Loan officer messed up?

West Haven, CT · Member since 2019 · 24 posts · 13 votes

Hey guys I'm not sure how to handle this situation. Monday I'm closing on my first rental property. I'll be profiting $1000 each month after expenses. I'm super excited. The problem comes with the rental property my spouse is buying. We just had the appraisal done and our loan officer is telling us she doesnt qualify for the house due to her vehicle lease. Why is this coming up now? (Maybe because the loan application was submitted and the underwriters brought up the issue) we already did the inspection and appraisal so that will be money lost. The only option we have to make the deal go through is to turn in the car and pay the remaining payments plus lease termination fee. This is not an option for her.

I dont want to blame anyone I just want to correct the issue and get the deal done.

Any ideas?

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Wayne Brooks

Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

Happens all the time.....your loan officer does a sloppy job, or You don't supply All relevant info....in the end when reality surfaces, you get denied. There is no saving it now, if her DTI is too high. On the other hand......Is the loan officer counting the expected rental income?

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Bernie NeyerPro Member
Investor · Chanute, KS · Member since 2016 · 160 posts · 60 votes
6y
Another option is for the seller to secure a subordinate mortgage for the down payment. You can then use your money to pay a larger down. If you're at an 80% LTV, then a 70% LTV offers less risk to the bank and more likely to approve the loan. It may also reduce your leveraged exposure over all, removing the 40% loan limits the lending institutions have
0 Reply
Rusty N.
Member since 2019 · 14 posts · 14 votes
6y
When did your wife sign the application? What was the date.
There are deadlines when the bank has to say you’re denied. And this seems very last minute.
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Paul Beets
Investor · Indianapolis, IN · Member since 2018 · 86 posts · 84 votes
6y
@Benjamin Greene Renting for 1650 but mortgage is 1300 ??? It doesn’t sound to me like the property is going to cashflow?
7% Vacancy = $115
3% Maintenance = $50
3% CAP rate = $50
10% property management? = $165
Mortgage = $1300
All of that equals $1680 and we haven’t even added in taxes & insurance?
This might be a blessing in disguise. Property should stand on its own two feet when the underwriter looks at it.
Paul
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Deepak Malhotra
Investor · Spokane · Member since 2019 · 28 posts · 19 votes
6y
@Michael Noto Please explain this strategy. Husband and wife can each have separate owner occupied properties without committing mortgage fraud? If you have an owner occupied property, how long do you have to have it before turning it into a rental and being able to get another owner occupied loan? How many owner occupied loans can one have at the same time?
1 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
6y
@Deepak Malhotra They are each getting a loan separately. Not together.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Michael Noto:
@Benjamin Greene You have gotten some sound advice regarding the lending aspect of things on here already, but as a whole I think it is a very good strategy for both you and your significant to house hack separate owner occupied properties. Good thinking on both your parts. I hope you are able to figure something out with the loan and move forward. Best of luck.
Ya this is the first time I have seen this a married couple each buying their own owner occ. property.. I wonder how underwriters look at that its a very different living arrangement.. mean technically they each need to live in the house for a year.. just curious really.

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Benjamin Greene
OP
West Haven, CT · Member since 2019 · 24 posts · 13 votes
6y
@Paul Beets it's a two family. It wont cashflow the first year she is in it. She will break even give or take. I'll be managing it also.
0 Reply
Benjamin Greene
OP
West Haven, CT · Member since 2019 · 24 posts · 13 votes
6y
@Jay Hinrichs we are not married but have been together for 10 years. So in a way we are. I know that opened up a slew of other questions lol but it's the truth. After year 1 we will buy the property we both will live in.
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Benjamin Greene
OP
West Haven, CT · Member since 2019 · 24 posts · 13 votes
6y
Also guys both properties are two unit multifamilies. With similar layouts.
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Account Closed
Member since 2019 · 5 posts · 2 votes
6y
I'd suggest asking the lender nicely what the exact issue is. Surely they want to make a loan. Also, can your GF's Dad cosign on the property loan and solve the bank's issue? Best wishes.
0 Reply
Bill Crow
Investor · Lewisville, TX · Member since 2012 · 106 posts · 103 votes
6y
@Benjamin Greene
I don”t know if this helps at all, but.... if she is 2-3 years into the lease; when does the lease expire? If that payment is going away in the next few months, that would be another point in her favor.
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Joey Morea
Lender · Tampa, FL · Member since 2018 · 149 posts · 102 votes
6y
@Benjamin Greene
Trade the lease car in and buy or lease another car but put it in your name. I am in the car business it’s a pretty easy thing to do. I once had to do that for my wife traded the car in took it out of her name and put it into mine on the new one. Between now and end of the year is the best time of year to get a deal on a car anyways. You might even be able to lower your car payment.
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Benjamin Greene
OP
West Haven, CT · Member since 2019 · 24 posts · 13 votes
6y
@Bob Jordan thank you for the suggestion sir. The officer says my GF's DTI is too high due to her car lease. I'm going to ask by exactly how much is she over. Also her dad is tied up in a couple investments himself so we are on our own.
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Benjamin Greene
OP
West Haven, CT · Member since 2019 · 24 posts · 13 votes
6y
@Bill Crow it expires in may. If we turn in the car now it will be about $2300 to release her from the obligation. This can happen but its unexpected and she will be without a car until we close. This might seem like a small sacrifice to us investors but she is riding my plan and dream. I'm trying to be fair without pushing too far. I've even offered my car up for that time. I'm willing to sacrifice and be uncomfortable for a while. I guess this is the life I'm getting into. Unexpected costs and risks for rewards.
2 Reply
Benjamin Greene
OP
West Haven, CT · Member since 2019 · 24 posts · 13 votes
6y
@Joey Morea thanks I'm going to the dealership monday to see what we can do. Thanks for the advice.
0 Reply
Bill Crow
Investor · Lewisville, TX · Member since 2012 · 106 posts · 103 votes
6y
@Benjamin Greene
Before giving up the car, I’d recommend talking to the lender. With the debt going away in a few months, it’s not going to have long term effect on her ability to pay the loan. I don’t know what underwriting flexibility there might be in this circumstance, but it wouldn’t hurt to ask.
1 Reply
Benjamin Haberman
Real Estate Broker · Ocean View, NJ · Member since 2014 · 188 posts · 82 votes
6y
@Benjamin Greene call a hard money lender. They have rental products.
1 Reply
Kyle NeffPro Member
Rental Property Investor · Cincinnati, OH · Member since 2015 · 128 posts · 59 votes
6y
@Benjamin Greene
I believe many banks consider 75% of the total mortgage for rents as far as your DTI is concerned. That's what a few financial institutions here locally have reported. If that's the case in your situation, you should be in the clear since your rents are covering 100%+ of the mortgage. Can you try a different lender to compare?
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James Williams
New to Real Estate · Charlotte, NC · Member since 2019 · 73 posts · 46 votes
6y
Sooo...I actually just learned quite a bit from this thread. I truly hope this loan gets approved for you. I believe you will find a solution. May have to jump through some hoops, but where there is a will, there is a way. (sending positive vibes your way). Congrats on closing on your first property on Monday. Good luck with everything!
2 Reply
Jennifer Runion
Member since 2019 · 10 posts · 1 vote
6y
it could be that the loan officer projected rents to be higher than reality. In my recent purchase, the rents appraisal came back $350 less then what I am charging. Luckily my DTI wasn't an issue. It was cutting it close though, and they asked the appraiser to come up with an additional comp, but unfortunately he could not find one. Luckily Closing still went through just a week late after some fussy underwriting Requests at the end.
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Clifford Paul
Rental Property Investor · Member since 2018 · 483 posts · 956 votes
6y
Originally posted by @Jay Hinrichs:
Originally posted by @Michael Noto:
@Benjamin Greene You have gotten some sound advice regarding the lending aspect of things on here already, but as a whole I think it is a very good strategy for both you and your significant to house hack separate owner occupied properties. Good thinking on both your parts. I hope you are able to figure something out with the loan and move forward. Best of luck.
Ya this is the first time I have seen this a married couple each buying their own owner occ. property.. I wonder how underwriters look at that its a very different living arrangement.. mean technically they each need to live in the house for a year.. just curious really.

Jay, this is actually very common with dual military couples. My wife and I have had our own houses at the same time.
The underwriters approve the second house as a secondary residence. As long as you complete the residency requirements no fraud has occurred.
Someone else above mentioned how many owner occupied houses can you have. I would say it depends on how the underwriters approve your loans. At one time we had a primary, secondary and 2 vacation homes. Our vacation homes only required 14 days of occupancy a year.

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Lynnette E.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
6y
I know nothing about how loan officers think, but common sense would indicate that if there are only 5 months left on the lease you could just prepay those 5 months and then that debt goes away. In May you turn the car in, buy it out or whatever. But for now there is not a payment due monthly. The debt to income ratio would then not have that debt to consider.
OTOH, it also seems very strange for someone to have a parent co-sign a car lease 2-3 years ago, and then try to purchase a property. It would seem to me that if you could not afford the vehicle without a co-signer, buying the property should wait. It there something else going on that would make the loan unlikely?
Also, 2 people in a long term relationship are not likely to have separate homes, so be careful that you really do fulfil the occupancy requirements so you do not blow chances of future mortgages to build your wealth.
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Benjamin Greene
OP
West Haven, CT · Member since 2019 · 24 posts · 13 votes
6y
@Lynnette E. I'm sorry but everything you said is based off assumptions.
1. Even though you can prepay the remaining payments and keep the car you are still in the lease obligation. You have to turn in the car and pay the lease termination fee. I called the leasing company and confirmed this.
2. Maybe she had other motives to have a co-signer. It certainly is possible for her Financial situation to change in 2-3 years. Which it has for the both of us. Hard work pays off.
3. We've never shared a permanent residence in our long term relationship. We have a plan that in 2021 we will buy one together. Everybody is different.
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Latifa Al Latif
Rental Property Investor · Aurora, IL · Member since 2019 · 11 posts · 3 votes
6y
@Benjamin Greene
Would you be able to put it in your name?
0 Reply
Deepak Malhotra
Investor · Spokane · Member since 2019 · 28 posts · 19 votes
6y
Ok, I understand the separate loans now. Keep in mind that if you do get married, you can still get loans as separate property, that gives you each 10 Fannie/Freddie loans instead of 10 as community property which is the norm.

Also consider a commercial or portfolio loan. The downsides of commercial loans include the lack of consumer protections, they are usually higher interest and adjustable after a certain number of years, and you have to show them your income and expenses periodically and they have more ways to call the loan due than with a Fannie or Freddie. But the underwriting is much simpler and they often just look at the income and expenses. Well Fargo, for example, has a commercial loan that is fixed for 15 years and amortizes over 15 years, which is better than a rate that adjusts after 3 years (unless you are planning to sell before 3 years).
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