Reasonable lender request?

Question

I am already working with a mortgage broker and have run into this issue:

I own a SFR outright, but the last tenants did a number on it.  I wanted to roll repairs into a note and borrow against the property.  Appraisal came back at $120k, I'm only asking for ~$55k (all costs rolled in).  That's less than 50% LTV!!

2 questions -

I have my tax returns going back until 2003, except 2013...  Mortgage broker said "no problem" now the underwriter says "no way"!!  I have the transcript, and I have every scrap of supporting documentation, am I going to have to: cough up $50 and wait for 75 days for the IRS to give me a copy, or re-create the return on my trusty Turbo-Tax, or find a begin looking for another broker, on my own, not on this site?

This underwriter also wants an explanation as to why we changed our mind from selling (deal fell through - buyer could not close) to renting (hot market, >$1000 / month income).  Is this a usual or normal request from an underwriter? I think this underwriter needs a new line of work!!

Point me to a mortgage TYPE that can close quickly as I am tiring of dealing with lenders that don't lend.

PS - I am NOT looking for leads for lenders.  I want to ask the more experienced folks if this is as dumb as it seems or if borrowing money has really come to this.

Note to Moderator: If this question still violates forum policy, then I apologize for taking up your time.

Thanks,

Mike

David Oldenburg · Answer

@Mike Coleman

Let me give you some advice that will help you.  I am a lender and have been for 23+ years.  The underwriter only cares about the last 2 years of tax returns, which they have to verify or the loan cannot be sold on the secondary market.  It doesn't matter if you have 20 years of tax returns, you need to have the last 2 in final form, and verified by a 4506T with the IRS before closing.  There is a way around this rule. You do private money at 8% to 10%... I know ouch!  That is why people put up with the near impossible rules these days :-)

The reason the UW wants an explanation on why you changed your mind on selling, is based on guideline issues.  Some investors will not fund a loan if the home has been listed for sale in the last 12 months.

I know it's frustrating because you have a great LTV, and probably great credit etc...  I see this all the time. Borrower has 800 credit score, lots of assets, low LTV and they get declined because the debt ratio goes 1% or 2% over a guideline max.  The lending world is vastly different from where it was just a couple of years ago.

Here is my recommendation.  Work with your lender and get the deal done, as long as they are offering you a good rate and terms.  They already have most of your documents, and what they are asking for is standard and will be requested by all "A" paper lenders.  Good Luck!

Dana Whicker · Answer

I understand your frustration with your mortgage broker.  You have to understand that a mortgage broker is a salesperson.  They convince you that they can do your mortgage, then the UW actually tries to make your mortgage happen.

"Never confuse the sale with the delivery" - Anonymous Salesperson

Mike Coleman · Answer

Thanks for the replies.  I will probably rebuild my return this weekend and look towards asset based lending for future needs.

Mike

Dawn Brenengen · Answer

@Mike Coleman I'm going through a similar experience. I close on a home on Wednesday, and the underwriter needs a full copy of my 2012 tax return. I too only had the transcript. I just paid an accountant $200 to recreate the documents.  I hated to spend the money, but I don't have time to do it myself, and I definitely don't have time to wait for the IRS to send it. I too wish I would have known the transcript was not going to be ok so I could have ordered from the IRS at the beginning of this process. I feel ya!

I'm also having to write explanation letters for this and that. It's all just part of the process...

Mike Coleman · Answer

Thank you for the response.

TurboTax is what I use. Not going to go into details on my less than stellar experience with accounting professionals in the booming area that I call home.

Good tip on the supporting documents. I have all of the originals. Had a bad Windows 8 experience and don't have a copy of the return we submitted...

Thanks again!!

Mike

Shaun Weekes · Answer

Hello Mike,

Your broker should have know that 1040's and W2's for the last 2 yrs are mandatory unless you're self employed.  In which case Freddie Mac will only ask for 1 year of tax returns in most situations.

What the other Gentlemen meant by 10% would be the interest rate that you would have to potential pay on a private money note.  He wasn't talking about how much of the property you own.

The following is just my opinion but I used Turbo Tax for four years and the last two years I used a CPA.  He found thousands of dollars that I had no clue about and amended some of my taxes from years previous which got me my maxim return.

I personally will never use turbo tax or any software like that again because at the end of the a really good CPA will be able to help you save money or structure your taxes the way you want them.  And he/she will always have a copy available for you as well.

If you order your 4506 ( full photo copied 1040's ) make sure you order your W2's as well.  The UW will most likely want both to match up numbers.

Finally you're going to need a really good loan officer or broker in the future because UW have a job and that's to follow DU and if they have OVERLAYS those too.  Some banks just follow DU or LP like mine but not all banks.  I know it's frustrating but you're so far into the process ( you've ordered appraisal etc ) that you might want to stick with them.  Make sure that your appraisal is going to be good with them for the next 60 days because it could take up to that long to get those 4506's from the IRS.  And don't have your credit pulled or buy a car or anything like if you're going to stay with this broker.  You don't want your credit scores to change or fall and most likely they will have to pull another report because your current one will expire with them in 60 - 90 days.

Take care and good luck Sir.  I hope some of my words help :)

Mike Coleman · Answer

You mentioned 10% private money. Maybe I'm not using the correct vocabulary.  I own the property 100%. I want to borrow 55 on a property worth 120. How would I need to borrow private money in this case?

I am "working with" my broker, but am frustrated because he told me lack of a return is "no big deal" and they only needed the transcript. I would have been chasing this rabbit 40 days ago instead of 5 days before close if I had the correct information.

Thank you for your input.

Mike

Reasonable lender request?

Most Popular Reply