Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.
As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.
Since Thursday I have covered the first 4 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The fifth question on Declarations Section VII Of Loan Application states:
- e. Have you directly or indirectly been obligated on any loan which resulted in foreclosure transfer of title in lieu of foreclosure or judgment?
This is another one of those questions that is not as easy to answer as it first might seem. That is because if a Bank files for foreclosure, even if a Homeowner transfers title in lieu of foreclosure, or avoids foreclosure by selling the house before the Bank forecloses on them, in all likely hood that Bank is still going to report it as a foreclosure on the Homeowners Credit Report. I have seen this several times lately, where the Homeowner sold the house before they were foreclosed on, even if it wasn't a Short Sale, and the Bank got paid in full, they still report a foreclosure on the Homeowners Credit Report. This might seem very unfair, but that is what is happening, and as far as Automated Underwriting is concerned, if it is reported as a foreclosure, its a foreclosure.
The only hope that a Borrower has in a case like this is if they get the Bank to agree to stop reporting the NON FORECLOSURE as a foreclosure, or that their Credit Scores and Debt-To-Income Ratios are within the qualifying guidelines for a Manual Underwrite, where an Underwriter will actually look at what really happened. If they can't meet the Manual Underwriting Guidelines, then they have to wait the same time period to purchase another house as if they really did have a foreclosure.
The sixth question on the Declarations Section VII Of Loan Application states:
- f. Are you presently delinquent or in default on any Federal debt, or any other loan, mortgage, financialobligation bond or loan guarantee? If "Yes" give details as described in the preceding question.
It is not good to be late on ANYTHING, but if you are going to be late on a financial obligation make sure that it is not a mortgage or Federal Debt. The Automated Underwriting in many case will forgive recent lates on credit cards, car payments, and other similar debts, but it is not forgiving of mortgage late in the last 12 months. Even if Automated Underwriting over looked a mortgage late in the last 12 months, the Underwriter will not, because it is unlikely that an Investor will purchase a loan that the Borrower had a mortgage late in the last 12 months.
A 30 day late payment or longer on a Federal Debt in the last 12 months is pretty much an automatic denial on FHA Mortgages. So young Borrowers with student loans need to make sure that those student loans are paid on time. Claiming that you did not know that the loans had gone into repayment, or that you were young and foolish is not a good excuse.
If you are planning to purchase a house in the near future, make sure that all your financial obligations are paid on time, but especially your mortgage and Federal Debts, or you could find yourself waiting several months before you can purchase that new house that you fell in love with.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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