Young Couple With Perfect Credit Discover Murphy’s Law of Lending
After months of house searching, problems with financial institutions and our mortgage broker and days of living in a limbo, my husband and I and our two small children are finally in our new-to-us Pasadena home.
Both of us have been gainfully employed since our graduation from USC eight years ago. We owe no major credit bills and our credit is established as A-1. Yet we can recite a tale that is unbelievable as to the amount of frustration and difficulty we have endured in a whirlwind of rejection for a home loan. In this time, when the economy suffers and other young people who are solvent cannot get a loan, we wonder just who can possibly purchase a house.
It was during the holiday season of 1991, after our condominium sold, when my husband and I made an offer on a nice four-bedroom home in Pasadena. Everything was going smoothly because our loan had been pre-approved by our mortgage broker since September.
Because we were both working, it seemed that our income and savings would qualify us for a 10% down loan. “No problem,” we were assured by our broker. Our offer was accepted and we opened escrow. I was eight months’ pregnant with our second child and very anxious to get settled somewhere.
In January, our troubles began. I went into labor four weeks early and had to go on disability. At that time our broker informed us that our loan status had changed. Because I was going to have a baby our income was drastically adjusted--my salary was no longer considered as part of our loan agreement even though I was planning to return to work.
Our son, Christopher, was born two weeks early. The week that we brought him home from the hospital we were contacted by our loan broker. I was told that I must return to work immediately to prove that I was still going to be working; otherwise, my salary would not be considered as part of our loan package and we would not get the loan.
Even though I was on maternity leave, which was anticipated and legitimate, we were told that virtually no institution would consider my salary. My company was willing to release any kind of statement about the truth of my employment. The loan was still not approved. If this was a typical precondition of the loan approval process, why didn’t the broker alert us to the possibility? How could he think that I could return to work days after having the baby?
Not ready to throw in the towel, we went to my husband’s mother and asked her to cosign on the loan; she had adequate income to cover any default. Papers were drawn up and proof of income was supplied to the lending institution. “Soon,” the broker guaranteed, “the house will be yours.”
Three days before escrow was to close on our condo and the new house, our broker informed us the loan was refused unless we provided a down payment of 20%. We were luckier than most people--family members contributed the additional cash needed within 24 hours. All conditions, at that point, were satisfied. Escrow on both the condo and house was extended by two weeks.
It was the day before escrow was to close on our condo when I received a call from my husband telling me our loan was once again denied unless I returned to work. The loan was rejected even though there was 20% down, a cosigner with a perfect credit record and three incomes to service the loan. It was necessary at this point that I actually had to go back to work and be given a paycheck stub to prove that my company intended to keep me employed. Escrow was once again extended.
It was a Friday, the day before the new owner was to take possession of our condominium, when we were forced to store our belongings for $50 a day and move in with my mom and her new husband in his home in Pasadena. I returned to work on Monday leaving my new baby and his sister, Kimberly, to prove that I was actually actively employed. After I had returned to work for three days, the final loan documents were drawn up. At that time, we signed an agreement with the sellers of the house to pay them $50 a day to keep the property.
The day before escrow was to close, my husband, mother-in-law and I met at the escrow office to sign the final documents. Because of the delay in approval, our loan rate increased .75%. I was expecting our rate to be lower than the original rate quoted due to the 20% down payment. In addition, we had to settle with a variable rate loan. There was nothing we could do but sign the documents--escrow needed to close because we needed a home to live in.
After five major setbacks, we are finally in our home. The ordeal we went through in the purchase was incredible, given the current economy. It makes me wonder how other young people who want to buy homes and raise families are going to get financing if they do not have a family that can financially support their efforts. Does the money for the monthly payment have to be guaranteed in triplicate before a reputable lender will grant a loan? Is a woman punished for bearing children? Would a man be penalized for paternity leave?
And finally, are mortgage loan brokers worth the percentage they charge if they are not savvy on loan parameters and maternity leaves? There are so many questions that have gone unanswered.
Although we are now happily in our home, the months of agony and frustration our family went through makes the American dream of owning a home look less perfect from this point of view.
Lisa Adam and her husband, Matt, are refinancing their loan to remove the co - signer and get a fixed rate and reasonable terms.
