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Frustrated and Confused

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My spouse and I are trying to get (preferably) FHA financing for a house. It would be a small mortgage loan by almost anyone's standards. We have a few credit cards, but we PIF and neither of us carries credit card debt. There is one car loan between us with perfect payment history. We are recovering from old credit issues and have scores in the mid-600s. We both have savings.

Here's the problem: I make the majority of our combined income and have W2s and tax returns for the past several years. However, unlike my spouse, I have been on leave from my job due to COVID-19 and cannot produce check stubs. I have finally been called back to work, but that is over a month away. We do have a co-signer available but were told we still have to qualify income-wise, and that can't be done without check stubs.

Please offer any advice you might have! We can't let this property get away from us. Thank you! 

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You should try to clear any old derogatory accounts from your credit reports.

Try this;

https://whychat.me/GUIDEBOOK.html

Opting out helps prevent JDBs( junk debt buyers)from poisoning your reports with old derogatory accounts when you are mortgage shopping.

If you have any errors or unknown data on your reports this is a good time to get them corrected.

If you have OLD collection accounts on your reports, you may be able to get them deleted by following the appropriate program for getting them removed. 

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I suggest WAITING instead of burdening someone and complicating matters with a co-signer.

 

Would a letter from your employer stating that your checks are restarting? Did you collect UE? Even just the helicopter money?

 

I'll also recommend you work on your scores so you can qualify for a prime mortgage instead of FHA.

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Posted (edited)
1 hour ago, hegemony said:

I suggest WAITING instead of burdening someone and complicating matters with a co-signer.

 

Would a letter from your employer stating that your checks are restarting? Did you collect UE? Even just the helicopter money?

 

I'll also recommend you work on your scores so you can qualify for a prime mortgage instead of FHA.

The co-signer actually offered, in the interest of keeping the house in the family. Needless to say, we would rather do it on our own.

 

The waiting part is risky, due to the property having other interested parties. (Is being sold by a relative who wants to sell asap.) We were just fortunate to be promised first shot at it. 

 

Yes, I have been on full UE. Do lenders look at that, though? Being a temporary source of 'income,' I assumed they wouldn't. 

 

ETA: Yes, I can get such a letter from my employer. 

Edited by cleverpronoun

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53 minutes ago, cleverpronoun said:

The co-signer actually offered, in the interest of keeping the house in the family. Needless to say, we would rather do it on our own.

 

The waiting part is risky, due to the property having other interested parties. (Is being sold by a relative who wants to sell asap.) We were just fortunate to be promised first shot at it. 

 

Yes, I have been on full UE. Do lenders look at that, though? Being a temporary source of 'income,' I assumed they wouldn't. 

 

ETA: Yes, I can get such a letter from my employer. 

UE is taxable income: https://www.forbes.com/sites/zackfriedman/2020/05/20/do-you-have-to-pay-taxes-on-unemployment/#5dc27197243d

 

I would get documentation of your UE payments and the letter from your employer. Check with your mortgage broker on how it treats UE and be prepared to change brokers.

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Thank you so much for your advice. I can easily show UE income and can contact my employer for that letter. (I actually have the email calling me back to work; would this suffice, in your opinion?) 

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One more thing: does it matter which lender we choose, such as the CU where we have credit, or a bank, or Rocket, etc., or are the lenders all bound to the same FHA rules? 

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Posted (edited)
57 minutes ago, cleverpronoun said:

One more thing: does it matter which lender we choose, such as the CU where we have credit, or a bank, or Rocket, etc., or are the lenders all bound to the same FHA rules? 

AFAIK FHA rules are the same across lenders but some lenders may be more willing to give less hassle for the UE. FWIW, I'm sure you're not the only person applying for a mortgage who experienced UE during the pandemic.

 

For the employer letter, ask the mortgage broker but IMHO something on letterhead is preferred to an email. Even if you are not able to count the UE as income for mortgage purposes, showing you have employment and the UE period was temporary may help.

 

Hopefully someone more versed in current lending guidelies on the matter will chime-in. But I would think with two years of tax returns, W-2s, and a letter saying you are going back to work will be enough. I mean, think about people who move across country for a new job and buy a house before they even start the new gig.... happens all the time.

 

good luck!

Edited by hegemony

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I sure hope they'll accept my documentation. I did the math, and at the 43% mortgage-to-income ratio, we qualify for three times the amount of this mortgage, including tax, insurance, and rounded up to the next $100. It's a no-lose proposition for a lender, but I understand that rules are rules. I'd sure hate to.see this house get away.

Thanks so much for all your input. If anyone else has anything to add, please jump in. We can use all the help we can get. 

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14 hours ago, cleverpronoun said:

One more thing: does it matter which lender we choose

A solid mortgage company will walk you through everything you need and point out the pitfalls.

 

If time is of the essence, your first priority should be selecting a company to do this mortgage for you.  The mortgage company is obviously compensated to do your loan, and part of what you're paying for is service.

 

Most for-profit mortgage companies* pay their loan officers at least in part on commission, so when you start the loan process you have someone else with an incentive to get your deal closed -- and they should understand and be able to clearly explain how to navigate through your current situation.

14 hours ago, hegemony said:

CU where we have credit, or a bank, or Rocket

* A CU is the last place I'd go for something this important, unless you have a very strong relationship with a person whose name you know and the institution has a strong track record of outstanding service (this last part eliminates every credit union I've ever used for anything, but that's my personal experience).  

 

Rocket isn't a mortgage company, they're a technology company and a sales organization that happens to do mortgages.  

 

If you don't have a local mortgage relationship, I've had very good luck with mortgage companies I've found by running a scenario through Zillow Mortgage Rates and then making some phone calls from the list of results. 

 

The phone is an essential part of the process, because it makes it easy to detect when someone is trying to "sell" you something vs. actually knowing what they're doing.  You don't need a salesperson.  You want an advocate.

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56 minutes ago, hegemony said:

I never said such a thing.

Double you tee eff happened there?

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Hi, all. Turns out, UE can NOT be considered for a mortgage. We've talked to several banks/CUs and applied at one. Furthermore, the company that called me back to work can't guarantee a 40-hour week -- far from it, in fact. I've decided to go ahead and file for SS which will cut my average salary for the last few years by 350%. Ouch. I will get a PT job (happily unrelated to the industry in which I've been employed) to supplement my meager SS. (Spouse is younger and has another 10 years until retirement.) So now that we're officially po' folks, we're pretty much out of options. Buy land, pay that off and get a manufactured home? Stay put in a house that needs a TON of repairs (35-40% of its appraised value) yet is in a great area and has 85% equity... and then...? This really sucks. I thank you all for your help. This turned out to be a much, MUCH more complicated issue than was initially presented. Hegemony, I believe your advice to just WAIT was on the money. 

Edited by cleverpronoun

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On 9/6/2020 at 9:57 PM, cleverpronoun said:

We've talked to several banks/CUs and applied at one.

Where did you end up applying?  Seems odd to me that a legitimate mortgage company would put you through the application process if your situation was well outside guidelines.

 

On 9/6/2020 at 9:57 PM, cleverpronoun said:

Stay put in a house that needs a TON of repairs

Are the repairs required for the stability of the structure and/or required to make the house safe to live in (vs. cosmetically appealing)?  

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