I have a question about the underwriter approval process. I am in the process of getting a home loan I am employed full time as well as a full time

Asked by Tkc, Winchester, VA Wed Jan 20, 2010

student who has college loans, my loans are in deferrment. The underwriter was concerned with my DTI ratio because my school did not update my graduation date so it looks as if I was supposed to graduate in 2012, but I will not be finished with my degree for aug 2013. I have sent the loan processor this information as well as the loan provider can the underwriter still deny my loan because they think my DTI ratio is to high even though they have evidence that my college loans will not be in repayment until 2014?
Also, I was told that if I had more than two years to complete my degree that these loans could not be used against me when applying for a loan. Is there any truth to that?

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Lori Jeltema, Agent, Suffolk, VA
Tue Apr 27, 2010
I had a similiar thing happen with my buyers last year and they had to provide evidence that the deferrment had been extended. Just showing their lender that they would not get their degree until later was not enough, they had to get the correct documentation showing deferrment. It sounds like you are just not supplying them with the specific info they need. Remember, the lender wants to do your loan - they aren't demanding more information for the fun of it. Sit down with your agent and go through exactly what is required and you should work it out.
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Patrick Sams…, Agent, Centreville, VA
Thu Apr 22, 2010
Hi Tkc,

What a lending world we live in now!?! It used to be a fairly informal process that allowed the underwriter to use common sense. Now, because of the 10's of 1000's of foreclosed homes on the books, underwriters are doing just the opposite. The Banks money and their jobs are directly tied to defaults. The entire focus now is "how is this loan going to go bad"!

It's no you, or any borrower for that point, it's the entire system that is under tremendous duress. The underwriter and the final investor are now focused on your ability to pay this loan not for 2 or 3 years, but well down the road. If they approve your loan and 3 or 4 years from now you crumble under the weight of your payments, you'll blame the Bank for over extending you money. It's a very tough situation that has left the mortgage business in a total mess.

Hang in there and work with the underwriter. Remember, everything eventually works out for the best!

best of luck! -Pat
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Gerard Dunn, Agent, Chevy Chase, MD
Sun Feb 21, 2010
If an underwriter was concerned about your DTI - it was because your ratios exceed current guidelines. The lending crisis over the past few years has caused banks to become much more critical on how they view and underwrite loans.

Although a loan repayment in deferral is normally not counted against you - there must be 2 years of deferment before they will not count the debt.

Get proper documentation from the loan servicer documenting the deferral. Also - write a letter to the underwriter letting them know that because you are young - you expect to have promotions and increases in compensation over the next few years. They will use this potential increase in earning power as a compensating factor when considering approval.

Underwriters are really looking for ways to make loans work and provide approvals to clients. We have to be sure we give them enough information to allow them to document the reasons for saying yes.

Give them something to hang their hat on - and you will find success!

Good Luck!

Gerry Dunn
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Carolyn Thom…, Agent, Rockville, MD
Sun Feb 21, 2010
Yes, I believe that your loan can be denied.

In addition to writing the lender, I suggest you write a letter to the three major credit reporting bureaus.

Contact information for the bureas, Experian, Equifax and Transunion are all on this link: http://www.canonespousefilebankruptcy.com/credit_repair
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Brenda Gerva…, Agent, Chesapeake, VA
Mon Jan 25, 2010
There is a possibility that the loan may be denied, I actually came across the situation with another buyer client and it set a reg flag up with the mortgage company but after very careful review, they approved the loan for my client. You don't mention your dealing with a mortgage brokerage or directly with a mortgage bank i.e. Wells Fargo, Suntrust, Chase to mention a few. Should you be denied, your realtor may be able to suggest another lender you could use, if you're using a realtor.
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