Trouble Getting a Mortgage

9 Replies

I have been declined for a mortgage because I don't pay rent. My boyfriend pays our rent (which is high) and my lending bank has told me that they have to consider that I would be paying all of the rent someday, which precludes me from any large loans. I asked if it would be possible to calculate using the average bay area rent of a single person, or even half of our current rent, but they told me that they need to assume I would be paying the total rent. 

Does this seem right/normal? I am wondering if I should just go to another bank and try again or if we should just apply for a joint mortgage. He's not interested in investing in real estate so I'm not super keen on having his name on a mortgage for a building that I have paid the full down payment on and am managing--but, I trust him so maybe it wouldn't be so bad?

Details:

current rent in bay area is $3,000

my salary is around $60,000

have saved $35,000+ for down payment

looking at duplexes and triplexes around ~$150,000-170,000

I would suggest that you go to another small bank and/or credit union and try again.

@Moira Mosley-Duffy this absolutely sounds like you spoke with a "larger" bank. To me it sounds like you should try a different bank but maybe a smaller bank too.  Large banks have a lot of extra rules.  I might ask in the California forum here on Bigger Pockets who knows of some good banks to use.  That way you can have some local advice.  You might find some good suggestions there.  Hope this helps.

try another lender ...assuming you are looking to purchase the duplex / triplex  as an investment  property - most lenders will  need  to factor in your  present  " housing expense "  in order to  complete the  qualification  calculations  they are required to do ......

one idea  is to possible  frame up the transaction to be an " owner  occupied "   multifamily  purchase scenario

Hi, I'm familiar with the area and work on the lending side. Is this your first purchase? If it is I would check out some more local banks. Otherwise, you could consider commercial financing as an investment property and the underwriting will be much looser as they will look more closely at the property income. I work with several lenders that would finance that for a first-time property owner if the deal shapes out. Best to you,

Originally posted by @Moira Mosley-Duffy :

Does this seem right/normal? I am wondering if I should just go to another bank and try again or if we should just apply for a joint mortgage. He's not interested in investing in real estate so I'm not super keen on having his name on a mortgage for a building that I have paid the full down payment on and am managing--but, I trust him so maybe it wouldn't be so bad?

No, I've done scenarios like that without having to hit the non-rent-paying person with the rent in their DTI.

@Moira Mosley-Duffy Yes, I agree with the below comments.This is not how things should be calculated on this type of transaction. 

Thank you all for your advice. I am definitely going to approach some more local banks and credit unions. 

FHA/USDA/VA guidelines and conventional guidelines will only require 12 month rent verification under specific scenarios, almost all of which are determined when your file gets run through Desktop Underwriter, which is the program that underwrites your file before the human underwriter touches it. The human underwriter then proceeds based on the findings from Desktop Underwriter. If DU gives you a full approval, then you almost never need rent verfication (unless the underwriter is really being stingy about something). If DU gives a REFER, that means you still meet min guidelines, but it wants the human underwriter to make the final decision. If you received a REFER from DU, then you will need 12 months rent verification. For government loans such as FHA/USDA/VA, the general line for that occurs with credit below 640, or if there is some other issue that Desktop Underwriter doesn't like such as lack of credit history, etc. However, if you have good credit (and sufficient credit history) and income and all that and DU is fully approving you, then rent verification should not be required.

Banks can sometimes have lots of credit overlays, which are basically rules on top of rules. If FHA says you can go a mile, the bank may say "we only let you go half a mile" as a simple example. So if your good enough to get a full approval through DU, the bank may still ask for rent verification. So, def shop around a bit more. If you still get flack, try some local mortgage brokers. The good ones will partner with lenders that have little to no overlays, so if your a full approval with DU, then no rent verification is needed and they wont ask for it.

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