Correlating to Borrower With Lower Score; Paying Over Appraised Value; Not Referencing Inspections
Here are a few quick reminders.
CORRELATING TO BORROWER WITH THE LOWEST CREDIT SCORE
We received negative feedback from a frustrated borrower last week b/c we correlated our interest rate quote to her husband’s lower credit score (low 600s) when her score was in the 800s.
We of course had no choice, as almost all loan programs require us to correlate to the lower credit score, when there is more than one borrower.
TITLE ONLY
The only way we could have NOT correlated to the husband’s lower score: remove him from the loan and put on him on “title only.”
That, however, was not an option b/c we needed the husband’s income to qualify.
Borrowers can only be “title only” when we don’t need to use their income.
BORROWERS CAN PAY MORE THAN APPRAISED VALUE
There is a misconception among some agents that FHA buyers cannot pay more than the appraised value.
That is not the case, as we sometimes purposely move borrowers from conventional to FHA financing when appraisals come in low.
This is b/c FHA has the lowest down payment requirement, and moving borrowers to FHA frees up cash to cover appraisal shortfalls.
ALL buyers (FHA, Conforming, Jumbo, and VA) can pay more than the appraised value for a property, as long as they have the cash to cover the shortfall.
But, they sometimes have to “acknowledge” that they know they are paying more than the appraised value in a signed letter.
NOT REFERENCING INSPECTION REPORTS IN CONTRACTS
This is another quick reminder to avoid referencing inspection reports in purchase contracts.
If underwriters see reports referenced, they will usually request them and often require that recommended work get completed prior to the close of escrow.
CREDITS FOR CLOSING COSTS ONLY
If buyers want credits for repairs of any kind, they should make those credits for closing costs on the contract (while also making sure the credits do not exceed actual closing costs).
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
