Complex loan request not suitable for in-house lender

Mortgage advisor:

Sheila Perez; Finance of America Mortgage.

Property type:

Single-family residence in Antioch. $704,000. $679,263. FHA 30-year fixed. 3.375% with no points.

My clients had made many offers on homes in Oakland, but were continuously beaten out by higher bids or by buyers with higher down payments. The clients’ credit and income profile, along with the ability to make a minimal down payment, meant that we needed to use FHA financing for their loan. FHA loans generally have lower rates and more relaxed underwriting

Purchase price: Loan amount: Loan type: Rate: Backstory:

criteria, but this comes with very high mortgage insurance costs.

Their agent, Adrian Diaz with Better Homes & Gardens real estate in Berkeley, suggested that they look in Antioch. They followed his advice and found a home in a new housing development that met their needs. The builder representative insisted that they use the builder’s in-house lender, asserting that this lender had more flexible underwriting guidelines and that the builder would give the buyers a closing cost credit if they used that lender, such that the loan terms would be more favorable.

With the assumption that this information was accurate, my clients put in an application with that lender. The lender approved the loan but with the stipulation that they pay off their student loans, something they were not able to do, because the debt ratio was too high. At that time the lender also revealed the loan terms they were prepared to offer.

The clients returned to me with this information. We had approved them without any requirement to pay off student loans and with terms that were the same as the terms offered by the builder lender. We proceeded to close the loan within contract deadlines.

It is not uncommon for builders and, sometimes, real estate companies to assert that their affiliated lenders have more flexible underwriting guidelines and better loan terms. A wise consumer will evaluate a number of options before selecting a lender and select the one that appears to offer the most reliable experience.

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