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slloyd

FHA Loan and NSF fees on bank statements

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Hello all,

 

Long time lurker, first time poster with a question about FHA loans and NSF fees on my bank statement.

 

I am applying for an FHA loan and I was approved even though I have a low credit score (580 - 590). I have no credit cards (no credit card debt - I paid them all off and closed them four or five years ago) and while I have had late payments in the past, I haven't had any within the last year. Not much on my credit report either except for a few medical bills sent to collections - one for $100 and one for $60. Everything else is paid.

 

I make about 5K a month and have no outstanding debt other than some student loans ($150 a month) and our utility bills. All are current and have been for a while (about a year).

 

We have found the house we want and I have enough in my 401K to cover the closing costs and the 3% down payment for the FHA loan. I have started the formal loan approval process and everything looks good except for my bank statement. I was asked to provide 2 months of statements and I noticed that i had 5 or 6 NSF / overdrawn fees in my checking account in the last two months. All of these were paid by the bank and my account never went into a negative balance for more than a day or two at the most. I also had deposits pending to cover these payments when they occurred.

 

I think these fees are BS and just a way for the bank to make money off me but I don't know how the mortgage company will view them. As long as they (the bank) paid these transactions I always looked the other way and let them get away with it. To me it was more important that my bills were paid on time. This has been going on for a while now and I've just learned to live with it.

 

Now that I am applying for a formal mortgage I've been asked to supply a bunch of different documentation. I've been at the same job for 8 years so verifying my income was no problem.

 

My question is this - will these NSF fees hurt my chances of final approval? Nothing else has changed and I have had no bankruptcies, foreclosures, etc. ever in my life. I sent an email to my loan officer explaining the fees and my side of the story. Is there anything else I should do? I've been freaking out about these NSF fees on my bank statement. Am I worrying too much or not enough? I know that every situation is unique, i just wanted to get a feel for how bad this will hurt my chances for final approval. Any comments /advice / reassurance would be appreciated.

 

Thanks.

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It will depend on the underwriter. I would plan on at minimum having to write a letter explaining what happened.

That seems like a lot and may throw up a huge red flag.

 

Good Luck

Brian

 

Thanks, I was afraid of that. Now I'm really freaking out.

 

All of these fees were incurred in groups of 2 or 3 and when they happened I had deposits pending from my on line savings account. My checking account was never overdrawn more than a day and sometimes only a few hours. I can't believe I've come this far to be undone by this. I put in a call to my loan officer and hopefully she can reassure me.

 

If worse comes to worse would getting a co-signer help?

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Brian,

 

Thanks for the fast reply. I spoke with my loan officer today (what a long weekend!) and explained the situation. She told me that I shouldn't worry about it. There was nothing else wrong with my application and she was certain that this wouldn't be a deal breaker.

 

According to her they've already run my application thru the initial process (not sure what that means but it sounds like they have some kind of software that simulates the underwriting process) and all it requires is a letter of explanation and we should be good to go. More and more people are getting these fees so i guess it's come up a lot recently. These were all overdraft fees (so nothing was ever returned for non-payment) and my avg daily balance on this account only went negative one day in the last two months.

 

I know I shouldn't count my chickens and all that but I feel much better after talking with my LO.

 

I appreciate all the help that everyone on these boards gives and I know I wouldn't be here (Buying a house) if it wasn't for the advice I got here.

 

Thanks to everyone!

 

-Steve

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I am dealing with this right now, the uw declined due to 'bounced checks' and I even have overdraft protection so there weren't really any! ha, hopefully it gets straightened out though, I dont think it showed the overdraft protection.

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I am dealing with this right now, the uw declined due to 'bounced checks' and I even have overdraft protection so there weren't really any! ha, hopefully it gets straightened out though, I dont think it showed the overdraft protection.

 

Alicia671, good luck, I hope it gets straightened out. I feel your pain.

 

It hardly seems fair when my bank seems to screw me over with these fees every chance it gets. We don't have overdraft protection which is what got us into this mess in the first place. When this whole ordeal is over we will.

 

Another thing that really bothers me is that our avg. daily balance on this account has been negative for only a single day in the last three months. And these fees always occurred in groups of 2 or 3. I know I'm being taken advantage of but I was so focused on paying my bills on time that I always let these slide. No longer.

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Yeah the fees are ridiculous. I don't balance anything so od protection comes in very handy for me, then just pay it back once deposit posts. Let me know how you make out with the UW, I will post when I hear back from mine. Have a feeling I'll still get declined and have to try another lender with a VOD instead. You could try asking your LO if you can get a VOD instead of bank statement since uw hasn't reviewed yet - wont show those NSFs - although could take a few days. VODs also show MONTHLY average balances, don't think they would have the option of showing daily balances.

Edited by alicia671

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I need help writing a letter of explanation to an underwriter for overdrafts that appear on my bank statement, the underwriter just wants to know why they occured, what was the circumstance.

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