MRF and student Loan Refund

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  • #63208
    Kiwicali011210
    Participant

    Hello all. I can’t seem to get past credit access, the UW is saying I do not have the required MRFs. I got a student loan refund of $4852 at the end of November. That refund was deposited into the same account as my payroll deposits, the same account I use to save the MRFs. My MRFs are 3000. I have $5000 in my account. I have paid $1000 for the earnest money, and $475 for the inspection (so $3000 MRF minus $1475 for earnest and inspection leaves $825 MRF).
    The UW is saying I cannot count the $4852 at all for purchase of the home, ok I get that. He is saying my balance of $5000 minus $4852 leaves just $150- not enough for minimum required funds. I disagree. I realize I can’t use the refund toward the home purchase, however I CAN use the refund for my living expenses since I’ve received it. In my opinion I’ve used it for my big ticket purchases/bills and saved my payroll checks to go toward the minimum required funds. The correct balance of the refund should now be $2300. My balance of $5000 minus the $2300 is $2700. That $2700 is over the amount I am required to have for my MRF (since I already paid earnest and inspection).
    The problem is all of the funds are in one account. Has anybody run into this issue? My MC said to write a LOE, which I did- and I itemized each thing I paid with refund money. I’m hoping this issue gets resolved. It already took 2 weeks for my inspector to upload my inspection so we are already behind. Any insight is appreciated, hoping @ttrumble is able to chime in if available. Thanks!

    Ps- new student loan figures and my prospective payments for the increased amount are already in my file and do not affect affordability.

    #63210
    Nelsont
    Member

    Your refund can be used for anything including buy down funds EXCEPT your mrf. If your 5000 includes 4852 of the refund then you only have 148 toward mrf no ifs ands or buts. You need to realize the rule is not what you plan to use the money on the rule is where it came from. It doesn’t matter that you have money left over. There is exactly zero you can use for mrf. I understand you get that. But unfortunately you need to be able to show you have your mrf PLUS any large deposits which means you need 7852.

    If your mrf is 3000 and your 5000 includes 4852 that can’t be used then you only have 148 in your account that can be used for mrf. Add 1000 you already paid for the good faith and that’s 1148. Plus 475 for the inspection that’s 1623.

    Your MC has probably the best solution for you. Let’s hope the underwriters can see you have more than just your refund.

    #63212
    Kiwicali011210
    Participant

    Thanks for the response. Am I noy allowed to use any of the $4852 for other bills or purchases? Also, I had a payroll deposit yesterday of $1700 (included in the $5000) . Seeing that the $1700 came directly from my job, that at the very least would mean I have over the $1623 that you came up with in your scenario right?

    #63214
    Nelsont
    Member

    That 4852 is yours to use however you wish for personal effects though it is not recommended to start buying furniture and other household items before you close. I was advised against it by my MC and @ttrumble has mentioned something along those lines on here before.

    I think you are missing the point on the mrf. The 1623 I came up with is not what you need. It’s what you have. You need 3000 as you stated earlier. Now with your 1700 that puts you over. 3323 to be exact. The 2 problems are because it was yesterday the underwriters obviously didn’t see it yet. And your mrf needs to be your monthly statement ending balance after your bills are paid.

    Are you saying your bank statement ending balance showed at least 3000 when your MC submitted you for qualification before you started looking for houses?

    #63215
    Kiwicali011210
    Participant

    I am sorry for any misunderstanding on my part, but yes I had over $3000 when I was submitted for qualification (before the refund deposit).

    #63216
    Nelsont
    Member

    Ok then. Just to make sure we are clear go back to the point before you got your refund. Pretend you never got it. Then add up all your purchases since then. What is your balance? That’s what the underwriters are looking at.

    Your statement needs to grow each month by your payment shock amount at the very least without fail until the day you close. So if you had over 3000 at qualification then you should have at credit access over 3000 plus your payment shock for every month between qualification and credit access. Minus 1000 for the good faith. Minus 475 for the inspection. Minus 4852 for the refund.

    #63217
    Kiwicali011210
    Participant

    I understand what you are saying. I have no payment shock. I have made purchases, in my mind from the refund, that I would not have made if I knew this was going to be an issue. I had over $3000 in my account at qualification. I paid for the escrow and inspection, then I got the refund. I paid back a family member from the refund, and made other purchases from the refund. My balance was $3300 as of Monday, and $5000 due to payroll deposit of $1700 by Friday. So, as of this moment, my recent payroll deposit would cover the remaining MRF needed, since I am assuming they will not count any of what was left in my account before my payroll deposit. Either way, does it look like I will be ok? I am just not understanding why I would not be allowed the use the refund for other expenses (but saving my own payroll for MRFs). I was just qualified a couple weeks ago so I’ve only had 1 payroll deposit since the refund deposited. It HAS grown, since being depleted some by the earnest money and inspection. And also, the amount of MRF has been differing. On my financial qualification sheet that I signed at the purchase workshop it said I only needed 2300, MC quoted 3000 (and she also said only the escrow would come out of it).

    #63218
    Nelsont
    Member

    You certainly are allowed to use your refund for other expenses. It is just frowned upon when buying a house through any bank to be making big purchases before you close and specifically with naca going all the way back before you qualify. They want to see that you are essentially doing nothing but saving and paying bills.

    The biggest issue here seems to be that your statement is not your mrf plus your refund. I think if it were then they would approve you. But personally if you can prove the money went to household expenses or debt I wouldn’t think it’s a big deal. Let’s hope the LOE is sufficient. I think often because no matter how clear it appears to you the underwriters will not connect the dots that an explanation in writing is all it takes.

    #63219

    Wait, you can’t use large deposits for MRF? How have I (and my MC) missed that piece?

    #63220
    Kiwicali011210
    Participant

    You can use large deposits, I believe it just matters where the deposit came from.

    #63221

    Ohh.. is the issue here that it’s borrowed because the student loan refund is originally from a borrowed source? I hadn’t thought about that.

    #63222
    Kiwicali011210
    Participant

    Correct. No borrowed money can be used (unless I think if you borrow from yourself like 401k). I’m having an issue because the refund was in the same account that payroll deposits are made. I can use the refund for other expenses, but now I have to try to see how if I can state or prove that i used the refund for other expenses and that the amount left in my account is my own saved funds. If that makes sense.

    #63232
    TTrumble
    Member

    Hello all,

    I haven’t seen this much confusion on a single item in quite a while.


    @Kiwicali011210
    , please define a “student loan refund”. Was it unused funds from money you borrowed through a student loan or refund of money that was overpaid on the account?

    Lump sum deposits can indeed be used for MRF as long as the funds are NOT borrowed and the source and be conclusively demonstrated. What you CAN’T use it for is Payment Shock.

    BTW, 401k funds are perfectly okay to use. It’s already YOUR money, and it’s impossible to borrow money you already have.

    Right now of course, you may only use five points for interest rate buy down, regardless of the source. (Before you ask, no, there’s no news on anything new.)

    Hope that sets things straight.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #63233
    Kiwicali011210
    Participant

    Hey Tim, thanks for the input. The refund was an excess of a student loan. Tuition and fees were paid, and the excess that was overpaid was sent to my bank account by my school. So, if it matters, the school sent me this money directly. Even without counting the large payment, I should have enough for my MRF, which is where my own confusion came in. Thanks for the help!

    #63245
    TTrumble
    Member

    Hello Kiwicali011210,

    Glad I could help clear things up. Regardless of the fact that it came directly from they school, it’s still borrowed funds, so the underwriter was correct from the start.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

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