Imagine that!! Well we just closed a loan that was a classic case of Murphy’s-law coupled with simple non-compliance by our client, but despite these obstacles the closing took place this week. This is a true story and the purpose is to let all you readers know what NOT to do when applying for a mortgage, going through the mortgage process and buying a home.
It all started with a home going up for sale and my client offering full price. A bidding war ensued and my client eventually bought the house $50,000 over asking price.
The client was buying it together with their parents. The client made a minimal amount and the bulk of the income was from the non-occupying co borrower. It was a simple straightforward file. The down payment was coming from a HELOC, the income was supported by w-2 and pay-stubs and all the #’s worked.
We began processing the file. This was February 2010. We asked for the 2009 w-2 and 2008 tax returns. We got the 2008 w-2, no tax returns and no 2009 w-2. Meanwhile we did the appraisal.
Finally the 2009 w-2 is faxed in. it showed $49,000 while the previous year showed $96,000!! His paystubs showed a weekly salary that would eventually total to $100,000. What happened? He told us that he took a sabbatical? Problem is, he wasn’t a Professor!!
Part of a mortgage file entails numerous verifications and re-verifications of employment. Well my processor called the job to verbally verify that he still works there, and the probability of continued employment and we were floored. Everything fell into place. This is how the conversation went:
Meridian Processor: Hello, I am calling from Meridian Mortgage and I would like t speak with someone who can verify employment for Mr._________.
Receptionist: I can do that.
Meridian Processor: Great, What is his current position?
Receptionist: Manager
Meridian Processor: Fine. What is his probability of continued employment?
Receptionist: What do you mean, of course, he is the BOSS!! He owns this company!!
Well that explained everything, but we had a major problem. If you are self employed and your income is reduces, we can only use the lesser amount with a GREAT and I mean a GREAT explanation as to why this happened and that the income will not continue to slide.
When I asked the client, why he never told me he was self employed and why he tried to hide the information by not providing me with tax returns, he said “someone once told him that for a mortgage, you never tell anyone that you are self employed”. Bad advice! In 2010, you cannot hide that information, we do pull a 4506T, transcripts of tax returns that would clue us in!!
The whole file was a series of bumps and valleys. The icing on the cake was a day before the closing, the client was supposed to prove that he withdrew his money from the Home Equity Line of Credit and deposit it in his checking account for the closing. When he gave us his bank statement printout, there wee numerous smaller deposits (ex. Supposed to withdraw $80,000 instead there were 5 deposits between $15,000 and $20,000 each) It turns out he borrowed the money from a friend because he thought it would be easier for us to close because he wouldn’t have additional debt. This basically just delayed the closing for another week while we worked out this issue.
Anyway they closed and now we are busy as ever closing loans. The lesson is, you must trust and be honest with your mortgage professional. A seasoned mortgage professional will guide you and work out the kinks in your mortgage and you will have a smoother closing !!
Now with rates in the low 4 percent range, we are handling loads of refinances and purchases. Find out about the 0 cost refinance!!
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