I have a dear friend who was scheduled to close on a new home on Friday, but received word today that their loan has fallen through.   Originally they were approved for an FDA loan as they are in a rural area, but then were told a few weeks ago that their income was a few hundred dollars over the maximum amount.  The original loan officer was fired and they were told they qualified for another program, but just needed a down payment.

Today they were told the problem is that they have a deed in lieu on their credit report- which was disclosed when they applied.   It is not quite 3 years old, and they were told they can't get any kind of loan until the three years are up in another 4 months.

They were approved for the loan over 6 months ago and were working with a builder to have a home built, and have everything packed to move in this weekend, so this bank error is certainly devastating to them and their young children

Their first home had an ARM they were unable to refinance due to declining home values, and the interest rate had climbed up to over 16%, they tried to work out a mod or refinance for several years but the loan servicer couldn't even figure out who owned the note.  They also had some major medical bills and loss of work during that time period.

Just wanted to see if their bank is correct that there are no other options, or if there is another loan program that would be suitable for them.  They are in Texas, the loan amount was around $150,000.

Hi...

Congratulations on having the good sense to sign the house over in lieu of foreclosure. This action probably saved your credit from being devastated. Not many people are aware of this option, but it can be quite useful.

Basically, the lender requires the title to be seasoned for at least one year before refinancing, means that you have to wait at least a year before refinancing. I don't think that the deed in lieu will adversely affect a lender's decision all that much, but it really depends on the lender. Don't be afraid to shop around. Along these same lines I've found that a mortgage broker someone who you pay to find you the best loan is usually well worth the price he/she charges.

Cheers, have a great day.

Richard

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Sell Your Own Home

I am sorry that your friend has had these issues with their lender.  The waiting period for FHA loans requiring a 3.5% down payment is 3 years, unless there were extenuating circumstances, which FHA describes as a serious illness or death or a wage earner.  For conventional loans, the waiting period is 2 years with LTV's <=90%, and there is documentation of extenuating circumstances. Your friend may be able to document by supplying the lender with:

• copy of medical reports or bills;
• notice of job layoff, job severance papers, etc., and
• any pro-active documentation prior to the deed-in-lieu (listed property but didn't sell, tried renting property with no results, letters to and from servicer, mortgage history prior to the circumstances that led to the deed-in-lieu, etc.)

The other option may be for your friend to go to the builder and see if they will carry the mortgage (they would be the lender) for enough time to arrange a refinance (to be safe, they would want the note to be for a least 1 year).  

Probably not the answers your friend is looking for, but hopefully will give them some alternatives.

Lea Shaw