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FHA and letter of explanation

Posted on: 09th Nov, 2007 02:41 pm
Question regards a FHA loan.
Had one late payment for two different CC\'s last year due to finacial constraints caused by a family illness (had to fly across country a couple of times).

Wrote a letter of explanation to go along with the packet..

The FHA underwriter comes backs and wants documentation from the Doctor of the relative who had the illness....which happened to be a stroke.

Is this common?
What do they want exactly? Sounds complicated to explain to the doctor. I wonder if they would even give you anything as it is private information. Sorry I don't know the answer but we do have a couple of FHA experts I am sure.
Posted on: 09th Nov, 2007 04:23 pm
My Loan officer said if I have a letter with a one line statement saying:

Ms. XXXX XXXXX had a stroke in the Spring of last year...

That the above would fly...


Basically, my extra money went to plane fares that would have gone to the CC which ultimatley caused one month late cc charges. My explantion was they were late (CC's payments) due to diverting the money to the unexpected cost.

Now, FHA wants a copy from the Doc. simply indicating that she did indeed have a stroke. I think the Doc. would do it, if we advise its ok... But its just the freaking principle of it...
Posted on: 09th Nov, 2007 04:40 pm
Hello A1sundevilsfan,

I know it is sometimes difficult to prove certain issues.

I think the doctor's certificate will help them to verify the cause behind the late payments and it will ultimately have its effect on the loan approval.

But the doctor may not be ready to give such a letter, as Eric has already pointed it out. You have to explain the real cause to him.
Posted on: 09th Nov, 2007 10:14 pm
jenkin7 stated "But the doctor may not be ready to give such a letter, as Eric has already pointed it out. You have to explain the real cause to him."

That's what I was thinking. There's an invasion of privacy somewhere in here, in my opinion at least. And, its really none of their (FHA people) business as far as I am concerned. The loan officer said if I had a bill or something that could work. Still an invasion of privacy...

In order to get the house, it basically comes down to two things. Its either I get some documentation from the Doctor who verifies she had a stroke so I can get a FHA loan with a better rate or, I will have to go the conventional loan route. If I go with the later, I will be paying a higher interest rate (2% more) and a higher PMI rate (3% more) both of which I think is totally unacceptable. If I have to go the conventional route, I will more than likely tell them to just forget about the whole thing, even though I could afford it.

Sorry for the little rant. But, we have been jumping through hoops for the last 3-4 weeks. And, I am beyond being ready to jump off this roller coaster and move on with my life, with or without the house.
Posted on: 10th Nov, 2007 08:48 am
a1sundevilsfan2,

I understand where you are coming from. And when I first started this business I felt the same way. Now that I understand more about the processes I think in a slightly different (more banker like)(don't worry it's not all bad, lol) way.

I like to use this very simplified example...
ie. Someone comes to you for a loan. They need $100. Do you? A. just give it to them. OR B. Think about whether they will pay you back.

Now I know the example is way off of what you are doing but, think about it... You are asking someone to give you 1000's of dollars. The purpose of FHA was to make people like yourself able to qualify for better rates and terms then someone without and explanation. Sure, you do have to jump through hoops, alot of them. But the end result is a mortgage that you wouldn't usually qualify for.

The rant is fine, and I have been known to rant myself. That is the beauty of forums like this. You can say whatever you want and get support from others.

I do think they are asking for some very private information about someone not connected to the loan (which seems out of line). Are you sure they are not asking for a letter from you stating the facts? I would think in this situation a simple Letter of Explanation from you would suffice. I am not an underwriter though and don't know the other compensating factors of your deal.

To sum it all up, the underwriter can really ask for anything they want as long as it is not illegal. They are qualifying you for a large amount of money and it is there, not only job, but obligation to be as thorough and dilligent as possible to protect their companies assets. Give em a break they are only doing their job.

Not trying to get on you, just trying to help explain where they are coming from. Because as I said before I agree with you, but see there side as well. Best of luck.
Posted on: 10th Nov, 2007 09:20 am
Eric,

I appreciate your words of wisdom. I really do..

Your statement above has helped me puts things more into perspective. If nothing else, it reminds me what the other side has to accomplish in order for them to do the right job. Which is what they are suppose to do in the first place anyway.

Anyway, it certainly has been a roller coaster ride. Both mentally and emotionally.

I have purchased 2 other houses in my life. This purchase by far has been the most strenous one. The first house I purchased at age 20, even when my income was considerably less then it is today, was MUCH easier. However, things were different almost 20 years ago too :-) Today, its ALOT different with all housing issues going on...Especially here in Arizona..

But, I see the light at the end of the tunnel... Just hope it isnt a train!!! :lol:
Posted on: 10th Nov, 2007 11:31 am
The FHA underwriter is looking for the way to make this work. The letter of explanation needs to be supported by documentation. If you cant get the doctors note perhaps you can show them the credit card statements with airline tikets purchase that you have used. And maybe your relative can get a copy of medical record fot you. The underwriter's job is to determine if this was a one time thing or going to be a pattern. Thing is they dont know you and all they can go by is what yu tell them.
Posted on: 12th Nov, 2007 06:50 am
Well, I received a good portion of her medical record around the time of her stroke on Saturday. I faxed it over to my loan officer and he indicated to me that this was far more than enough.

Of course, the FHA folks are closed today for the Holiday (Veterns's Day). So, we wont have an official response from them until Tuesday Morning..


Keeping my fingers crossed...
Posted on: 12th Nov, 2007 11:49 am
If this the only thing you will do fine. FHA is always reasonable when you telling the truth and can document it. Good Luck.
Posted on: 13th Nov, 2007 05:44 am
Well, just an update!!! :D

Just got the call from my real estate officer... Everything is a wrap!!! We were approved for the FHA loan!!!! :D

We sign off on it in the morning and the deed should be recorded at the courthouse in the afternoon!!!

I really appreciate you Eric and Eugene for all your input!!!


SunDevilsFan
Posted on: 13th Nov, 2007 04:24 pm
Congratulations!

Best of luck in your new home.
Posted on: 13th Nov, 2007 06:32 pm
glad to hear good luck!
Posted on: 14th Nov, 2007 06:38 am
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