[Gustan Cho]

🏡 VA homebuyers: did you know your appraisal could list repairs that would need to be done prior to closing?

A VA appraisal is not simply about arriving at the market value. The appraiser also checks that the property satisfies the VA’s Minimum Property Requirements (MPRs).

If there are any issues with safety, structure, or sanitation, then those repairs need to be carried out prior to the VA loan proceeding.

But if your appraisal comes back with a flag, then that doesn’t mean your purchase is dead.

Depending on the issue you’re dealing with, you may be able to move forward by way of repairs, further inspections, or a VA waiver.

🎥 Watch this video to learn:
https://youtu.be/512k0_zpaMo

Veterans and military homebuyers: did your VA appraisal come back with a list of repairs that needed to be done prior to closing? What happened, and how did you deal with it?

Share your experience below as your story may well be the one that helps another veteran get ready for homeownership.

[Gustan Cho]

Manual, here’s a clear look at your situation and some options that could help you keep your second property.

The Core Problem: The July 2026 Foreclosure

A foreclosure on one property does not always stop you from getting financing on another. It depends on how long ago it happened and how it shows up on your record. Here are the main things to know:

• If a foreclosure is still open and not finished or sold, lenders usually treat it less harshly than a completed foreclosure since there is no final loss yet.
• After a foreclosure is completed, you usually have to wait three years for a conventional (Fannie/Freddie) loan, three years for FHA loans, and two years for VA loans. The waiting period starts on the sale date, not on the date the foreclosure was filed.
• Since the foreclosure was filed in July 2026, it is very recent. This means a standard refinance on your second property will probably run into the waiting period required by agency rules.

Still, you do have some options.

Options to Cure / Save the Second Property

1. Loan Modification with your current second lender. This is usually the cheapest and fastest way, made for people facing hardship or foreclosure. You work directly with your lender to change the loan terms, such as adding missed payments to the balance, extending the loan term, or lowering the rate. You do not need a new loan, and it does not restart the foreclosure waiting period. Since your broker’s mistake is documented, you have a strong case for hardship.

2. Bring the second loan current with a HELOC or home equity loan. If your second property has equity, you can use a new second-position loan or a HELOC on the first property to catch up on missed payments. As of late July 2026, second mortgage rates are about 7.36% to 8.08% for fixed loans and 7.23% to 7.43% for HELOCs. These rates are still lower than most credit cards or personal loans.

Keep in mind that a new second-position lender will look closely at your total loan-to-value ratio and your credit history.

3. Forbearance as a temporary fix. If your second lender agrees, you can pause payments for a short time while you work out a solution. Forbearance plans were still common in the second quarter of 2026, with about 37,000 loans in forbearance at quarter-end.

4. Cash-out refinance of the first mortgage on your second property. This option lets you use your equity to pay off or catch up on the second loan. However, it restarts your loan term and adds 2% to 6% in closing costs to the loan amount. It can also change the order of liens and may require additional review if you have a recent foreclosure.

5. Short refinance or short payoff. If your property is worth less than what you owe, the second lender might agree to accept less than the full balance to remove its lien. This is usually cheaper than going through a full foreclosure.

6. Fannie/Freddie relief programs. If either property has an agency-backed conforming loan, RefiNow (Fannie) and Refi Possible (Freddie) offer a minimum 0.5% rate reduction plus a $500 appraisal credit. These help low- to moderate-income borrowers who might not qualify under standard criteria, but again, the recent foreclosure seasoning may still apply depending on the loan type.

Direct Answer to Your Question

Is the July 2026 foreclosure a deal-breaker? Usually not, but a standard agency refinances right now will be limited by the waiting period. Here are your best short-term options:

• A loan modification on the second loan (this has the best chance and does not have a waiting period), and/or
• A portfolio lender or credit union that keeps loans in-house may be able to work with you even with a recent foreclosure, especially if you have other strengths as a borrower. Credit unions like FourLeaf and big banks like Chase are often more flexible.

What Your Legal Team Should Confirm

Two main things affect your options:

1. Is the July 2026 foreclosure on the first or second loan for that property? The lien position decides who gets paid first and how your second loan will be handled in any solution.
2. Is the foreclosure on the first property finished (sold) or still in progress? If it is still pending and can be stopped or reversed, you might avoid the full waiting period penalty.

Practical Next Steps

• Contact the loss mitigation department at your second lender right away and request a loan modification or repayment plan in writing. Be sure to document that the broker’s failure to provide the term sheet caused the default. This is your proof of hardship.
• Ask for a written payoff and reinstatement quote on your second loan so you know the exact amount needed to fix the problem.
• Contact two or three portfolio lenders or credit unions that do manual underwriting. Ask them directly, “Can you offer financing if I had a foreclosure filed three months ago?”
• Think about getting a HELOC on the equity in your second property to bring the loan current while you work out your legal claim against the broker.

One important detail is whether these properties are residential (1-4 units) or commercial. If they are commercial, refinancing works very differently. For example, CMBS special servicing reached 11.42% in August 2026, and many maturing loans are being modified or foreclosed. Let me know if your second property’s loan is agency-backed, FHA/VA, or a portfolio loan. That will help determine which options fit your situation.

7 Key Insights on Refinancing Your Mortgage in 2026: Pros, Cons, and When It Makes Sense
https://www.amerisave.com/learn/key-insights-on-refinancing-your-mortgage-in-pros-cons-and-when-it-makes-sense

The 2026 Maturity Wall: How to Refinance a Commercial Mortgage Maturing Into a 7% Market | CR Equity AI
https://crequity.ai/article/commercial-mortgage-maturing-2026-refinance

amerisave.com

7 Key Insights on Refinancing Your Mortgage in 2026: Pros, Cons, and When It Makes Sense

Refinancing your mortgage isn't just about chasing lower interest rates. Think of it like this—your mortgage represents one of the largest financial...

[Gustan Cho]

Thanks for your service. You’re up against it at the moment with just 30 days to sort your home and the added stress of the custody issue.

The good news is that a 566 credit score won’t automatically bar you from getting a VA mortgage. The VA doesn’t set a minimum credit score for these loans at all. Some lenders will of course have their own requirements.

Your biggest problem may well be that 566 credit score rather than the late payments over the last year. That said, there are some things you can do immediately to improve your prospects.

Here are Five Urgent Steps You Can Take Right Now to Move Forward:

• Find a VA lender who does manual underwriting (i.e. they look at the full picture rather than just your credit score).
• Ask them to look at your full case and not just the numbers.
• Collect all the documentation relating to your military assignment and your financial problems.
• Write a letter explaining the reason for the late payments, when the problems arose, how they impacted your finances and what has changed since then.
• Attach your military orders and any other relevant documentation.
• Collect solid proof of your rent payments.
• A good rental history is a very important factor in the VA’s assessment of your ability to manage a mortgage.
• You should gather 12 to 24 months of bank statements, cancelled checks or rent books.
• The VA will also look at your take-home pay after you’ve deducted your outgoings and housing costs.
• A stable employment history, sufficient take-home pay and evidence that you’ve recovered from any previous financial difficulties can all help your application even if your credit is not ideal.
• Get in touch with your landlord as soon as possible and request a written extension of 30 to 60 days whilst your loan is being processed.
• You’ll already be living in the property so you may be able to expedite certain aspects of the purchase, you’ll still need to complete the appraisal, title work, loan approval and the closing.

Important Protection for Military Families on Active Duty

Contact your military legal assistance office immediately to have the notice relating to the purchase or move out reviewed. Service Members Civil Relief Act does provide some protection against eviction, but it does not automatically stop a lease from terminating or prevent the landlord from selling. What will happen in your particular case will be dependent on your individual circumstances and state law.

What I Need to Know to Help

Please Send Me These Details:

Property:

• What city and state is the property in, and what is the agreed purchase price?

Military Status:

• Are you active duty, retired or a veteran?
• Do you have your VA Certificate of Eligibility? Income:
• What is your approximate gross monthly income (including any military pay you’re receiving)?
• Credit: How many 30-day, 60-day and 90-day late payments have you had in the past 12 months?
• When was your most recent late payment?

Rent:

• What’s your monthly rent, and how long have you been at your current address?

Financing:

• Have you applied for a VA loan and been turned down already or are you just starting out?
• My suggestion would be to take two actions: get a fast tracked VA mortgage review from a lender that does manual underwriting and is familiar with the current credit situation and to formally request a written extension from the property owner.

It’s a difficult situation, but don’t give up just yet. With a 566 credit score, documented military hardship, and a solid rental history, there may yet be a way, depending on your full credit picture, your income, and the lender’s requirements. Your number one priority at the moment is to find out whether an underwriter can approve your application in time to keep your family’s home safe.

[Gustan Cho]

Your 30-Day Action Plan: Navigating a 566 Credit Score When Custody Matters

It’s vital to understand that the VA doesn’t have a minimum credit score. That’s up to the individual lender. A 566 doesn’t automatically mean you’re going to be turned down. The issue is simply finding a lender who will work with you.

1. Target the Right Lenders (This Week)

The vast majority of lenders will be looking for a score of 620 in 2026. Many will accept 580, and some will go even lower if you have a good enough reason to justify it. As your score is below those levels, it’s advisable to steer clear of the big banks and the retail lenders. Stick with the options listed below.

• Veterans United: known for manual underwriting for scores in the 500s
• Navy Federal (if eligible): their own portfolio VA loans are more flexible
• PenFed, USAA, Freedom Mortgage, and Carrington: all offer programs for lower credit scores
• Find a broker who works with several wholesale lenders. You want someone who will go out and look for a lender who will approve you, not just someone who sticks to the 620 rule.

Just had a lender approve a loan for an Army veteran with a 583 using manual underwriting (no down payment, good rate). With your strengths a 566 is absolutely achievable.

2. What Actually Gets You Approved at 566

Automated underwriting looks at more than just late payments. It looks at how frequently you’ve been late, how severe the late payments were, and how recent they are. For the next 30 days, concentrate on the rest of your application.

• Residual income is your main advantage. VA guidelines will allow a DTI above 41% if your residual income is strong.^1^ You need to know your actual residual income, as this will help to offset a low score. If your late payments were the result of hardship or a military assignment, then you’ll need to have your orders, your deployment paperwork, and any hardship documentation to hand. Manual underwriters will appreciate a clear explanation.
• Having no late rent payments is a major plus. Lenders look at your housing payment history more than your late credit card payments. Your housing history is spotless, so make sure you point that out. Ask your landlord for a letter confirming 12 months of rent paid on time.
• Late card payments are far less damaging to your score than late mortgage payments. If your only late payments are on your credit cards and consumer debt, you’re in a far better position than I3. Rapid Credit Repair (Next 14 Days: What’s Possible) 14 Days — Realistic Gains)

You can’t fix a year’s worth of credit history in 30 days, but you can still raise your score:

1. Get all three of your credit reports from AnnualCreditReport.com today. Disputing the errors can result in a score increase in 30 to 45 days which is well within your timeframe. Look out for duplicate late payments, wrong balances and collections that aren’t actually yours.
2. Bring your pay down on each credit card to below 30% of the limit (below 10% is even better). That’s a huge factor in your FICO score and can often see your score go up in one or two reporting cycles. ^1^ ^7^ Switch on autopay on all your bills straight away. Another 30-day late payment and your score could drop by 60 to 100 points. Just don’t hand the underwriter any more late payments.
3. Ask your loan officer about a ‘rapid rescore’. That can quickly update your credit report following a balance paydown, and new scores can appear in days rather than weeks. Don’t forget to ask for it.

4. The 30-Day Timing Problem: Take Action Now. Most VA loans take about 30 days from application to closing so you’ve got just enough time. You could ask your landlord for a short extension or to go month to month. Let them know you’re in the middle of a custody battle, and you’re working through the loan approval. They’re more likely to oblige if they understand the circumstances.

• Get pre-approved before the 30 days expire. That way you can demonstrate to the seller or landlord that your financing is all sorted.
• If closing is going to take longer, consider a rent-to-own or lease as a temporary solution. That keeps you in the house and maintains the stability for custody.
• Manual underwriting takes 35 days (as per the 583 score example above^4^) so you’d be best to submit your application this week rather than wait.

5. Documents to Gather Today

• Last 2 years W-2s / tax returns, last 30 days pay stubs
• Last 2 months’ bank statements
• COE (Certificate of Eligibility): get it from va.gov or ask your lender to pull it
• Military orders showing the assignment away.
• Hardship documentation
• Landlord rent verification letter (showing 12 months with no late payments)
• Write any letters explaining late payments yourself. Keep them factual and brief. Two Things to Avoid
• Don’t have multiple lenders checking your credit in a rush. VA mortgage inquiries within a 14-45 day period are all counted as one inquiry so you should shop around fairly quickly but don’t rush the process.
• Don’t open any new credit accounts at this point. The key point is that a 566 will work for a VA loan if you can find the right lender and a manual underwriter. Your strengths (perfect rent history, military hardship, good residual income) are precisely the things that underwriters are looking for to approve a lower score. This week, find a broker who works with the sub-580 lenders, dispute any errors you can, get your credit card balances down, and if necessary, ask your landlord for a bit more time. Give yourself some breathing room.

[Gustan Cho]

Fannie Mae and Freddie Mac have begun using VantageScore 4.0 for underwriting, marking a significant shift in the industry. This update directly impacts the ‘stalled but recoverable’ file issue you raised. The new credit score model is now a key factor in determining whether a file can be revived. Here’s a quick look at what’s changing and how it will shape our work.

What’s actually changing: The move to VantageScore 4.0 is the first major shakeup to the FICO rule in years. Previously, Fannie Mae and Freddie Mac relied on the ‘classic’ FICO score, which simply used the middle score from the three credit bureaus. Now, the FHFA is requiring both VantageScore 4.0 and FICO 10T to be accepted. This sweeping change will unfold over several years and will require us to update our systems, pricing, and processes. These are the two main features: Trended credit data: Unlike classic FICO, which offers only a single snapshot, VantageScore 4.0 tracks patterns in balances, credit use, and payment habits over time. For instance, someone who was once maxed out but has steadily paid down debt will see their efforts rewarded with a higher score under VS 4.0 than with the old snapshot approach. VS 4.0 than with a snapshot model. Medical collection tolerance and rent/utility history: VS 4.0 is more forgiving with medical debts and also recognizes on-time rent and utility payments. This opens doors for people with limited credit histories or those whose credit was primarily affected by medical bills. Why this matters for the stalled-file problem: This gets to the heart of your earlier question. If a borrower was stuck in a ‘credit remediation’ or ‘second look’ queue due to a low classic FICO score, VS 4.0 could change their fate. A file that once needed 12-18 months of perfect payments to recover might now bounce back in just 3 months, or even qualify immediately. The new model’s focus on data patterns and rent or utility history can lift scores without any extra effort from the borrower, which has a direct impact on our operations: Re-scoring trigger: Files in remediation deserve a fresh look with the new model. Rather than letting them sit and age out under the old system, we should re-score them right away. If a file was sidelined because of classic FICO, that reason may no longer hold. Updating the scoring model is a strong signal to revisit these files. Organizations without a clear process for this will likely face challenges. The successor reconstruction problem: If the original loan officer has moved on and the note reads ‘FICO 640, needs to season,’ a new team member might assume this still applies under VS 4.0, even if it no longer does. They may not realize the file was scored using the old model. Current operational status: The transition has been complicated. The GSEs and FHFA have followed step-by-step timelines, but there have been the usual industry challenges, such as system updates and pricing changes. Many lenders still use systems built for classic FICO, so both models have been used during the transition, and scores don’t always match. Borrowers with certain data patterns or thin credit files, especially those with rent payment records, often benefit, while those with long credit histories and some past issues may see different results. The timeline has changed and been delayed several times, and exact dates depend on the agency or investor. Even if the GSEs accept VS 4.0, individual lenders and investors may set their own credit rules and model requirements. Just because the GSE accepts it doesn’t mean every lender’s system will follow. For stalled files, a model change is a good reason to review them, but it won’t automatically help every borderline borrower. Debt-to-income, savings, income documentation, and property eligibility still have to meet requirements. Key takeaway for your workflow research: The rollout of VS 4.0 offers a compelling real-world case for your research. Its adoption demonstrates how an external change can transform a ‘stalled but recoverable’ file into one that demands immediate attention. Organizations with strong review processes and triggers will catch these opportunities, while those without may let files slip by as borrowers’ situations evolve. Trended data also changes how underwriters evaluate income and debt-to-income ratios for borderline cases.

[Gustan Cho]

This part of mortgage operations doesn’t get much attention, so it makes sense to focus on the handoff process. Most public resources only talk about the ideal workflow: intake, verify, underwrite, and close. They usually leave out what happens when a file stalls but can still be saved. Here’s what actually happens in practice, based on how these organizations operate.

The main problem is that ownership gets divided, and this split is behind most failures.

When a file runs into a recoverable problem, such as missing income documents, a debt-to-income ratio that requires a compensating factor, credit events that need time, funds that must be sourced, or employment history that needs rebuilding, there is almost never a single person in charge. The file gets stuck between stages. Processing teams usually handle the process from intake to closing, but a stalled file is where this normal flow breaks down.

In practice, here’s where the file usually ends up:

1. The file stays with the loan officer in an informal ‘pending’ bucket. This is most common in small and mid-sized shops. The loan officer keeps it in their pipeline, adds a note in the loan origination system, and works on it when they have time between active deals. Without deadlines or requirements, these files often get forgotten.
2. Sometimes the file sits in the loan origination system with tasks or notes, but no one is working on it. Technically, it’s still ‘in process,’ but if you look at the five back office stages—document intake, verification, conditions management, underwriting submission, and clear to close—it’s stuck in a stage it can’t move past. The tasks are open, but no one is making progress.
3. In some cases, the file is moved to a ‘second look’ or credit remediation track. Larger lenders and some correspondents use this setup. Usually, a specialist processor or junior underwriter manages a group of ‘recoverable’ files. This is the closest most organizations get to real remediation instead of just nurturing leads.
4. Sometimes the file is moved to CRM nurture and removed from active operations. This is common in high-volume shops. The file leaves the loan origination system; the borrower is added to a drip marketing campaign, and reactivation occurs only if the borrower reaches out again. Remediation and lead nurture are both real, but most organizations do not clearly separate the two.

When organizations do make a distinction, it’s usually in one of three ways: a separate pipeline stage, such as ‘credit repair,’ ‘second look,’ or ‘pending conditions’; a dedicated queue or team; or a tagging system in the CRM that a manager reviews later. Most of the time, though, there’s no distinction, and the file is treated like a dead lead. The borrower keeps getting marketing emails, but their real underwriting issue is ignored. The ‘remediation’ and ‘cold lead’ files follow the same workflow, using the same templates and timing. That’s a structural mistake. A borrower who is 40 DTI points away from qualifying is in a very different situation than someone who just wasn’t ready to buy. They need a different approach.

Now, let’s talk about tracking the specific blocker, ongoing work, received documents, and unresolved items:

This is where the ‘PDF trap’ and unstructured data become a real problem. In older, document-driven loan origination systems, the file is just a stack of PDFs and some free-text notes. The blocker might only be in someone’s memory, in an email thread, or in a note like ‘waiting on 2023 K-1s.’ There’s no structured field to capture the real blocker, so tracking depends on whoever remembers.

Organizations that do this well use structured data and track each condition with a status, owner, and due date. The system flags stale conditions instead of relying on a processor to mark a package as complete without proper tracking. Deciding when a file goes back to the underwriter is still usually a human decision, not an automated one.

Your main operational question—can a successor reconstruct the file?—is important. The answer is usually: only partly, not very reliably, and only if the organization is very disciplined.

If the original loan officer or processor is gone, a replacement can usually figure out what the blocker was (it will be in the notes or open conditions), but almost never what work has been done since, what’s been received but not yet logged, or whether it’s actually ready for another look. This is because remediation work occurs between stages and systems, where friction is highest and documentation is weakest. Files often move backward when underwriting finds a gap, and these backward moves are the least tracked part of the process.

A successor who gets the file might find the blocker and the documents, but there’s a good chance they’ll repeat work that’s already been done or ask the borrower for documents they’ve already provided. This quickly destroys borrower trust.

Here’s what it looks like when an organization has solved this problem:

• There is a separate pipeline stage for files that are recoverable but stalled, separate from both active underwriting and cold nurture.
• Condition records are structured with owner, status, and age, rather than just free-text notes.
• There is a clear reconsideration trigger, such as a specific event, a score threshold, or a seasoned trade line, that automatically sends the file back to the processor or underwriter rather than waiting for someone to notice.
• There is a clear rule that remediation files are handled on a different schedule than lead nurture files.
• The system is set up so that if an employee leaves, a successor can rebuild their files in minutes instead of days. Organizations have the first and fourth features. Some have the second, and only a few have the third or fifth.

In today’s market, the ‘stalled but recoverable’ file is the least managed, least tracked, and least standardized part of the mortgage process. That’s why it’s so hard to answer your question with public data, and why the answer varies so much between lenders. If you’re working on solutions in this area, the gap is real and still unaddressed.

Let me know if you want more detail on any part. For example, I can explain how second-look or remediation teams are staffed and paid, or how structured-data loan origination systems handle condition aging.

[Gustan Cho]

Here’s the straight answer to all four of your questions, specific to your situation in Brownsdale, MN.

1. Manual underwriting with no credit score (yes, that’s possible), but you have to find the right lender.

This is the single most important gate in your file. The vast majority of lenders will run you through an automated system (Fannie Mae’s Desktop Underwriter) which is predicated on having a score. If the reports come back as “unscoreable” the automated approval will typically fail, but that doesn’t mean you’re automatically rejected.

• Fannie Mae and Minnesota Housing are both looking at the prospect of manual underwriting for files that don’t fit in the automated system and Minnesota Housing goes so far as to state that lenders “originate and close loans under their individual underwriting and closing procedures”.
• Fannie’s own manual underwriting matrix (HomeReady/HomeStyle) permits manual files with a maximum DTI of 45% so a strong documented file can be manually approved.
• What you need is a lender that will do non-traditional credit / manual underwriting. The big banks often won’t. Credit unions, portfolio lenders, and some of the lenders that are part of the Minnesota Housing program will participate. Ask specifically: “Do you do manual underwriting for borrowers with no FICO score using non-traditional credit?” If they hesitate at all, move on.

You’ve got 9 years of perfect $600/month payments from 2017 onwards. That’s precisely the kind of alternative credit paper trail that manual underwriters are looking for.

2. Yes, paying off a contract for deed via refinance is the standard.

A contract for deed payoff refi is a normal refi in all respects: you go through the application, the income, the credit, the appraisal. You’re not ‘buying’ the house at all as you already effectively own it, so it’s just a standard refi which pays off the contract seller and puts you into a first lien position. One caveat in terms of structure: Minnesota law does treat a contract for deed differently from a mortgage (the term ‘mortgage’ doesn’t cover a contract for deed under state statute), but again that doesn’t stop it being a refi. It just means the payoff and title work has to be done properly.

Two things to nail down:

• Get a written payoff statement from the contract seller. Don’t just go on the $25,879 that they’ve said.
• Confirm the seller doesn’t have a senior mortgage with a due-on-sale clause, which could complicate the title. If the seller has an underlying loan, then you’ll want the title to confirm that it clears.

3. The $40k-$50k loan is fine, though small loans have their own set of quirks.

$25,879 payoff so you’re looking at somewhere in the region of $14k-$24k of cash out or to cover your closing costs. That’s a fairly standard sized small loan. Two quick warnings:

• Some lenders have a minimum loan amount (e.g. $50k, $75k) so you’ll need to check that before you apply.
• On a small loan the fixed costs of closing (appraisal, title, VOE) will have a much bigger impact as a % of the loan. Get a Loan Estimate early, so there are no surprises.

Minnesota Housing has the Start-Up and Step Up programs which are worth looking at. Start Up has a restriction against being used to refinance an existing mortgage so you’d need to check whether your contract-for-deed payoff would qualify or whether a straight conventional refi would be the better option.

4. Alternative credit documents to gather (build a thick file).

Since you have no score, the manual underwriter will use documentation instead. Send:

1. 12 to 24 months of cancelled cheques or bank statements showing every $600 payment to the seller. That’s your #1 document. Perfect 9-year history.
2. A signed 12-month rent/payment history letter from the contract seller (name, address, phone, amounts, dates, “paid as agreed”).
3. Utility bills (12 months, all in your name, all paid on time: electric, gas, water, internet).
4. Insurance premiums (12 months paid) – auto, home, life.
5. Any other recurring obligations which are paid on time (phone, cable, gym, child care, etc).
6. Bank statements (2-3 months) showing reserves and steady deposits.
7. Proof of income (pay stubs/W-2s or if self-employed, then tax returns).
8. The contract for deed and the payoff statement.

Three to four tradelines of on-time payments (utilities, insurance, phone, your $600 payment) is generally the threshold that a manual underwriter will use to create a ‘non-traditional’ credit report. You’ve got more than sufficient material.

Bottom line: this is doable. The refi is standard, the loan amount is appropriate, and your payment history is excellent. It all comes down to finding a lender that will do manual underwriting on a non-traditional credit profile (that’s your make-or-break). Call 2 or 3 local Minnesota credit unions and ask that very specific question before you send a single document.

[Gustan Cho]

Most of the time, borrowers pay for their Verification of Employment (VOE) or Certificate of Employment (COE) through their employer, and this cost is included in the loan’s closing costs.

Here’s how these costs typically work:

Who usually pays the fee

• You’ll find this fee listed on your loan estimate or closing disclosure as a third-party service fee. It might show up as its own line item, or be grouped under ‘verifications’ or ‘credit report and related fees.’ The borrower pays this as part of their closing costs or through lender credits.
• Usually, the lender or broker pays the VOE vendor up front when they order the verification, since they have accounts with vendors like The Work Number, Truework, Verifier, and Equifax. They then pass this cost on to the borrower at closing.

Loan officers or branch owners rarely pay the VOE fee themselves, since they work on commission and margin. The $100-$200 VOE fee is usually passed straight to the borrower, so it doesn’t affect the loan officer’s pay or the branch’s profit and loss.

• Sometimes, though, the loan officer or broker will cover the fee. Some loan products have a flat fee or ‘no closing cost’ setup, where the lender pays third-party fees as a marketing strategy.
• 1. In a competitive situation, a loan officer might pay the VOE fee to win the deal.
  2. Sometimes, brokers will pay part of the lender’s verification fees to make things easier for the borrower.
  3. If the VOE needs to be done again, like after a job change or a delay, the lender or broker will often pay for the second or third verification instead of charging the borrower again. Paying $100-$200 for another check can seem high, and often it is.
• An automated VOE through the Work Number can cost as little as $5 to $30. A manual phone or written VOE from the employer usually costs between $50 and $150.
• The $100 to $200 fee usually covers the markup, the vendor fee, or a ‘verification package’ that often includes an SSN trace, employment check, income check, and tax transcript check. Some lenders also cover the credit report fee, which can be surprising. Large employers, like big companies, government agencies, or staffing agencies, may pay the vendor directly, which can add to the cost.

Key point to remember

• In most cases, both by law and in practice, the borrower pays this as a closing cost.
• The loan officer, branch manager, or broker owner only pays if they are covering the cost for pricing or marketing reasons, or if it’s a re-verification not started by the borrower. If you’re a loan officer or branch owner and want to avoid looking like you’re overcharging, the simplest approach is to use a vendor like Truework or a direct Work Number integration, which is much cheaper than older verification companies, and just pass through the actual cost instead of using a bundled fee.

If you’d like, let me know if you’re asking as a borrower or as a broker or loan officer. I can then give you more specific advice about who can be billed and how the costs can be set up.

[Gustan Cho]

A credit supplement is a request you make via your credit reporting vendor asking them to add, verify, or update information that is missing, out of date, or inconsistent on the borrower’s tri-merge report. You’d do this if, for example, a trade line is missing from one of the bureaus, a paid collection or judgment is still showing as unpaid, a balance or payment history is incorrect, or a creditor needs to confirm the status of an account. Both the borrower and the creditor may be required to provide documentation, and at times the vendor will arrange a three-way call with the creditor to confirm the details. The intention is to ensure the credit file is accurate and complete, not to artificially inflate the score.

A rapid rescore is different. It’s used when the borrower has made a verified change to their credit that hasn’t yet appeared on the credit bureau files. This could be as simple as paying down a credit card, paying off a collection, correcting a reporting error, or removing negative information that was reported in error once the creditor has confirmed the error. The credit vendor will send the creditor’s documents to Equifax, Experian, and/or TransUnion. Once the bureaus have updated the file you can pull a new report and score. This typically takes 3-5 business days (though the timing can vary by vendor and bureau). The cost will vary by vendor, by the number of bureaus, and by the number of items you need to update/rescore. A credit supplement is typically $15-$20 each, while a rapid rescore is about $25-$50 per item per bureau. If you’re updating multiple accounts and/or bureaus the total cost can quickly add up. Who pays for the service is up to your broker’s policy. It’s common for the lender or broker to pay for the rapid rescore and the borrower to pay for the credit supplement. Always check with your broker, your credit vendor and your compliance department to confirm the policy before you tell the borrower anything. Never assume you can charge the borrower directly for a rapid restore without checking RESPA, state, investor and company rules. Correcting missing or incorrect information can help to avoid a delay in underwriting and, in some cases, can even prevent a rejection. The main benefit of a rapid rescore is speed. If the borrower is just below a score threshold a rapid rescore can quickly improve their score and get them approved for a loan, get them a better rate, meet a conventional loan requirement or keep their purchase contract on track. A small increase in score can make a big difference in terms of getting a better rate or meeting a lender’s requirement.

Neither of those services is credit repair and neither can remove valid negative credit history. They can’t create a better score out of nothing. What they can do is accelerate or clarify the accurate, verifiable information in the report. If the updated information results in a lower score, that’s the score you’ll get. Before you order either of those services, you must check the report, identify the issue, get the documentation from the creditor, get the borrower’s consent and note the expected benefit. That process protects the borrower, protects your broker and protects your NMLS record.