Mortgage Loan Denial: What Went Wrong?
Home buyers depend and rely on a mortgage pre-approval and once they get a written pre-approval letter by a mortgage lender, they go and enter into a real estate purchase contract on a home. They already have completed a mortgage application, their credit have been checked, they supplied documents such as two years tax returns, two years W-2s, two months bank statements, and other required mortgage documents. The mortgage loan originator most likely got a Fannie Mae Automated Underwriting System DU approval and everything seems like a go. However, during the underwriting process their mortgage loan gets a mortgage loan denial. What went wrong?
Reasons For Mortgage Loan Denial
Every mortgage loan originator has their own style in how they originate and qualify the borrower’s mortgage loan application. Fortunately, I represent many wholesale mortgage lenders who have no mortgage lender overlays so as long as I get an Automated Underwriting System approval, I know that I can get the mortgage loan processed, underwritten, and clear to close and closed. Unfortunately, most mortgage lenders have their own lender overlays which surpasses Fannie Mae’s Automated Underwriting System approval and during the mortgage underwriting process, a mortgage loan denial is possible. Over half of my business are mortgage applicants who have gotten denied by other mortgage lenders. The way I qualify my borrowers who have challenged credit is to go over their case scenario with my underwriter and cover every possible hurdle. One of the main reasons for a possible mortgage loan denial is if the mortgage loan borrower has high debt to income ratios where every additional income can get the borrower over the maximum allowable debt to income ratios.
Here Are Possible Reasons For Mortgage Loan Denials
There are many reasons for a last minute mortgage loan denial. Maximum debt to income ratios allowable for FHA mortgage loans is 56.9%. If the borrower barely meets the required debt to income ratios and there are any additional expenses, it will disqualify the mortgage loan borrower and will trigger a mortgage loan denial. Examples of reasons of mortgage loan denial are that additional expenses incurred due the interest rates have gone up, insurance premium is higher than expected, homeowners association fees were not calculated corrected, flood insurance is required, other income cannot be used, borrower applied for additional credit cards and did not tell lender about it, borrower maximized their credit cards so monthly payments increase, borrower purchased or traded in their vehicles, borrower changed jobs, borrower had recent overdraft, or borrower forget to pay their bills on time. Other reasons for mortgage loan denial is that the mortgage lender cannot verify the down payment because the borrower has used it or funds in banking account cannot be sourced.
What To Do If You Get Mortgage Loan Denial?
If you have been denied by a bank, credit union, or mortgage banker, your option is to go to a different mortgage lender if you have a mortgage loan denial. If you are working with a mortgage broker, your mortgage broker can take your mortgage loan denial to a different wholesale lender. Mortgage loan denials happen from time to time. If you are a mortgage loan borrower in Illinois, Florida, California, Wisconsin, Indiana and have gotten a mortgage loan denial from a mortgage lender and need a quick approval and fast closing, please contact me at 262-716-8151 or at www.gustancho.com . As mentioned earlier, over 50% of my mortgage clients are borrowers who have been denied for a mortgage loan by another lender or cannot qualify with another mortgage lender.
FHA Back to Work Extenuating Circumstances Due To An Economic Event Mortgage Program Available
Effective Auguest 15th, 2013, HUD has shortened the waiting period to one year for home buyers who had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale as long as they were unemployed or underemployed at least six month prior to the economic event which has resulted in a 20% reduction of their household income. I am able to offer mortgage borrowers a TO BE DETERMINED SUBJECT PROPERTY mortgage approval as long as they have completed a one hour HUD approved counseling course. The mortgage application cannot be processed until 30 days after completion of the housing course.