Buyer switches pay struc­ture dur­ing loan, al­most gets de­nied

Connecticut Post (Sunday) - - Real Estate - Terry Hast­ings

Mort­gage banker: Terry Hast­ings

Home value: $ 300,000

Loan amount: $ 265,000

Loan terms: 4.99 per­cent, 30- year fixed

Back­story: Hast­ings re­ceived a call from a buyer who was re­ferred by their Re­al­tor. They owned a home, but while ini­tially look­ing, they fell in love with a home and wanted to buy it. They were very ex­cited and didn’t want to lose this house. What could they do?

Hast­ings spoke with them at length, ask­ing ques­tions about their in­come and as­sets and ran a credit re­port. The hus­band, a loan of­fice 15 years, had switched jobs and like his wife had a steady salary. Their home was go­ing on the mar­ket the fol­low­ing week with high ex­pec­ta­tions to sell it at the same time they pur­chased.

Since they were not us­ing equi- ty from their de­par­ture res­i­dence, and as a mat­ter of cau­tion, Hast­ings ran their num­bers car­ry­ing both the home and cur­rent home and it still met the guide­lines. So as a worst case sce­nario, they could buy the new home with­out sell­ing their cur­rent home.

Hast­ings col­lected their paystubs, bank state­ments and had an ap­praisal or­dered. The ap­proval came less than a week later and things looked great, even though their cur­rent home had no of­fers.

Ev­ery bank runs a ver­i­fi­ca­tion of em­ploy­ment ( VOE) to ver­ify the em­ploy­ment sta­tus of each bor­rower.

To Hast­ings’ sur­prise, the un­der­writer was told that one bor­rower while at the same job just switched to a per diem pay rather than salaried pay. The bor­rower ex­plained that they would still be work­ing at least 40 hours a week, but the switch in pay method ac­tu­ally in­creased their in­come.

Hast­ings ex­plained that as a salaried em­ployee, a bank looked at the in­come as guar­an­teed while a per diem em­ployee is not ob­li­gated to work 40 hours. Even though it was their plan, a bank plans for the worst.

While the last paystub showed 40 hours of work, there was no guar­an­tee that the bor­rower would con­tinue work­ing at that pace af­ter the loan closed. There­fore, no in­come could be used.

Hast­ings and the un­der­writer went into emer­gency mode to find a so­lu­tion. By re­mov­ing the bor­rower and their re­lated debt on the credit re­port, the debt re­mained too high for ap­proval. How­ever a car pay­ment listed on the re­port was ac­tu­ally paid ev­ery month by an­other mem­ber of the fam­ily.

Hast­ings asked for a 12- month his­tory of checks show­ing this and re­moved that debt from the credit re­port and the loan just squeezed though.

The buy­ers closed on their home two weeks later. It was al­most a costly les­son that you should never change your pay struc­ture dur­ing a mort­gage loan.

Terry Hast­ings, To­tal Mort­gage Ser­vices, 203- 470- 5434, Terry Hast­ings. com

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