Only 1 Bank Will Approve This Loan

For many years I have said thousands of times "Cash is King!" Let me be the first to tell you: The King Is Dead!!!

Two clients tell the story the best. One gentleman could put $100,000 down on a $200,000 house; but I could not get him approved for even a FHA loan! Why? His credit report consisted only of 4 unpaid collection accounts. And I was not allowed to verify non-traditional credit like rent, utilities, insurance payments because his traditional credit report was filled only with collections. A 50% LTV did not matter!

A second client is a young lady fresh out of college with her first professional job. Her problem: she has no traditional credit or credit score. Thus, I added her Dad to the loan as a non-occupying co-borrower which FHA allows. Her Dad is giving her $40k for a down payment. His credit is perfect and he has a 7 figure income. I have their FHA loan approved through FHA's Total Scorecard underwriting software. Easy loan? Wrong!

Knowing that she has no credit score, I thought this could be a problem. It was! 11 of my 15 FHA banks said "NO!" Three of them said maybe if I can verify at least 3 or 4 non-traditional credit tradelines for her. Only one bank has said YES to this loan as approved by FHA!

So, who is the new King? The new King is definitely credit and credit scores. In fact, most banks and the PMI companies require that a borrower have at least 3 traditional credit tradelines open for at least 12 months regardless of any on-line approval that I receive from Fannie, Freddie, FHA, or VA.

Say hello to the new KING.

Why My Job Is So Tough

Back in the pre-historic ages of mortgage lending, June 2007, mortgage lending was so easy. I remember in early 2007 a new on-line lender appeared that allowed people to close their own mortgage by themselves without a Loan Officer or Mortgage Professional. It was deemed so easy to get a mortgage that anyone could do it and save money at the same time. It was like self checkout at the grocery store.

This week I have been working with a young lady who is a recent college graduate and she has a good job and some money saved. Should be easy? Wrong! Her problem is she has been part of the Secret Witness Protection Program from the credit bureaus, meaning that she does not exist with them, because she has not credit and no credit score.

So, I add her Dad as a co-borrower with her on her FHA mortgage. Her Dad has great credit, lots of money, and a very high income. Their loan is approved through FHA's on-line mortgage approval software called Total Scorecard.

My work is done right? Not anymore! Many banks won't accept FHA's approval of the loan because she has no traditional credit or credit score. Loan denied.

Thankfully, a few banks will let us compile non-traditional credit for her if we can. By doing so this will certify that she is a good credit risk. If this does not work, I will go to Plan C which contains a little secret that I know that will help her greatly within 30 to 60 days and get her loan approved then.

I keep telling myself that all this difficulty means job security for me. What do you think?