sunshine, I'm so sorry about all of this!! This new guy sounds like he is willing to work things out for you. Good luck!!!

  16. Debtfreeme Says:

    Gamecock,

    I am interpreting the above information this way:

    House is selling for 100k.
    You put down 40k.
    House appraises at 110k.
    You borrow 60k.

    Your loan to value of the house is already past the 78% goal so you should not need the PMI. Obivously it depends on the figures but i think there are ways of not paying the PMI even with an FHA loan. e.g. never having to start it should save you between 50 and 100 dollars a month. At least that is what my broker told me when we looked at the FHA loans in December.

  17. gamecock43 Says:

    ahhhh...that would make sense if the house appraises for over its selling price. We'll see. It hasnt been appraised yet and I have made peace with the extra PMI payments.

  18. whitestripe Says:

    oh gamecock you poor thing. this must be so stressful. my heart goes out to you guys both.
    i will be waiting on your next post to find out what happens and i'll keep my fingers crossed for you.

  19. mooshocker Says:

    NEVER PUT ANY MONEY DOWN IF YOU CAN HELP IT. "OPM"...OTHER PEOPLE'S MONEY!!!!!!!!!!!!!! Best of luck sunshine and God bless.

  20. CouponAddict Says:

    If you can save money and have to option of not doing the escrow, avoid it. We have a FHA loan, and were not given the option of not having it; so at the start of the year they have a $700 escrow cushion and that goes up each month until by the end of the year they have 4K of our money to pay taxes and special that is not getting interest for us. I wish we were given the option of no escrow.

    What is the house worth? If you are putting down 40% you should not have to pay PMI, we made sure when we bought our house we put down 20% so that we would not have to pay the PMI.

  21. frugaltexan75 Says:

    Oh wow gamecock! It sure sounds like you and BB have had a stressful couple of days. I really hope everything works out and you get the loan!

  22. scrimpandsave Says:

    I hope you get the loan! Keep us updated babe!

  23. whitestripe Says:

    how is everything going? i hope you hear some good news soon! i keep checking hoping you have updated with positive news! fingers are crossed for you

  24. sicilyyoder Says:

    I have many friends that have FHA loans, and they are happy with them. Good Luck!

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