Middletown, CT

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application. Since

Thursday I have covered the first 9 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The tenth question on Declarations Section VII Of Loan Application states:

• j. Are you a U.S. Citizen?

This is a very simple question, either you are or you are not a U.S. Citizen, but even here I have had Borrowers not answer this question truthfully. This information is not as easy to verify as the previous questions, but if an Underwriter suspects that the Borrower is not telling the truth, they will investigate. The last time that one of my Borrowers answered this question incorrectly, it created a huge problem for everyone. It turned out that the Borrower did not answer this question truthfully because he did not have a valid Green Card, and thought that he could get around that issue by stating that he was a Citizen. The loan ended up being denied, the Borrower was out the money he had paid for a Home Inspection, Appraisal, Loan Application Fee, and deposit on the Sakes Contract. The Seller waisted almost five weeks that his house was off the market, therefore, missing out on other possible Buyers. And the Realtor, who was on both the Selling and Buying side spent a lot of time for no compensation. Charges could have been brought against this Borrower, because he signed at the bottom of Page #4 attesting that all of the information that they have provided is the truth to the best of their knowledge, but we did not press charges.

• k. Are you a permanent resident alien?

This question goes hand in hand with the previous question. If the Borrower is not a U.S. Citizen, then hopefully he/she is a permanent resident alien. But as you can see in my previous example, that is not a given. If a Borrower is a permanent resident alien, he/she will need to provide a valid permanent resident alien card (Green Card. I don't know why they still call it a Green Card, because it is no longer green) with a valid date for at least 12 more months and their status (card) needs to have been renewed at least once. The Non U.S. Citizen will also have to provide a Passport and Social Security Card.

I will end this series with the next blog on the final two question on the Declarations Section VII Of Loan Application. Hopefully this series is providing some insight into areas of the Loan Process that are not as well know outside of the Lending side of the process of purchasing a house, and making everyone more aware of why these Questions Must Be Asked On The Declarations Section VII Of The Loan Application.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Since Thursday I have covered the first 6 question on Declarations Section VII Of Loan Application, and today I will cover the next 3 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The seventh question on Declarations Section VII Of Loan Application states:

• g. Are you obligated to pay alimony, child support, or separate maintenance?

This question is very clear and self explanatory, but unless asked Borrowers do not volunteer this information. Some even try to hide it which is very foolish, because alimony, child support, and separate maintenance payment can significantly raise the Borrowers Debt-To-Income Ratios. It is also relatively easy to find out if a Borrower is paying paying alimony, child support, or separate maintenance.

First of all it is in many cases deducted right out of the Borrowers paycheck, so once they provide a copy of their paycheck, which is required with every loan these days, there it is. Bank Statements are also required and it can pop up there, as well as on Tax Returns if they claim it as a deduction. But there are also red flags that are raise during the course of taking a Loan Application. One of the questions on page #1 is do you have any dependent children. If dependent children are listed there, and the Borrower claims to be unmarried, or separated the Underwriter is going to ask for an explanation. Another red flag is the Credit Report. If the Borrower has a previous mortgage, even if it is paid, and it shows up on the Credit Report as a Joint Mortgage, an explanation will be asked. If the explanation is that they were previously married, then the Underwriter is going to want to see a copy of the divorce decree, and the alimony, child support, or separate maintenance will show up there.

So to answer this question NO when it it really YES is foolish, because there is a very good chance that it will be picked up, and once they catch you not telling the truth, they are going to start questioning everything. And if it is some how missed during the Underwriting Process, but discovered later after the loan closes, the loan could be Called. Also they could face criminal charges for lying on the Loan Application. This is because at the bottom of Page #4 Borrowers have to sign attesting to the fact that all of the information that they have provided is the truth to the best of their knowledge.

• h. Is any part of the downpayment borrowed?

This is important because it will not show up initially on the Credit Report, but is a future additional debt that will impact the Borrowers Debt-To-Income Ratios. It is especially important for the Borrower to answer this question correctly if they plan on doing a Bridge Loan for the Downpayment while they are trying to sell an existing house. In this case it will definitely be found out, because the Bank doing the Bridge Loan will contact the Bank doing the First Mortgage. It is best to see what that additional payment will do early on to the Debt-To-Income Ratios. By taking this additional payment into consideration early, we can avoid the loan being denied late in the process, because the Debt-To-Income Ratios are now to high, or the Borrower does not qualify for a Bridge Loan, and now does not have enough money to Close.

• i. Are you a co-maker or endorser on a note?

This questions just like the previous question can create Debt-To-Income Issues as well, and cause problems late in the Loan Process if it some how does not show up on the Credit Report, but surfaces before or after the Loan Closes. Not answering either of these two questions correctly because you think that it will not be discovered is a BAD idea, could raise other issues, and end up being a big waist of every ones time, as well as prove to be a very costly experience for the Borrower.

This now brings us to the last four questions on Page #4 of the Declarations Section VII Of Loan Application, and to some seemly very Innocent question. We will begin to see tomorrow that they are not so Innocent.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Since Thursday I have covered the first 4 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The fifth question on Declarations Section VII Of Loan Application states:

• e. Have you directly or indirectly been obligated on any loan which resulted in foreclosure transfer of title in lieu of foreclosure or judgment?

This is another one of those questions that is not as easy to answer as it first might seem. That is because if a Bank files for foreclosure, even if a Homeowner transfers title in lieu of foreclosure, or avoids foreclosure by selling the house before the Bank forecloses on them, in all likely hood that Bank is still going to report it as a foreclosure on the Homeowners Credit Report. I have seen this several times lately, where the Homeowner sold the house before they were foreclosed on, even if it wasn't a Short Sale, and the Bank got paid in full, they still report a foreclosure on the Homeowners Credit Report. This might seem very unfair, but that is what is happening, and as far as Automated Underwriting is concerned, if it is reported as a foreclosure, its a foreclosure.

The only hope that a Borrower has in a case like this is if they get the Bank to agree to stop reporting the NON FORECLOSURE as a foreclosure, or that their Credit Scores and Debt-To-Income Ratios are within the qualifying guidelines for a Manual Underwrite, where an Underwriter will actually look at what really happened. If they can't meet the Manual Underwriting Guidelines, then they have to wait the same time period to purchase another house as if they really did have a foreclosure.

The sixth question on the Declarations Section VII Of Loan Application states:

• f. Are you presently delinquent or in default on any Federal debt, or any other loan, mortgage, financialobligation bond or loan guarantee? If "Yes" give details as described in the preceding question.

It is not good to be late on ANYTHING, but if you are going to be late on a financial obligation make sure that it is not a mortgage or Federal Debt. The Automated Underwriting in many case will forgive recent lates on credit cards, car payments, and other similar debts, but it is not forgiving of mortgage late in the last 12 months. Even if Automated Underwriting over looked a mortgage late in the last 12 months, the Underwriter will not, because it is unlikely that an Investor will purchase a loan that the Borrower had a mortgage late in the last 12 months.

A 30 day late payment or longer on a Federal Debt in the last 12 months is pretty much an automatic denial on FHA Mortgages. So young Borrowers with student loans need to make sure that those student loans are paid on time. Claiming that you did not know that the loans had gone into repayment, or that you were young and foolish is not a good excuse.

If you are planning to purchase a house in the near future, make sure that all your financial obligations are paid on time, but especially your mortgage and Federal Debts, or you could find yourself waiting several months before you can purchase that new house that you fell in love with.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Yesterday I covered the first 2 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The third question on Declarations Section VII Of Loan Application states:

• c. Have you had property foreclosed upon or title or deed in lieu thereof in the last 7 years?

This question may seem easy to answer at first, but it is not as simple as it may appear. The reason why it is not as easy as it appears is because many people who are foreclosed on consider not owning the house from the point that they were evicted from the house. This eviction can place many times when the bank holds a Foreclosure Auction, but this not the date of the foreclosure, so technically the owners still own the house. In fact they are considered the owners of the house up until the bank completes the foreclosure process which could be several months later. Even the date on the "Foreclosure By Sale Committee Deed" is not the date of the foreclosure. This date is just the date that the Foreclosure Committee (usually a committee of one) approved the foreclosure, but it is not the final date of the foreclosure. That date could be 3 to 6 months later, and it is at that point that the owners of the house have been foreclosed on and no longer own the house.

So as you can see a question that seems easy to answer is not so easy after all. Because of the confusion that this process can create, it is important to fully investigate all foreclosures if the Borrower answers YES to this question.

FHA requires three years from the time of the foreclosure before a Borrower can qualify for an FHA Loan again, and Conventional (Fannie Mae & Freddie Mac) requires five years. If a Borrower honestly believes that three years have past since they were foreclosed on, because that was when they were evicted form their house, and foreclosure documents are not requested in the beginning of the loan process, everyone could be in for a big surprise at the end.

The forth question on the Declarations Section VII Of Loan Application states:

• d. Are you a party to a lawsuit?

I always thought that it would have made more sense to have this question as the sixth question after the next two questions which continue to deal with foreclosures and delinquencies on mortgages. But higher powers then me determined that it should be placed at this point.

This question like all the others, if answered incorrectly can create major problems late in the loan process. A Borrower can quickly go from being in great financial shape, and their Debt-To-Income Ratios falling in place, to no longer qualifying because their Debt-To-Income Ratios are now to high. Just like foreclosures, more questions need to asked if the answer to this question is YES.

If the Borrower is the one who has brought a lawsuit against someone else, it needs to be explained, but it most likely will not create their Debt-To-Income Ratios to change. But if they are the ones that a lawsuit is being brought against, there is a risk of an additional financial obligation that could easily put the Borrower over the qualifying Debt-To-Income Ratios for a Loan Program. The potential risk will in a lot of cases cause a loan to be rejected, and it is something that is better explained sooner than later.

Just as I stated before about previous questions, if a Borrower answers NO to this question and it is discovered they do have a lawsuit pending against them. not only will the loan be denied, but they could face criminal charges for lying on the Loan Application. This is because at the bottom of Page #4 Borrowers have to sign attesting to the fact that all of the information that they have provided is the truth to the best of their knowledge.

I am going to end this blog with these two questions because the next question "e. Have you directly or indirectly been obligated on any loan which resulted in foreclosure transfer of title in lieu of foreclosure or judgment?" of the Declarations Section VII Of Loan Application will require a lengthy explanation of the problems that it can create.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Yesterday I began a series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated yesterday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Today I will start to go through each questions and explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The first question on Declarations Section VII Of Loan Application states:

• a. Are there any outstanding judgements against you?

Even though judgments will show up on a Credit Report, they maybe reporting wrong, and need to be corrected. A case may also exist that a Borrower just acquired a judgment, and it has not reported on the Credit Report yet.

In the first case it is important to correct a judgment that is being reported incorrectly immediately with the three Credit Bureaus (TransUnion, Equifax, and Experian), because no loan for a Mortgage can be done if the Borrower has an existing judgment.

In the second situation it is equally important for the Borrower to be honest and upfront about any recent judgments that might not be reporting yet on their Credit Report. Just because it is not being reported on their Credit Report yet does not mean that it will not be discovered in the course of the Loan Process, or worst yet just before they are set to Close on the loan. If it is discovered that they have a judgment and did not disclose it, not only will the loan be denied, but they could face criminal charges for lying on the Loan Application. At the bottom of Page #4 Borrowers have to sign attesting to the fact that all of the information that they have provided is the truth to the best of their knowledge.

The second Question That Must Be Asked On The Declarations Section VII Of Loan Application is:

• b. Have you been declared bankrupt in the past 7 years?

As in the case of judgments being reported on the Borrowers Credit Report, so are bankruptcies. However, they are not always being reported correctly as to their status or discharge dates. If a bankruptcy is reported on the Borrowers Credit Report, or the Borrower acknowledges a bankruptcy, it is important to immediately get a copy of their bankruptcy and discharge papers. This is the only way that the actual dates can be verified, and documented.

If a Borrower has had a bankruptcy within the last 7 years, a loan can still be done, but the guidelines for this vary from FHA to Conventional Loans. for example:

• FHA requires that 2 years have past from the time a Chapter 7 Bankruptcy was discharged, and 1 year form the time a Chapter 13 Bankruptcy was discharged.
• In the case of a Conventional Loan (Fannie Mae or Freddie Mac Insured) the time period is 4 years for a Chapter 7 and 2 years for a Chapter 13.

The above time periods are from the time of application for a loan, and not when the loan is expected to Close. It is very important to keep that in mind because a loan could be denied for a matter of a few weeks, if the application process is started to early.

There are exceptions to these guidelines but that will be the topic of another blog that will just focus on bankruptcies. For now I will not go into detail on this matter, because the exceptions are few, and are far from the norm.

Just as in the case of the first question a Borrower could face criminal charges for loan fraud if they do not answer this question truthfully as a result of them signing at the bottom of Page #4 that all of the information that they have provided is the truth to the best of their knowledge.

The problems that these two questions create during the Loan Process, can be easily avoided if the Loan Officer does his/her job at the time of Pre-Approval, by taking a full application at that time and not ignoring the these Question That Must Be Asked On The Declarations Section VII Of Loan Application.

My next blog in this series Questions That Must Be Asked ............ Declarations Section VII Of Loan Application, we will cover questions c, d, and possibly e depending on the length of the blog.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com