Many credit issues are caused by overextending credit or another way of stating that - not adhering to a budget. Underwriters frequently face the problem of increased housing expense while reviewing loan applications. Stated simply, if the homebuyer is asking for a loan that will have a payment higher than their current housing expense, is it possible for them to make the higher payment? If the applicant has been saving an amount each month that covers the difference, it is a strong indication they can afford a higher payment.
This issue came up recently in a class I taught for first time homebuyers. One of the participants asked, "What if you aren’t saving by choice?"
My answer, "What are you proposing to give up after you buy a home? Nice shoes by-the-way, are they new?" Even she had to laugh with the rest of the class, exactly the point.
The loan officer that originates the loan application must include any documents provided by the applicant that supports the loan request. Fight fire with fire!!! This is the slickest trick I have ever thought up for using the system to trump the system. Freddie Mac publishes a sample budget on their web site under some obscure section (and I think it gets moved around). I saved a copy long ago. What is the underwriter going to think when he or she discovers a budget in the file that documents the ability to afford a higher housing expense AND it is on a form provided by Freddie Mac and contains the Freddie logo? I promise you it will be like finding a candy bar in the file. Well, lookie what I found!
In all the years originating loans I have never had a homebuyer offer a copy of their budget as part of the support documents. What a killer tool this would be especially if it documents a turn around contained in the credit report.
Send me an email if you want a copy of this form and I will send it ASAP: jsimms@cmcloans.com
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