The Sub-Prime Scrutiny Spares No Score

Posted on September 14, 2007 by Melissa
Filed Under Mortgage

Freaky closeup of a $20 bill The sub-prime fallout has finally hit close to home.

When we decided on our new to-be-built home we got pre-approved for loans by 2 different mortgage companies. We knew we would have to go through the process again when we approached closing, but this was just to show the builder we could afford it. Getting pre approved was simple. They didn’t even want to see pay stubs.

Both of the loan officers approved us on the spot for our 80-10-10 loans and gave us excellent rates. We knew we would do just fine on everything. Our only concern was that we could appear debt heavy by holding the current home and the new home for a time. But it turns out we were still safely in the right percentages. With both of us having credit scores over 800 we thought we were golden. And based on our pre-approvals we were.

Fast forward to today. We get a notice from one of the brokers requesting that we submit a bunch of paperwork (basically an actual loan application with proof of income, assets, etc). Attached is a note saying they are no longer accepting “stated income” approvals. We never wanted a stated income loan in the first place but they wanted information on everybody because of the sub-prime mess. What a hassle.

The other loan officer says that although we will likely qualify without an issue, most of their lenders now want 80-20 loans and are pulling out of the exotic loans. An 80-10-10 is exotic now? Oh boy.

We will be getting new good faith estimates in November or December. Let’s see what happens then. We have started exploring our options in case the 80-10-10 is no longer a good plan. We already have our 10% down, but putting 20% down by December will be difficult, and we really want to avoid private mortgage insurance (PMI).

It makes you think. If we are facing potential difficulties with a loan with our scores, what in the world are people going through with scores below 700?

Image Source: AMagill

Comments

2 Responses to “The Sub-Prime Scrutiny Spares No Score”

paidtwice on September 14th, 2007 6:01 pm

You know, it could totally work out differently for you, but we were interested in an 80/20 and we ended up going with a single mortgage at 100% because paying the PMI til we got to 80% was less money (a lot less actually when our broker ran the numbers) than getting an 80/20 with the variable on the 20% loan.

Your mileage may vary. Good luck! (Our scores are 800ish too btw lol)
Melissa on September 14th, 2007 8:23 pm

I think we’ll still be able to get an 80-10-10. I called someone else I know in the mortgage business and he said it should be fine unless the housing mess gets progressively worse. We’ve heard some horror stories (unconfirmed by us personally though) about some lenders refusing to remove PMI when you got up to 20% equity in your loan. I’m not sure if it was just an unscrupulous company, or what the situation was exactly, but it certainly made us want to avoid PMI altogether if possible.

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