AArgh! (Loan troubles)

[professionalhenchman]

So, we got a message from our lender today, and there's a bit of a problem.  Since we're only able to get a 10% down payment, we need PMI (mortgage insurance for the bank) to get a loan.  However, as of *this week* the companies that provide said PMI have changed their standards so that Sarah's credit score is too low and we can't get the insurance.  Without that, we're stuck trying to come up with an additional $37,500 - not so doable.  One possible ray of hope - our lender is passing our info on to her contact at FHA to see if we qualify for one of their loans, since they don't require PMI.  We won't know until tomorrow at the soonest since she only found this out this afternoon and we only got to talk about it this evening.  So, keep your fingers crossed for us.
    Also, is there any way to get an aboslutely binding commitment for a loan before fidning a house one wants to buy?  Because if this falls through, I'm going to get very cranky about the whole idea of "prequalification".  I mean, if this had been the case from the outset, we'd simply have waited, but as it was, we took the prequalification in good faith that it meant we'd be able to get a loan if we met the terms as far as money we'd have to come up with on our part.  However this turns out, some congresscritters are getting an annoyed note from me in the near future.

Comments

[kelsied.livejournal.com]

lendingtree.com. Bailed us out like whoa, when we were dealing with the same sorts of nonsense.

You can get an estimate in advance, and then find a house in your price range, yes. Just tell them that's what you're doing. I'm not sure how binding the estimate is, though...

[groblek.livejournal.com]

Sadly, already tried them, back before we got a preapproval, got a response of "Thank you for choosing LendingTree to request Mortgage loan offers. Unfortunately, we weren't able to match your loan request with a LendingTree lender at this time." Thanks for the idea though.

[kelsied.livejournal.com]

*blinks*

Damn. I knew the industry had shifted, but I hadn't quite realized it was so very very bad.....

[cahwyguy.livejournal.com]

I'm not sure institutions can do things to a final level without the house, as they need the appraisal to do the final commitment. The big problem is the 10% down these days -- life is so much easier when you don't have to deal with PMI.

You're already dealing with a credit union, which gives you more flexibiilty than a bank or a broker. Still, if you want the name of the loan broker we used in the past (he's in Laguna Niguel, which is SoCal), we can pass it on. Not knowing your credit situation, I don't know if a 2nd for the 37.5K would be a feasible backup option.

[groblek.livejournal.com]

See, I'm willing to allow some kind of binding commitment based on the house appraising properly, or something like that, it's this sort of "well, things have changed, sorry, you're screwed" that I have issues with. I don't think it's unreasonable to want to be sure the bank's not going to try and back out of the deal unless the house just isn't worth the money being asked.

That said, I do understand that it's not their fault that the PMI terms are being changed under them, and the credit union rep is being quite helpful in trying to explore options.

[cahwyguy.livejournal.com]

Silly question that came to be on the van into work: You say the PMI problem came about because Sarah's credit score was too low. Is there any way you could do this transaction on your credit alone, and eliminate that problem. I don't know if you can swing it (at least on paper) on one income, but that might be a solution to the PMI issue.

[groblek.livejournal.com]

Nope, that was the first thing our lender checked.

I find it obnoxious that basically, my credit score counts for nothing at all here - if it was bad it'd hurt, but since it's good, it doesn't help.

[cahwyguy.livejournal.com]

I think they operate on a "weakest link" philosophy, believing that in a relationship the one with the weaker credit handles all the finances. I can understand why they do that from a risk perspective, but it is a pain.

I also remember how frustrating my first home buying experience was (and my second, and my... hmmm, they've all been frustrating in one way or the other)... and this is with good credit. I could easily climb on the soapbox on why they should really teach about credit in high school, so folks don't lower their credit rating before they even know what it is, but I digress.

You're being hit by the economic jitters here: lenders and related institutions are scared by anything non-pristine, and are treating the non-pristine as bad, when that likely isn't the case. Hopefully, the Credit Union has some options, but what used to be the easiest option (getting a bridge 2nd to get the downpayment into the 20% region) is a lot harder. You might explore what your options would be for that, or for arranging a private 2nd that would be treated as a gift from the POV of the original lender (I remember doing things like that with my father when we did a finance at our previous house: I paid him 6% interest only, which gave him some additional income with the understanding the debt disappeared when he died).

Good luck. With some creativity, I have confidence you'll at least give it your best shot.

[groblek.livejournal.com]

Thanks for the advice.

Sadly, we've pretty much tapped what we can pull from family as it is, and our credit union's told us that the bridge loans for part of the 20% are not just harder, but outright impossible these days. It seems most of the options that used to exist have disappeared.

[buffaloraven.livejournal.com]

Yeah, that's what happened to sunnysmilixer and I. We were preapproved with 5% down. A month later, when we'd found a house...Oh, we need 20% down! It sucked a lot. Good luck.

[groblek.livejournal.com]

Yeah, and the part about it that really upsets us is that because of what happened to you, we explicitly asked about whether something like this could happen, and were told that we'd be fine.

[buffaloraven.livejournal.com]

Freakin banks, man. I'd say more, but then this would become NSFW, lol.

Good luck, hope it goes well for you.

[groblek.livejournal.com]

In fairness, it's not completely the bank's fault - the insurance companies changed the terms out from under them. Still, yes, much NSFW language has passed through my head. We'll justt see how things go, I guess.

[buffaloraven.livejournal.com]

Point, and you are too fair. ;) Prayers are with you.

[doubletake.livejournal.com]

Aargh, indeed. Good luck getting it straightened out...

[temperance14.livejournal.com]

Who was your mortgage insurer?

And hugs dear. This was pissy news.

[groblek.livejournal.com]

According to our loan agent, there are only 2 companies that they can get PMI from, and they keep identical requirement, and won't make exceptions on this.

[cinnicat.livejournal.com]

Hmmm.

Perhaps request the credit scores yourselves and start challenging the justifications?

[elhoff.livejournal.com]

It has always been my impression that pre-qualification means more in getting an offer accepted than it really does in the rest of the transactions.

In the credit industry, you can always trade risk for $. On our first mortgage we were able to avoid PMI by offering to pay a higher interest rate. Amusingly, the interest uplift was less than the PMI, and it was tax deductible. This was something that we asked the lender about (Aleece worked in credit scoring), they did not offer it up voluntarily. I'm not sure if this works in the current credit environment.

Also, a word of warning...historically, many lenders would loan more than you may really want to pay. Make sure that you are comfortable with the payment, not just that the lender says you qualify for it.

[groblek.livejournal.com]

On loaning more than we can pay - thanks for the heads up, but we're well aware of that trap. One of the major reasons we went back to Shelley at USE is that last time we looked into this, she was the only one who looked at our finances and told us we shouldn't be buying a house right now, rather than telling us "We'll loan you as much as you feel you can pay back."