All of you know I like to use sports analogies in my newsletters. I use a lot of football analogies.
However, now that it is baseball season, I am going to use a baseball analogy.
In baseball, if your team is winning late in the game(8th inning or beyond), a team usually brings a relief pitcher or "closer" to finish out the game.
If the closing pitcher ends up keeping the lead and your team wins the game at the end, that pitcher gets a "save".
If the other team comes back and wins, that pitcher gets hit with a "blown save".
Rarely do I have a "blown save", but I have had some recent near misses.
Here are some situations that all of you should now that could potentially result in a 'blown save'.
(1) If one is self-employed, forming a new company within a year of application(even in the same industry) will result in that income not being counted PERIOD.
The reason: Although an owner may have experience in his or her industry over the years, any new business has a high risk of failing in its first year.
With no exceptions, that income will NOT be counted. I have just recently experienced this situation(it was an admitted oversight), and luckily "saved" this loan by having his family co-sign. (FHA loans allow co-signers)
(2) Using gift money from relatives for a purchase but the donors of the gift used "cash" for their gift.
A gift from a donor has to be sourced, and although some people are leery of putting money in a bank due to identity theft, etc, a lender will not accept gift funds that cannot be sourced. If you are using gift money from relatives for a purchase, make sure they have that money in their bank prior to donation of gift. (Or, if they don't have a bank account, get one opened yesterday).
(3) Excessive transfers of money between accounts.
Lenders frown on seeing money being transferred all over the place. It arouses suspicion. It is even worse if transfer of funds is from a self-employed business account to a personal account. If that happens , the business owner's CPA, with no exception, has to prepare a letter indicating that transfer of business funds to personal account does not negatively impact the business.
(4) If there has been a job switch in past two years from a salaried position to a commission position, that is a death sentence.
If commissions do not have a two year history, that commission will not be counted, even with earnings that are as much as one's salary in the past years. Commissions, of course, are not guaranteed and fluctuate, so an underwriter cannot use that unless there is a documented two year history.
(5) Student loan deferments on credit report that do not show the deferment period.
If I prequalify somebody, his or her credit report has student loans with high balances, and the payment shows "deferred', I have to see a letter from each student loan servicer that says the student loan payments are deferred for 12 months from the date of loan CLOSING, not the date of loan application.
I just ran into this problem recently. I am currently working with a client that came in and applied back in February and got credit approved. His letter from the student loan company indicated that the deferment was good until Febuary of 2012. However, now that we are into April, we are less than 12 months between now and first payment due.
Because of that, now the debt payment is included in the debt ratio. Now the client's debt ratio is too high to qualify. Again, we saved the deal by having the customer pay off some other debt to offset the student loan payment. (Again, FHA allows one to pay off debt before loan closing to exclude those respective payments from debt ratio. CONVENTIONAL LOANS do not allow you to do that).
Again, that was a situation where this should have been addressed up front. It almost resulted in a "blown save".
To get the "save", if one is applying for a purchase loan and the student loans are showing deferred on the credit report, the first thing to do would be to anticipate the month you are going to close. After that, make sure the deferment letter shows 13 months from month of close before first student loan payment is due.
Example
: You think you will close in May. To be safe, I would make sure client's deferment letter shows first payment on student loan shows due June 2012.
I have had some scares with these above situations in the past year.
Because of that, I want all of you to avoid these scares that may result in "blown saves".
"Blown saves" mean mean "blown transactions" , "blown credibility" and "blown dreams".
I have been in the industry 14 years, and still run across scenarios that I had never met before. The ones above are five of them that may happen to you.
Do the work up front:
Be prepared. Get a great starting pitcher. That way, by the time you are in the late innings, you have a big enough lead to preserve your 'save"
Thank you again for your business.
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