Losing Your Privacy, or, Meeting Lender Conditions

by brandt

I know I’ve told this before, but when I was in college, I was in a pretty bad accident that put me in the hospital for 8 days.  I believe the exact phrase that was used on the medical and police reports was “Pedestrian vs. Motor Vehicle,” and I was the pedestrian.  Needless to say, the motor vehicle won that confrontation.

While I consider myself a pretty open person, I wasn’t prepared for just how “open” I would need to be in the hospital.  I was prepared for some of the awkward questions they ask when getting your medical history.  I used to donate plasma for $25/pint when I was in college for some extra cash, and many of the questions they ask make you blush and feel uncomfortable, but you get used to it.  What I wasn’t prepared for was the lack of personal privacy that happens in a hospital.

I know every woman who has given birth is laughing at me, but probably because you know what I’m talking about.

Hanging out solely in a hospital gown and THAT’S IT, with tubes stuck every which place and people coming in every couple of hours, you learn to get over your personal privacy barrier really quickly.  I would go into some of the stories about exactly how that privacy is violated diminished erm, regulated, but I figure most people don’t want to be sick to their stomach.

How does it relate to house buying?  Well, you are the patient, and your lender is the doctor/nurse.  You have no privacy.  And in some cases, the buyer is just as bad.

For example, when we were working with the buyers to get a purchase agreement ready to send to GMAC, we had some intense discussions on closings costs.  As first-time home buyers, Ashley and I were putting almost every penny into getting into this house, and the money for closing costs wasn’t something we had readily available.  You are allowed to ask for up to 6% of  the sale price in seller-paid closing costs (also known as “seller concessions”), and after discussions with both my loan officer and agent, we decided that 6% was a bit too much, especially considering if there’s money left over from paying off the closing cost, it goes away.  You don’t get it back in cash.  We decided on 3%, which could quite possibly pay for all our closings costs, or come very very close.  And we weren’t asking the buyers to pay for it, especially since it was a short sale.  We wanted the bank to pay for it.  The sellers were concerned.  They came back to us saying “If the bank says ‘we’re not paying those costs,’ what’s going to happen?”  We told them we’d pay for it.  Well, that wasn’t good enough . They wanted proof of funds, something that lenders frequently ask for.  So in order to meet with their conditions for the purchase agreement, we had to send over all of our bank statements for all of our accounts for the seller’s review.  If a lender, loan officer, mortgage professional, financial advisor, etc., is asking for that type of information, I understand it.  But sellers?  I felt like they were asking me to drop trou, turn, and cough.  We sent over the information though, because unless that condition was met with the sellers, we couldn’t get a signed purchase agreement.

The other condition in our purchase agreement was to basically get approved as lenders (without property) by the lending institution as part of our contract with the sellers.  I consider myself a pretty organized person, so when our loan officer sent over the first round of conditions, I was fairly confident we’d have no problem.  Bank statements, drivers licenses, pay stubs, W2’s, the normal things that lending institutions ask for we already had ready to go.  No problems here, right?

Until we got the first round of conditions.

When I worked at a lender, I saw lots of conditions.  Weird conditions.  Random tests that needed to be performed on something or other in the house.  Weird credit card statements from 9 months ago.  A pattern of saving lasting for 3 months.  And you have to understand underwriters to understand their conditions.  I hope I’m not being derogatory, or offensive, but they are extremely analytical, and their job is to evaluate the riskiness of any certain borrower.  When they look at someone who has had “NSF” on their bank statements, or someone who consistently pays credit cards off late, or someone who doesn’t have enough cash to close, they raise red flags.  And you can understand why.  But then again, if they have someone who doesn’t fit their mold of what a typical “borrower” should look like, they also raise red flags.

Enter Brandt and Ashley Malone, stage right.

We don’t fit a normal mold.  First, we’re first time home buyers with no debt.  Nothing.  No student loan debt, no car loan debt, no car payment, nothing.  As a matter of fact, when we were going through our pre-approval process, our loan officer needed to put $1.00 in the “liabilities” section of our application for the computer to take it.

We’ve also been renting since October of 2009, but our complex does so with personal checks and their own (outdated) system of processing rent.  So we had to get 12 months of cancelled rent checks.

We both graduated in April of 2009, and while FHA loans allow for college courses to count towards employment (I believe they required 2 years of employment), they needed our degrees/transcripts for verification.

Next was a bit of a situation.  When our first pre-approval was running out, we contacted our loan officer for an updated pre-approval amount.  For some reason, my bank was screwing around with my statements, and I couldn’t locate a savings account statement for the month of November.  The odd thing was, neither could my bank.  Believe me, those phone conversations were fun.  “What?  You’re the bank!  You’re telling me you can’t find my statement?”  And apparently, they couldn’t.  So we transferred a huge chunk of money out of my brick-and-mortar bank over to my online bank, and obtained a statement from them.  The underwriters saw this large amount of money transferred out, and wanted to know where it came from, where it went, and where it was going.

Ashley has an out-of-state driver’s license.  To quote the Ooompa Loompa’s from Charlie and the Chocolate Factory (or Da BackWudz feat. Caz Clay), “I don’t like the look of it.” They want to know why.  Why would she have an out-of-state driver’s license when we’re applying for a home in Michigan?  Um, because we wanted to wait until we had a permanent house before we start changing things over to Michigan?

Sometimes, I think I should get in touch with the underwriter and see if they want to head out to dinner with Ashley and I.  With all this information they gleaned off of us, I feel like we should be best friends.

All that being said, I can’t blame them.  The entire industry was turned on their heads from problems within and outside of the mortgage industry.  While they couldn’t control the economy crashing (especially the auto industry in a place like Southeast Michigan, which revolves around the industry), they could control risky lenders handing out loans to less-than-ideal candidates.  So my advice?  Prepare for it.  Get ready to feel more exposed than that one awkward dream where you go to work naked.  But know that it’s all for good reason, and also know that the underwriters are doing it because you don’t fit in their mold for what a borrower looks like.  Keep it all in perspective, and you should do fine.

Now could you please turn and cough?  Thank you.

Images via and via.

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5 Comments to “Losing Your Privacy, or, Meeting Lender Conditions”

  1. *LOL* Glorious and to the point! Things got really funny for us when the selling bank (ours was a bank-owned foreclosure) required our FICO scores. Our lender got really irate and went on a tirade along the lines of “my loan approval isn’t good enough for them?!”

    You’re almost there! Hang in and enjoy the incredibly anti-climatic closing *grins* No confetti, no sparklers.

  2. I’m really loving your posts lately. We are going through the same process in parallel (we are closing on April 29th, supposedly,) also have no debt, and are going through crazy things to submit our loan. Good times. I’m jealous you guys are closing soon…I bet you can’t wait to close your door, breathe a sigh of relief….and get out the paintbrush. 😉

    • 🙂 Thanks so much Vicki! I probably need to subscribe to that “TMI” theory, because Ashley is constantly embarrassed, but it makes good reading material!

      And does it help that I TOTALLY feel your pain! It’s like the underwriters are never satisfied! And let’s hope you guys do close on the 29th, because we had our date changed 3 different times! (Not to make you freaked out or anything!) We’re going for the final walkthrough today, so only one more day before we can finally call it ours!

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