Refi Question - Is This Legal?!

[nyalpine90]

Originally Posted by DETRoadster

Well we aren't out of the woods yet. The loan is supposed to close this week. We've signed everything as of last week. Underwriting just came back wanting MORE details and documentation on my wife's business before they will sign off.

It's crazy to me because if you take all our debt and only use my income, completely writing off my wife's income, we have a debt to income ratio of 19%. Their limit is 43%.

My wife and her business partner took out a government backed small business loan at the height of COVID, didnt need a penny of it, and paid it all back 4 months later. That's somehow reflecting poorly on the business in the eyes of underwriting.

I just dont understand thee guys. God help any of you who are self-employed and trying to get a home loan or refi. What a nightmare.

Thats exactly what my wife and I encounter while purchasing our 1st property. No debt, only car payments and all of credit cards were 0 balance.
credit scores 800 each. we came in around 15% debt ratio, still underwriting wanted every transactions in and out of our banks until we closed. Any deposits over $5k, they wanted to know where it came from. Background checks, identity check...at one point i felt i would have to bend over too lol

[Joekerr]

Originally Posted by DETRoadster

OMG, YES! That's the Hell we are trapped in. Luckily I have a folder on my desktop with all the documents they've asked for over the past month so when they want one again it's an easy find.

Last night the loan officer's little assistant guy reached out and asked my wife a bunch of questions. The best of which was "Is there anything else you can tell us about your business that might help us get through underwriting?" Like the 24 months of financial records aren't enough? Now you want color commentary to seal the deal? So is underwriting not convinced by the documents but will suddenly say "Oh, well, now that's she's finally explained by e-mail, in her own words, that the business is super awesome, we will fund this." What specifically are you guys looking for her to add? That the clinic has bamboo floors and one of the doctors cant seem to wash her lunch dishes in the break room? What a shit-show.

Different country, but I too went through this, and I was employed at the time, but they were just making me bend over backwards basically. Bunch of stupid stuff, and my father in law was giving us a "gift" which was really a loan so that we could make a larger downpayment and not have to pay for mortgage insurance.

Well they wanted to know where the downpayment money was coming from and all sorts of stuff. The last straw was when they said they'd need to see my father in law's bank statements and investments to assess whether they'd fund the mortgage!!

That is none of their business at all, and I said no way, told the broker I was dealing with to move immediately to another lender and get this funded asap. Well, all of a sudden, the original lender had no further questions or requests for documentation and were willing to lend as soon as I told them I was going elsewhere. So I did fund with them after all because I didn't want to go through it all again with someone new, and they were fine after, but I never used them for our next mortgage.

Originally Posted by RickFLM4

I’m self employed and just closed a couple of weeks ago on a refinance of our primary home in FL with an internet lender who will end up selling the loan (Sebonic / Cardinal).

Yup, the Sebonics, Auroras, etc. of the mortgage world are great to work with on refis. They literally do these types of transactions day in/day out and the process is super efficient up to and including the handoff to the eventual servicing company.

Given that, I've had really good luck with sifting through options that www.BankRate.com has returned in the past. What they quote is exactly what you get; that's definitely made me a repeat customer in the past for sure.

[RickFLM4]

Originally Posted by FCobra94

Yup, the Sebonics, Auroras, etc. of the mortgage world are great to work with on refis. They literally do these types of transactions day in/day out and the process is super efficient up to and including the handoff to the eventual servicing company.

Given that, I've had really good luck with sifting through options that www.BankRate.com has returned in the past. What they quote is exactly what you get; that's definitely made me a repeat customer in the past for sure.

Yeah I originally found them on BankRate. I went with them because I used them for our vacation property 2 years ago, they were ok on that, and had a very good rate with no points or lender fees (only title and state fees, which can’t be avoided). We wanted to get the primary residence done since we took over a point off what we were paying and also rolled a HELOC into it now. So glad that one went well. The vacation condo was borderline worth doing, but no fees and they could leverage the app I did for our primary so supposedly easy to save a little on rate. But when it started costing me billable hours to address their requests and they started calling when I was working, it stopped being worth it since it seemed like it would never conclude.

[UncleWede]

So, on the additional documentation route:
We were doing a (8.75%) constructiuon loan. It was all but approved and then suddenly they say "We need a 10% contingency in your account"
WTF, you know how much I have.

I took my 1-yo H-D motorcycle over to the local dealer, said "don't F with me, just write me a check"

OK, I have the contingency in the bank
Where did you get that?
I sold my H-D
Can you prove it?
WTF, yeah, it's no longer in my yard, and I have an extra $16k in the bank
We need a letter from the dealer stated they purchased it , and the price they paid

[DETRoadster]

So for you guys who have gone through similar documentation issues with being self-employed, how recently were your loans taken out? Our bank is giving us a bunch of excuses about how there's new rules put in place since COVID that are requiring all the extra due diligence.

[RickFLM4]

Originally Posted by DETRoadster

So for you guys who have gone through similar documentation issues with being self-employed, how recently were your loans taken out? Our bank is giving us a bunch of excuses about how there's new rules put in place since COVID that are requiring all the extra due diligence.

On the one that closed, we signed April 24. They didn't need an appraisal and it was technically a cash out because we rolled a HELOC balance into it. I gave them 2019 and 2018 tax returns plus a P&L for 2020 and YTD 2021 (2020 taxes still not filed - fuck gotta get those done this weekend), along with business bank statements. A few questions and requests for information, but overall very little inquiry on the primary residence, although it did take them about 6 weeks to finish the data gathering and analysis.

I got the rule change talk on the second home, where I was also told second homes and condos are tougher (which is true). Provided same data to them, but also needed to put together an analysis of revenue trends and reconcile my P&L to bank statements because they couldn't figure it out. Also needed to fill out some form to describe my business, how I find new customers, expenses incurred, etc. They got hung up on low expenses and seemed to not understand that a CPA does not have cost of goods sold. Wasted a bunch of time on that one that didn't end up closing.

The other issue I had, more on secondary than primary, is they seemed to have problems getting information from third parties, like existing lenders. This should be routine work so not sure what was wrong.

[DETRoadster]

Originally Posted by RickFLM4

On the one that closed, we signed April 24. They didn't need an appraisal and it was technically a cash out because we rolled a HELOC balance into it. I gave them 2019 and 2018 tax returns plus a P&L for 2020 and YTD 2021 (2020 taxes still not filed - fuck gotta get those done this weekend), along with business bank statements. A few questions and requests for information, but overall very little inquiry on the primary residence, although it did take them about 6 weeks to finish the data gathering and analysis.

I got the rule change talk on the second home, where I was also told second homes and condos are tougher (which is true). Provided same data to them, but also needed to put together an analysis of revenue trends and reconcile my P&L to bank statements because they couldn't figure it out. Also needed to fill out some form to describe my business, how I find new customers, expenses incurred, etc. They got hung up on low expenses and seemed to not understand that a CPA does not have cost of goods sold. Wasted a bunch of time on that one that didn't end up closing.

The other issue I had, more on secondary than primary, is they seemed to have problems getting information from third parties, like existing lenders. This should be routine work so not sure what was wrong.

LOL, you had to explain to the bank why a CPA doesn't have COGS???

I went though something similar with our bank. I have an LLC that is literally just a holding company to park a small ownership grant I was given by my employer. It's an LLC on paper with a bank account. They wanted P&L, balance sheet, assets, debts, etc. Sheesh. I gave them the K1 and they they still insisted on a P&L. So I took the topline income on the K1, added a "misc. charges and expenses" line that subtracted out and magically arrived at the bottom line income on the K1. Some underwriting sloth just needed to check a "P&L Received" box and had no concern over what was on it or how I arrived at it.

[Maestro]

I personally have never run in to an issue where points on a loan or the loan interest rate were subject to the appraised value of a home. If the bank is claiming this they are playing a game. The interest rate is a function of your credit worthiness, and how much your are borrowing.

Every time I dealt with points being offered, it was at the very beginning of the loan process, they offer them to reduce the loan interest rate if for some reason your credit worthiness did not get the lowest rate. In the last 20 yrs of doing loans I never been offer points since I always qualified for the lowest interest rate being offered.

Some people said working with a Broker or online loan companies is better, yes this make it easy to get a lower rate. However, as someone pointed out most time these loans are then immediate sold especially if the load is FNMA, these kinds of loans get sold all the time. Sometimes when the loan is sold the servicing of the loan stays with the loan originator other times it moves to the new bank. When this happen many time you have to change your auto payments if you have one set up. I ran into this once and I seen lots of complaints where the new bank screwed up the auto payment or the old bank never notifies you that the loan was sold and your need to setup your autopayment with the new bank. When this get screwed up this late payment show up in your credit report and get it remove can be difficult.

I personally rather deal directly with the bank writing the loan and plans to keep the loan. My last 3 loans has been with the same bank that I do all my personal banking with and they been able to match or beat the rates I found online and they even offer to cut the rate by 0.25% by agreeing to autopayment and escrowing taxes and insurance even though I am not required due to having more then 20% equity. The other benefit I got doing this, when I refi or got a HELOC they did not do a credit check they used my banking history with the bank over the last 25yrs as the basis of issuing the loan. How do I know they did not check, they told me and loan requests did not show in the credit history.

Doing this a number of time, and talking with the bank, I found out that when you work directly with a bank and you have banking histor and they do not plan to sell your loan and keep it as part of their own loan portfolio, they have most flexibility on what they do with the loan. We are in the process of building a home and we will be taking out a building loan, my current bank will not underwrite a building loan they got out of this business a number yrs ago. I am looking at a new bank, and speaking with the Building Loan officer, He told me we have two options, a convertible loan (FNMA) which has lots of rules and restrictions (like the house has to be complete in 1 yr, interest rate on the complete home is not locked until the home is complete) or we can go with a Bank portfolio loan, which they have more flexibility on, but need really good credit history.