Financing in Orange>Question Details

Selina, Home Buyer in Orange County, CA

Hi-I am looking into an FHA loan which I believe we would qualify for based on me and my husband's gross

Asked by Selina, Orange County, CA Wed Jul 9, 2008

income. The problem is not only are we carrying some credit card debt we are also have properties that on paper show a negative cash flow. This weighs us down to almost a 50% back end ratio for the loan amount we want. Do you think we could use our down payment money to pay off debt and then get some down payment assistance from the FHA? One guy from Countrywide said sell one of your properties. In this market! Any other ideas out there?

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Lending answer:

It all depends on what FHA's automated approval software says about your application. With substantial reserves (FHA requires you have at least $100 left over after closing) it may be possible to obtain an automated approval from FHA Totalscorecard. With an "Approve/Eligible" rating, you'd have a range of lenders to choose from. Some lenders might cap your debt ratio at 43% regardless of AUS (Automated Underwriting System) results, but I can think of 5 lenders right off the top of my head that will accept debt ratios over 50% with an "Approve/Eligible" from FHA Totalscorecard.

The problem with working with banks or direct lenders, in your case, is that you'll have to "shop" them one at a time... a very lengthy process. A mortgage broker could contact dozens of possible lenders in an afternoon to determine if you meet their guidelines. It all depends on how much time you want to spend on hunting around for a loan.

If FHA Totalscorecard comes back with "Refer/Eligible", you would have to work on the debt ratio to bring it down to 43% or less (to meet manual underwrite guidelines). Lenders vary widely on how to restructure your debt... again if you work with a bank or direct lender like Countrywide (now part of Bank of America), you would have to shop lender after lender until you found one that has the right combination of guidelines, investor tolerance of compensating factors, and of course pricing and rate. A mortgage broker could help you with various debt restructuring scenarios (pay down credit card debt, increase down payment, etc) to match the best lender guidelines.


By the way I've been a mortgage banker, mortgage lender, and run a mortgage brokerage. All have their advantages and disadvantages. In your case, it would seem that a broker might be able to speed the shopping process.
2 votes Thank Flag Link Thu Jul 10, 2008
The best thing to do is talk to a local lender who is FHA approved. Most are not at this time. I work with a company who is great. InterCoastal Funding. You can reach Tuan at 714.317.8826 or the main office number is 714.594.1414. I do NOT make a commission for referring you to them. I have referred my clients to them and have had great feedback and experiences with them.
Web Reference: http://www.LehmanHomes.net
1 vote Thank Flag Link Thu Jul 10, 2008
Dear Selina:
I am certified to demostrate the differenr downpayment programs available today. Some of these programs you may not have to repay. Please call me with any questions you may have.
Victoria, REALTOR
951-294-4426
0 votes Thank Flag Link Tue Jul 22, 2008
Do not, do not, do not apply for a loan overseas with a yahoo address. This is someone who will either steal your identity or scam you.
0 votes Thank Flag Link Thu Jul 17, 2008
There is a down payment assistance program called "HART". The Seller of the desired home you seek must accept your offer through the HART program, whereby the Seller can pay your down payment plus your closing costs, as nec. Your earnest deposit to HART is a mere $500. Ask your Lender or Real Estate Professional for more information about HART.

Good luck!
Ryan
0 votes Thank Flag Link Sat Jul 12, 2008
There is a down payment assistance program called "HART". The Seller of the desired home you seek must accept your offer through the HART program, whereby the Seller can pay your down payment plus your closing costs, as nec. Your earnest deposit to HART is a mere $500. Ask your Lender or Real Estate Professional for more information about HART.

Good luck!
Ryan
0 votes Thank Flag Link Sat Jul 12, 2008
Congratulations Selina, it's good to see that you didn't take the word of only one "so called" loan agent. People are willing to get a second opinion on auto repairs, construction bids, medical procedures.....This is a great medium for open communication with real estate professionals.

This is a great success story! Congratulations again - it sounds like you're a "professional investor" now!
0 votes Thank Flag Link Fri Jul 11, 2008
Actually according to my real estate agent he was a seasoned pro who had 20 years under his belt. He just didn't seem interested....
0 votes Thank Flag Link Fri Jul 11, 2008
Congratulations! I'm glad to hear you can move forward on your loan

"It seems my cash reserves(401K etc) were enough to compensate for a high back end ratio. " - Eureka!

"...the fellow from Countrywide(who frankly did not take the time to ask me about other assets)..." - unfortunately, failure to properly complete FNMA Form 1003 (mortgage application) is all too common and the leading reason why banks/lenders/brokers lose business. It's amazing that the Countrywide mortgage sales rep never bothered to ask about assets (especially after running into debt ratio concerns) and indicates a lack of experience and training. Getting accurate and complete asset and income information is Mortgage Origination 101. It seems that a lot of banks and lenders are hiring inexpensive rookies rather than more costly pros in their call centers and internet centers.

I'm glad you didn't take Countrywide/Bank of America's "word for it" about your chances for FHA approval... and that you were able to get a correct answer from an experienced professional.
0 votes Thank Flag Link Fri Jul 11, 2008
Thank you all very much for the advice. This is a great website! Today I was preapproved for an FHA loan via the FHA total scorecard. It seems my cash reserves(401K etc) were enough to compensate for a high back end ratio. The issue has never been the down payment...as I said I do have that. But having talked to the fellow from Countrywide(who frankly did not take the time to ask me about other assets) as well as from what I've read I was really afraid I wouldn't be approved based upon the high back end ratio. What upsets me is the fear being spread and the condescending attitude of lenders who were handing out money left and right a few years ago to "flippers". I am not a professional investor and I did buy somewhat high in 2005. But except on paper the rentals carry themselves. I have never been late on a mortgage payment and I am in it for the long haul. Its good to know there are still some lenders who also feel that way...FYI I went FHA because everyone said they have more liberal ratios and thanks Deep River I did use a broker!
0 votes Thank Flag Link Thu Jul 10, 2008
why dont you go conventional?
0 votes Thank Flag Link Thu Jul 10, 2008
Hi Selina,

I'm with OC Buyer on this one. With FHA you will either receive an automated underwriting or manual underwriting decision. With a manual (an underwriter has to physically review the file) approval your back end ratio must be less than 50%. Sounds to me like you simply need to speak with a lender that's willing to take the time and figure out the best way for you to structure this deal. Sell one of your properties?! Wow, I sometimes wish it were more difficult to work in this industry.
0 votes Thank Flag Link Thu Jul 10, 2008
"You may be very interested in this! Follow the link to learn about potential changes to the down payment assistance options w/FHA. Act now and there is something you can do."

Currently FHA provides loans with only 3% down. If someone cannot come up with 3% down and closing costs, they are not ready for homeownership. First time buyer or not, people have to have the financial capability of being able to save some money before they take on a home.
0 votes Thank Flag Link Thu Jul 10, 2008
You may be very interested in this! Follow the link to learn about potential changes to the down payment assistance options w/FHA. Act now and there is something you can do.
0 votes Thank Flag Link Thu Jul 10, 2008
You do need individual counseling from lenders. Since you're so far from me, I can only suggest this - talk to lenders, not mortgage brokers. Get a referral from your real estate agent; and talk to your current bank (whereever your checking and savings accts are). Be careful talking to companies that are about to disappear (like Countrywide) - their guidelines could change at the drop of the hat... and if you've put months into positioning yourself to buy based on that lenders criteria, you might find it was in vain.

No, it is not too early to start talking to real estate agents. This is only one of the buyer agency type of services we have, and since we work with mortgagors all day every day, we can usually suggest some good ones.
0 votes Thank Flag Link Thu Jul 10, 2008
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