We try to share real world scenarios with you to educate the public and the professionals alike in our industry. This week we have a buyer who qualifies all around. He works hard, gets overtime and can afford to buy. He is the perfect candidate. He has a child and lives with his girlfriend. And here is where it gets a little weird.
Most will agree that the modern family isn’t always a husband and wife and 2.3 kids anymore. In fact, more and more couples aren’t even married. But whether married or not, families have issues and arguements. and here is one case where an old wound rears its ugly head to throw a wrench in the mortgage process.
When qualifying for a mortgage we take into consideration all income, all credit report payments, and all loans and other items disclosed as liabilities, including alimony and child support.
In our case study, the buyer/borrower had a baby with a girl. Then he decided to go to college and play sports but decided not to pay his child support. The “baby momma” then filed a claim with the family court. These delinquent payments are reported on the credit report.
Since then the buyer has reunited with his “baby momma”, and it feels so good, they’ve decided to buy a home. All parties are getting along and that is great for the child and for the mother and father. However, they never update the family court and completed the proper filings releasing the father from having delinquent obligations.
Underwriters are tasked with making sure all borrower obligations and potential obligations are accounted for and documented as to why they are or are not included. Since there was no order updating the status of payments the buyer/borrower still appears to have outstanding child obligations, and delinquent at that.
It’s easy but takes borrower focus to get this rectified. If the mother and father simply go to the court and ask for new filings to update the credit bureaus and inform the underwriter of the current status of payments, if any, the mortgage process can be completed. With the borrower showing delinquent obligations and no current payments being made, the underwriter cannot properly account for the debt to income ratio and therefore not approve the loan to close.
Moral of the story, if you filing something with a city, county, state, or federal agency, make sure you update those agencies of any updates, like thefamily is together and all is good! So update those family orders and make sure you are prepared to buy.