House hunt update: Loan process blip

As a Dave Ramsey radio show fan and participant in his Financial Peace University plan we contacted Churchill Mortgage when we decided to buy a home this year. I’m not a fan of anyone who disrespects our modest financial standards and tries to talk us into things we don’t want. For that and a few other reasons we have been confident about doing business with this lender, one of Dave’s endorsed providers. Our Home Loan Specialist is Aaron Kayser out of their Herndon Virginia office. But I’ll write more about him later.

We worked hard at becoming debt free, paying our bills on time, building our credit scores from bad to excellent. In fact, I’m proud of what we accomplished. It took a long time, but it’s been worth it. We have been debt free for about 4 years. Except for our home loan debt of course. We deal on a cash basis for purchases, and we maintain an emergency fund cushion. We have built our savings slowly and with the sale of our home in San Antonio we have enough to easily put 20% down. As I’ve mentioned before we are also basing the price and loan amount based on one salary so we continue to save and continue to enjoy a sensible budget.

We filled out forms, lots of forms, and were pleasantly surprised to find we have 800+ credit scores. We also asked for a 15 year fixed rate loan. All very desirable for a lendor. I returned things in a timely fashion, and checked and double checked progress.

But, we have a hold up. It is rather unexpected. The underwriter of the loan questioned and threw back the loan request based on the sales history of the house. Did you know this could happen? We didn’t! It seems there were some odd transactions, and the price fluctuated on the house to extremes, and the appraisal was off a bit, which worries the prime lender.

For me this makes no sense. If the title is clear, and we can pay, and are qualified, why does what may or may not have happened 4 years ago matter? And, from a resale point of view, should we be concerned? The other issue comes from the independent appraisal which either omitted or overlooked at least 2 things, which includes answering the question, has this home changed hands in the last 4 years, to which the appraiser answered, no. That was wrong by 4 times. It didn’t match the title search. Still why not correct the appraisal? It turns out there is a new law that prohibits direct contact from the buyer so as to not appear to influence. And, there’s no time.

Here’s what Aaron The Mortgage Guy said:
“Let’s say that we just closed the loan, despite having these seemingly minor issues. You would soon make your payments to a different company—we don’t service loans here. When we transfer the servicing rights of your mortgage we earn money (this is how the company generates income). When your loan is transferred, the bank is given a full package with underwriting findings, title work, etc…they get pretty much everything.
Let’s then say you and Bob decide at some point that paying your mortgage is for the birds, and default. The company that is servicing the loan can then turn around and come after us for ANY issue that may be in the file. In this case, they could see that the title was questionable and tell us that we need to “buy back” the loan. That involves reimbursing them for whatever they paid us, AND we would become legally responsible for any fallout from the now defaulting mortgage. It would be a real can of worms.”

So basically the prime lender turned us down for three reasons, all having to do with the house and not actually US:

  1. Price fluctuations
  2. History of ownership transfers
  3. Appraisal inaccurate

What’s next? Well as Aaron The Mortgage Guys tells me, this happens a lot and normally a loan applicant isn’t really aware of those who review and turn down a loan request. You only know about the one that does fund your mortgage. He also said it’s not likely to cause us a problem in the future if a lender is like most other lenders in the world who don’t dig that deep. Which brings me to Aaron and Churchill Mortgage. All along the way I’ve had very personal communication with Aaron. He’s answered a fragillion questions and been right on top of whatever needs to come next. I’m not sure I’d get that anywhere else. I can tell you as a former Countrywide customer, the only human we saw was at closing, not since, and in fact I was recently helped by a robot at Bank of America (who took over Countrywide), in order access our interest statement.
 
We’ll hear today who is going to fund our loan and we hope to have Closing on Friday. Your prayers for that would be appreciated.
 
***
 
Here’s where we started with our budget and financial recover:
 

 
 
 
Other books by Dave Ramsey

I have not recieved compensation from Dave Ramsey or Churchill Mortgage for mentioning them in this blog post. I would be compensated through Amazon Associates should you click through and order any of these resources.

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About Robin Arnold

Reader, writer, gardener, geek, maker of homes in several states, now settled in Virginia with husband Bob, and Hazel and Wilson the tabby cats.
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