Loan Approval with Conditions/ Letter of Explanation HELP!

7 Replies

Hi All,

I'm a first time home buyer and received a home loan approval with conditions this past weekend! I need advise how to do a letter of explanation explaining that I helped my parents refinance their house 9 years ago and they are currently attempting loan modification or short sale. The loan was done through a family relative but since it never showed up on my credit reports all these years I thought it never went through. I have not lived there for 8 years and never once made a payment for their house. Basically, I found out through the underwriter that I am listed as a property owner! Can my loan get denied? 

Not sure exactly what you're saying. What conditions are in your loan approval? Did you sign as a coborrower/co Signer?  That wouldn't make you an owner, only on the loan.

Originally posted by @James R. :

Hi All,

I'm a first time home buyer and received a home loan approval with conditions this past weekend! I need advise how to do a letter of explanation explaining that I helped my parents refinance their house 9 years ago and they are currently attempting loan modification or short sale. The loan was done through a family relative but since it never showed up on my credit reports all these years I thought it never went through. I have not lived there for 8 years and never once made a payment for their house. Basically, I found out through the underwriter that I am listed as a property owner! Can my loan get denied? 

Could you get denied? - yes you could (from experience professionally)

If I put on the underwriter "hat," I would ask you for the mortgage note to document that you were obligated or not obligated on that loan that had lates or issues.

Whether that modification or shortsale shows up on your credit report or not is irrelevant because once they've determined that it should or should not have showed up on your credit report you'll have to abide by those guidelines. Shortsale is 4 years for conventional, 3 years for FHA, 2 years for VA, or 1-2 years for modification so this has to be factored if you are determined to have been "obligated," on that modification or shortsale.

What should you write? probably the truth, however if anything you write points to you being obligated on the debt then just know you'll have to abide by those guidelines.

They probably found your name on the property title through running a skip tracer to ensure you disclosed all properties that you had an interest in. On the 1003 or loan application there is a question on the back that asks you if you've ever been an owner or had an interest in real estate. So if they (underwriter) finds that you "do," have a property then the integrity aspect of the file may be questioned. Integrity of the file is important for a smooth closing with the least amount of conditions as possible.

Your loan officer should help walk you through this. This is where experience and knowledge is key.

Hope the tips helped.

Originally posted by @James R. :

Hi All,

I'm a first time home buyer and received a home loan approval with conditions this past weekend! I need advise how to do a letter of explanation explaining that I helped my parents refinance their house 9 years ago and they are currently attempting loan modification or short sale. The loan was done through a family relative but since it never showed up on my credit reports all these years I thought it never went through. I have not lived there for 8 years and never once made a payment for their house. Basically, I found out through the underwriter that I am listed as a property owner! Can my loan get denied? 

 The proof you need to remove this condition from harming your loan approval will be to prove that you were "not," obligated on this debt that is current going through a modification or shortsale.

I saw that you mentioned "currently going through modification or shortsale," if they find that you're obligated on this note/debt then your loan may be shot depending on what the verfication of this mortgage comes back with.

Here are the steps the underwriter will probably ask for:

- ask for mortgage note to see if you're obligated on this debt

- run title profile or obtain a title report to see if you're on title

- then run a VOM (verification of mortgage) to see what the mortgage rating and payment history has been on this mortgage (if you're obligated)

- update the file accordingly and run the file through the current guidelines to see if you still qualify

@Wayne Brooks

The condition for this particular question is:

provide explanation if any ownership on the property

I believed I ended up being a co-signer.... Im not sure I was 22 years old and my parents keep saying they don't have the note. Im thinking I need to go to county clerk office tomorrow to figure it out myself. 

Originally posted by @Albert Bui :

 The proof you need to remove this condition from harming your loan approval will be to prove that you were "not," obligated on this debt that is current going through a modification or shortsale.

I saw that you mentioned "currently going through modification or shortsale," if they find that you're obligated on this note/debt then your loan may be shot depending on what the verfication of this mortgage comes back with.

Here are the steps the underwriter will probably ask for:

- ask for mortgage note to see if you're obligated on this debt

- run title profile or obtain a title report to see if you're on title

- then run a VOM (verification of mortgage) to see what the mortgage rating and payment history has been on this mortgage (if you're obligated)

- update the file accordingly and run the file through the current guidelines to see if you still qualify

 ----------------------------------------------------------------------------------------------------

Thank you for your replies Albert! 

The fact of the obligation to the mortgage is key here. 

I need to get my hands on that loan note to see what I signed and what I didn't! 

After having a long discussion with my parents this weekend I have learned at this point, the mortgage is not in good standing and has been sold several times to other banks. 

According to my parents they do not know what bank "owns" the home right now to make the payments to??? 

I wonder if the loan officer would suggest using another person to apply with my wife for the loan to go through....

Originally posted by @James R. :

@Wayne Brooks

The condition for this particular question is:

provide explanation if any ownership on the property

I believed I ended up being a co-signer.... Im not sure I was 22 years old and my parents keep saying they don't have the note. Im thinking I need to go to county clerk office tomorrow to figure it out myself. 

 If you or your parents are an obligator on the note you could look up the mortgage statement and call the customer service number to order the "mortgage note," or you can go back to your closing documents and the mortgage note should be in the closing package close to where the trust deed or mortgage papers are.

You won't find the note at the court house. Your parents will be getting statements snowing where the payments are to be made. If not, start with the last Servicer that sent statements.

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