Help Please - Daughter Was Conditionally Approved For An Fha Loan And Then They Found A Default Loan

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Puppysmoocher

LoanSafe Member
Apr 8, 2013
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0
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Hi there!

My daughter had a lot of student loan debt when she graduated and was unable to make payments, eventually resulting in a default. They began garnishment and taking her tax returns for a few years until she was able to enter a rehabilitation program (make on-time payments for nine month and then have her loans consolidated).

She has made nice strides in her career and has paid off all her credit cards in anticipation to buying a home this spring. She was pre-approved and began her search, resulting in putting an offer on a home with $5,000 down in Earnst monies. The loan process began, the appraisal was scheduled and the home passed the appraisal. She received notification from the mortgage company last Thursday that her loan had been conditionally approved.

Then on Thursday afternoon, the mortgage company called and said the underwriters found she had a student loan default. They gave her a number to call and lo and behold, yes - there are other loans from her undergrad degree that somehow were not added into the rehab loan program she signed up for two years ago. She knew nothing about these.

They were not on her credit report before she was pre-approved. This is a real curve ball. She called the number and was able to start another loan rehab program for this $10K loan but mortgage company says not good enough - if you are in default with a government loan, you can not get another government loan (FHA).

We tried to be co-signers for her but our debt/income ratio isn't good enough. Her grandma said she would co-sign, so that is Plan C, if necessary. In the meantime, Grandma said she would prefer to pay off the outstanding student loan and have my daughter just pay her back. Soooo, here is my question....

We are attempting to reach the student loan collector this morning and make an offer to pay off the defaulted loan with the guarantee that they immediately remove the Default from her record. Has anyone gone through something like this before? Is it realistic to expect that the default can be removed immediately? Any and all advice is greatly appreciated!

Puppysmoocher~
 
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Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
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Hello,

If you are in a hurry, the best way would be to simply pay off the loan and get a letter stating that the past due amount was paid if full and will be removed from your credit. You can then give this letter to your lender who will most likely be satisfied with this letter.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
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www.loansreduced.com
That's a tough situation that you've run into at this point. The question remains, even if they remove the default would the current lender be willing to fund the new loan as they have seen the default on her record? I'm assuming they can do a rapid rescore to remove the default if the creditor is willing to put it in writing or via a three way call.

I would be more than happy to ask my underwriters specifically about this. Please feel free to e-mail me at: [email protected]