Q: I need to know how to proceed in obtaining a two-week bank underwriting commitment. My home purchase contract has a no-financing contingency, and I could lose my deposit if I don’t move forward.
Here’s the story: I have a $75,000 annual income and my wife, who has been self-employed for one year, has only $4,000 in income. I have avoided credit cards since my student loans were listed as in default (my side of the story is of no consequence), but my wife had two department store cards and her credit score is very good.
I was working with a direct lender who is a friend and said he would do anything he could including placing an affluent friend of mine on the loan and even the title if need be so that I could qualify for the current low rates at conventional financing with no points.
Today my lender friend informed me he was shocked to see just how poor my credit is, and the best and only thing he could offer me is a loan with 7/8 of a point at 7.125 percent interest. But the loan would only be as an investment because my affluent friend needs to be on the title as a non-occupying owner. And, we need to put down 20 percent.
The lender said that combining my wife’s score with mine would not qualify for anything at all, including an FHA loan. On your website, you suggest checking with a credit union, or a sub-prime lender. What do you think is my best bet given the 14-day time constraint?
A: You seem to have backed yourself into a corner. I’m not sure there are that many ways out. Your chances of getting a different loan approved by another lender within 14 days seem rather grim from what you’ve put in your letter. Why on earth did you sign a purchase offer without a financing contingency if you weren’t already pre-approved for your mortgage? That was a crucial mistake.
Your current lender appears to be doing what he can to work with you, and what he is telling you would appear to be correct, given the information in your letter. I can only assume that in addition to the student loan problem you have a number of “late pays” on your credit history. Your wife’s income is basically ineligible (for self-employed income to count you need to be self-employed for two years). Her credit can help some but not that much.
You could check around with other lenders, and look at your own credit score to see where you are (the best place to do that is myFICO, and the cost is $12.95). You could talk to sub-prime lenders to see if they can help, but your interest rate will be higher, and you’ll pay a load of points. Can you afford to buy a home at that price?
The only way out seems to be having your affluent friend on your title. While a concern, you should attempt to do this loan given your time constraints. Once you are in the house and have cleaned up your credit by paying your mortgage on time for a year or so, you can try to refinance and get your friend off the mortgage and the title.
Again, my feeling is that you’ll have a minimal chance of getting pre-approved for your loan from another lender within 14 days, and perhaps not even from the lender you’re working with. But if your deposit is at stake, I’d certainly try almost everything, including borrowing money from your 401(k) at work.
October 24, 2004
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