Only 1 Bank Would Approve This Loan

For many years I have said thousands of times "Cash is King!" Let me be the first to tell you: The King Is Dead!!!

Two clients tell the story the best. One gentleman could put $100,000 down on a $200,000 house; but I could not get him approved for even a FHA loan! Why? His credit report consisted only of 4 unpaid collection accounts. And I was not allowed to verify non-traditional credit like rent, utilities, insurance payments because his traditional credit report was filled only with collections. A 50% LTV did not matter!

A second client is a young lady fresh out of college with her first professional job. Her problem: she has no traditional credit or credit score. Thus, I added her Dad to the loan as a non-occupying co-borrower which FHA allows. Her Dad is giving her $40k for a down payment. His credit is perfect and he has a 7 figure income. I have their FHA loan approved through FHA's Total Scorecard underwriting software. Easy loan? Wrong!

Knowing that she has no credit score, I thought this could be a problem. It was! 11 of my 15 FHA banks said "NO!" Three of them said maybe if I can verify at least 3 or 4 non-traditional credit tradelines for her. Only one bank has said YES to this loan as approved by FHA!

So, who is the new King? The new King is definitely credit and credit scores. In fact, most banks and the PMI companies require that a borrower have at least 3 traditional credit tradelines open for at least 12 months regardless of any on-line approval that I receive from Fannie, Freddie, FHA, or VA.

Say hello to the new KING.