Problems with Mortgage Underwriting Guidelines

by Jeff
(New York, NY, USA)

Ask Kate about Problems with Mortgage Underwriting Guidelines: Hi Kate, No exaggeration, I have been trying to refinance my existing mortgage with a major financial institution with whom I already have a first mortgage. This process has gone on for about six months.
Jeff continues... My wife and I have never missed a monthly house payment. We have a high FICO score, over 40 percent down on our million dollar (plus) home. The existing mortgage is being paid to this bank directly from my checking account twice a month.

The refinance would save me over $800.00 a month.

I have been communicating mostly via e-mail and somewhat via telephone with two individuals at this bank. They feed information that I supply to their underwriting department.

The thing is I get the impression that underwriting is trying to find a way not to approve my refinance application, since they seem to continually ask for more information from me.

Recently, I was told that if I do not pay off an existing school loan for one of our daughters, it was likely that I would be declined for the refinance. Apparently, I am failing to meet a "back-end percentage" if I do not pay off this loan. It is only $383, paid directly to the US Department of Education.

So, I went about paying off that loan within two days. Now they are asking for a payoff letter.

Unfortunately the US Department of Education cannot provide a payoff letter for roughly 45 to 60 days. I have provided them with statements of account and yet that does not seem to be helping. They are demanding a payoff letter.

What can I do?

The process is so frustrating. Underwriting has even eliminated my wife's salary since she is a substitute teacher, not a permanent teacher, mentioning that her salary is not consistent enough to be counted in the monthly percentages to qualify for a loan.

So my salary must go with it alone. Amazing, huh?

Thank you. Jeff

Kate Answers: Problems with Mortgage Underwriting Guidelines

***zz-portrait-left.shtml*** Dear Jeff,

The mortgage industry is throwing out the baby with the bath water. It's a real problem for the qualified borrower!

For years, underwriting guidelines relaxed to the point that regardless of qualifications, almost anyone could get mortgage approval. Now to counter the trend, overly stringent guidelines are applied across the board.

Mortgage Underwriting Guidelines - Monthly Payment

Our relatives purchasing a commercial building have encountered similar challenges. I suggested they write a letter pointing out the proposed mortgage payment will be significantly less than their current lease.

Whether or not this was responsible for securing loan approval, we will never know.

If you have not done so, write a letter comparing the two payments and pointing out not only the lack of payment shock, but that the new mortgage will free up more than $800 a month. Follow with your existing mortgage statement.

Mortgage Tip: Make it easy for the underwriter to say yes. Attach supporting paperwork to letters of explanation.

More mortgage tips can be found at Free Online Mortgage Advice - How To Become A Savvy Mortgage Shopper.

Mortgage Underwriting Guidelines - Gross Income

Now don't take for granted, because they claim your wife's income is too sketchy to use in debt calculations, that mortgage underwriters are always accurate. They are human just like you and me.

Gather your wife's gross income for the past two tax years and year-to-date for the current year. Total it and divide by the number of months.

Lay out your calculations in another letter, re-attach W2s and year-to-date paystub and submit if your figures are higher than the mortgage underwriter's.

Mortgage Underwriting Guidelines - Debt Ratio

I find it a shame that you were told to pay off the student loan but not given instructions until after the fact. Suggest a credit supplement verifying pay-off.

In addition, write one more letter detailing how you paid off the loan. Did you wire the money or mail a certified check? Whatever means were used, attach copies to the letter.

This page on my website, although for fixing bad credit, explains how to document payoffs in light of getting a mortgage.

Motivate The Sympathetic - Missing Documentation

If you're down to one piece of missing documentation, like the payoff letter, re-request the item from the source using this phrase, The only thing preventing me from getting a mortgage is (fill in the blank). Can you help me please?

This simple phrase can be motivating to the sympathetic ear. Good luck. Be tenacious and I believe you can obtain your loan approval.

Jeff, one more thing. I'd like to hear back from you. Let me know if this page was helpful to you.

Comment on Problems with Mortgage Underwriting Guidelines. Or Ask Kate another question here.

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Best wishes,


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Questions about my income - I am not even on the loan
by: Anonymous

Hi Kate,
A lot of the underwriting questions here sound very familiar and are frustrating. I have one myself.

I am German and recently moved to the US, now we are closing on a house in a week and the underwriter suddenly asks for my income (which did not count at all, that's why the loan is only in my husband name) and wants to know everything super detailed.

For what? For tax purpose? Thank you!

From Kate - I wish I knew! Now I'll admit that different loan programs have their peculiarities but generally underwriters ask about spousal debt.

Are you perhaps self-employed? If so, the underwriter may be looking for negative income on the tax returns, that is - more expenses than income.

I'd come right out and ask WHY the underwriter wants to know. If my income (or lack thereof) becomes a problem, I'd inquire into switching to a comparable loan program with different parameters, if I didn't lose a rate lock or incur expense.

Sorry this is your intro to US lending. While frustrating in recent years, it has served homeowners well in the past.

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