Some Things Just Don’t Add UP!!!!

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

 I got a phone call today from a Realtor that I work with, asking me to Pre-Qualify one of her Buyers.  This Buyer was working with a Lender that this Realtor had not heard of before, and she did not trust what he was telling her Buyer.  Supposedly this Loan Officer had Pre-Approved this Buyer for a No Money Down Loan up to $160,000 with a 6.50% interest rate.  Based on what the Realtor new about this Buyer, this “just did not add up”.

Let me start by giving the Buyers financial position:
She is a single person.
She makes $12.00 per hour on her first job, and works 35 hours per week. ($1,820 per month).
She has a second job that she makes $11.30 per hour, and works 12 hors per week ($587.60 per month).
She only has $1,500 in the bank, and no Gift money available to her.
Seller is willing to pay up to $5,000 for closing costs.
Credit Scores are 685. 687, & 663.

She is trying to purchase a Condo:
Purchase Price ………...$117,300
Taxes………………......$1,149 per year ($120.75 per month)
Condo Fees…………….$1,980 per year (165 per month)
Other Revolving Debt….$431 per month

With this information the only loan programs that I have that she could possibly qualify for are My Community or a Flex 100.  Obviously between the two My Community would be the program of choice, because it has a slightly lower interest rate and a much lower PMI multiplier.

My Community will allow the Seller to pay up to 3% towards Closing Costs ($3,519).  My Closing Costs with zero points were $3,346.81.  In order to take full advantage of the 3% Closing Costs I was having her buy .25 point witch would give her a 6.785% interest rate.

Monthly Payment with No Money Down on a My Community Loan 6.875%:
Principle and Interest…....$770.58
Taxes…………………….$120.75
PMI……………………...$  57.67
Condo Fees……………...$165.00
TOTAL……………..…$1,114.00

This means that we have a Front Ratio of 46.27% and a Back Ratio of 64.172%.  With this scenario I got an Approved/Eligible fro DU.  If I go over a 65% Back Ratio, DU will not give me an Approved/Eligible.  But I am under a 65% Back Ratio so everything is fine.  Wrong!!!  It turns out that she has only had her present job for 8 months, which means that I can not use her second job towards income.  So all of the sudden her Front Ratio becomes 61.209% and her Back Ratio becomes 84.89% no way is this going to work on this a Condo, much less a Condo or House with a Sales Price of $160,000 like the other Loan Officer qualified her for.  So this left me more than just a little puzzled as to what this Loan Officer is doing, what was he trying to accomplish besides wasting everybody’s time.  The only way that this might ever work is to do a “Stated Program” at a much higher rate, and lie about the income.  Unfortunately I see this all to often, and then I hear the horror stories of what happens when they get to the Closing. 

I hope she asks lots of questions and looks at the Good Faith Estimate and Truth in Lending REAL CLOSE.  I was sorry that I was not able to help her on this purchase, but I will sleep well tonight that I took the time to look at her whole financial situation, and did not mislead her into thinking that she can do something that she can not do.  I have also given her advice on what to ask this other Loan Officer before she finds herself in a very unpleasant situation.  I will be following up with the Realtor that she is working with to see how this ends up.  I hope this Loan Officer doesn’t end up making a monkey out of both of them.

 

********************************************************************************************

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

Posted by

******************************************************************************

 

 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & #FL and can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Location:
Connecticut Middlesex County
Groups:
Real Estate Rookie
Tags:
buyer beware

Spam prevention
Show All Comments
Ambassador
895,835
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production
I'm really not sure about this...I really think that I need to sleep on it.  Thanks for the comments.
May 02, 2007 03:41 AM #57
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Larry, I hope you have a good nap.

 

Lisa, Connecticut does not require Loan Officers to be licensed, however, I think licensing should be required in every state.  Having said that, I do not think that licensing would be of much help in many of these similar situations.  A lot of these scenarios would require the Loan Officer to fully disclose (by further explaining what their ratios mean) to the Borrower.  It would be almost impossible to monitor to what degree that was done.

Where I do think licensing would help is in the area of product knowlege, and hopefully ethical standards. 

 

May 03, 2007 04:28 AM #58
Rainer
62,624
Nick M.
Certified Residential Appraiser- West Palm Beach Real Estate - West Palm Beach, FL
Realtor-Appraiser in West Palm-South Florida Real Estate Appraiser
George, you did your thing and that's honorable. after all that mortgage jargon Nick feels like that monkey in the photo (no offense to the monkey!!).  i hope she doesn't get the short end of the stick on her deal and that she isn't devastated about not getting the place. it's good to know that you can sleep at night isn't it? :)) take care brother. enjoy the weekend. :)
May 04, 2007 10:15 AM #59
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Nick, I am sure that the monkey will not take that personally.....LOL

I have talked to this borrower a couple of times since I wrote this and she is OK, and know now what she needs to do to be in position to purchase a property. 

May 04, 2007 12:59 PM #60
Rainer
102,978
Earl Sorrells-Palmdale
Coldwell Banker Hartwig - Palmdale, CA
"The Pearl", Rosamond, Lancaster
This is a great illustration.  I have seen this alot, people wanting something they just don't make enough to be able to make the payments, even though the credit is decent.  Then you see different companies willing to do whatever it takes to get them financed, even though they will be foreclosing on them 1-2 years down the road.  Too many people let their minds get fogged up and they don't remember the client.  Thank you again for the blog.  Earl
May 04, 2007 05:58 PM #61
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Earl, yep sometimes we get a little to caught up with making the deal work, that we forget about what the ramifications might be.
May 05, 2007 06:59 AM #62
Ambassador
938,758
Kristal Kraft
The Berkshire Group Realtors - Denver, CO
Selling Metro Denver Real Estate - 303-589-2022

George, Your Blog log is working, I see my silly face!  I wonder why there are only two people there, you've got 60+ comments here... Guess it's not retroactive.

kk 

May 11, 2007 03:32 PM #63
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Kristal, there is nothing silly about your face and I am honored that it is the first one on there.  And I believe that you are right about it not being retroactive, I did not implement it until all of the comments before you were made.

May 11, 2007 03:43 PM #64
Rainmaker
579,959
Dena Stevens Coriz
Rocky Mountain Realty - Canon City, CO
Putting The Real Into Realtor Since 2004
George, does this mean you will know when I'm stalking you?
May 11, 2007 03:56 PM #65
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Dena, it should mean that but for some reason your picture is not showing up.
May 11, 2007 04:02 PM #66
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Ok Dena, you are there now, so now you can't stalk without me knowing it...........LOL.
May 11, 2007 04:49 PM #67
Rainmaker
495,586
Philip Turner
MCCUE MORTGAGE COMPANY - New London, CT
Mortgage Banker Since 1980

Glad to see the borrower listened to you.  I am seeing the damage done by the lenders that really pressured people into taking a loan that they couldn't afford when they come in to see me looking for help.

Great job.

May 12, 2007 08:47 AM #68
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Phill, sometimes things just don't feel right and this was one of them.  I am also glad that she listened in the end.
May 12, 2007 09:00 AM #69
Rainmaker
4,432,533
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
I recently had buyers who said they were pre approved and showed a pre qualification letter , giving just a loan amount and interest rate tbd.I explained it to buyers, but they said they were referred to the person and said  they had things on their credit which would be cleared in a month .They were not very open about the finances .They made an offer on a house and while writing the mortgage contingency clause I asked them what rate I should write.They said the loan officer had said 6% after the credit is cleared .I called the loan officer and found out that he said it would be 9% no doc and it may take a year to clear the credit.He had not expected me to ask questions.The buyers did not buy because the payments would be too high.It is sad that people mislead others.
May 13, 2007 12:19 AM #70
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Gita, looks like you had your hands full with this one. Sounds like either the Buyer misunderstood the Loan Officer or the Loan Officer did a bad job of explaining things to the Buyer, but in either case how did they expect you to put in an offer on a house based on credit issues maybe being cleared up? 
May 13, 2007 08:26 AM #71
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Rebecca, in my case the Borrower did end up backing out and not going through with this, but I have had others that did not listen.  All we can do is advise and give them the information to make a decision, but in the end it is their decision and they are the ones that have to live with it.  But like you, I still don't like it when they do not listen to reason.
May 13, 2007 02:18 PM #73
Rainmaker
308,577
Dawn Workman
Veracity Real Estate Group, LLC - Camas, WA
Camas Real Estate Expert, MBA, 480-540-8100
That does not seem to add up and I am assuming the wool is being pulled.  Also, I am curious if the Realtor had any actual communication with the lender, sometimes people hear that they want to hear versus actually getting the facts.  
May 30, 2007 06:32 PM #74
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert
Dawn, in this case the Realtor was listening the the Buyer and it did not sound right, that is why she asked them to have me pre-approve them.
May 31, 2007 03:25 PM #75
Rainer
7,787
Steve Hawk
Guaranteed Home Mortgage Company - Pawling, NY

George,

I just joined (re-joined actually) AR and have read a few of your blogs. I agree with everything you said and it definitely sounds like you run an ethical business which unfortunately is refreshing! My first blog yesterday was about bogus pre-approvals that brokers issue to suck the clients into their pipeline and it certainly sounds like this is what happened. I do believe that in most cases they're issued by uneducated (not unethical) loan officers and the goal is not to deceive but it does help to give our business a bad name.

Keep up the good work.

Jun 01, 2007 03:14 AM #76
Ambassador
3,890,768
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Steve, you could very well be right about that, there are a lot of Loan Officers out there that I also question if they really know what they are doing.  In this business when we are dealing with this kind of money, I think that we need to educate ourselves as best as possible to truly service our clients.

Glad to have you back on AR, and hope that your second stay is an enjoyable one. 

Jun 01, 2007 04:47 AM #77
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Ambassador
3,890,768

George Souto

Your Connecticut Mortgage Expert
Call Me With All Mortgage Questions
*
*
*
*
Spam prevention