Mortgage Denies my loan

18 Replies

Hey BP!!!

So I’ve had this amazing duplex under contract since May 2019. All parties are ready to close. My lender is now telling me they will not give me the loan to purchase the house. Their reasoning behind is I “dont qualify”.

Quick background:

Sale price - $414,000

Taxes - $7,100 now are $9,400 (according to lender)

Homeowner isn - $1100yr (was $1740, but I got a better quote)

Flood insurance- $3020yr (I tried to shop around)

I have $10,000 Ernest $ in the deal.

I am going FHA here.

It’s in northern New Jersey....Bergen County.

Any ideas how to save this deal????

Please I have no idea what to do next.

Great deal background, but what's YOUR background?  They're telling you that you don't qualify, not the deal.  The short answer is that you need to find a new lender, and you need to find out exactly what about you doesn't qualify and what you can do to rectify that.  Without more cash, you are probably stuck.  If it's truly amazing, maybe you can assign it for a fee and pocket some quick cash for the next amazing deal?

I hope that helps.

- JM

Dang that flood insurance... it's not even that bad down here in most areas of HOUSTON, and we flood on a regular basis. 

Agreed with what JM said above, lenders aren't just going to shell out a huge chunk of cash like that. With FHA, you were probably putting less than 10% down , right? Best of luck talking w/ another lender ASAP

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There must of have been some issues along the way from lender, that were communicated to you.  Why Exactly are they saying you don’t qualify?  Change in income, undisclosed debts, bad estimates on tax and insurance, etc?  If you are completely honest with them up front, it takes about 10 minutes after they pull your credit report to see if you qualify.

@Jonathan Valdes

As others have mentioned what is the reasoning for denying the loan? How is it that the deal got to the closing table and they said you no longer qualify? I would be glad to see if there is a strategy to solve this. 

Originally posted by @Jonathan Valdes:

Hey BP!!!

So I’ve had this amazing duplex under contract since May 2019. All parties are ready to close. My lender is now telling me they will not give me the loan to purchase the house. Their reasoning behind is I “dont qualify”.

Quick background:

Sale price - $414,000

Taxes - $7,100 now are $9,400 (according to lender)

Homeowner isn - $1100yr (was $1740, but I got a better quote)

Flood insurance- $3020yr (I tried to shop around)

I have $10,000 Ernest $ in the deal.

I am going FHA here.

It’s in northern New Jersey....Bergen County.

Any ideas how to save this deal????

Please I have no idea what to do next.

I believe FHA requires 3.5% down (on $414,000 that amount is $14,490) and 6 mos reserves for making the payments, this changes depending on credit score but it's a good general number. Your PMI might take you above the acceptable DTI ratio allowed. There is usually a seasoning requirement for the money.

If you are in to a zero down FHA, you probably have a debt to income ratio problem.

What did your mortgage broker tell you? He should be able to find out quickly what the problem is. After all, he wants the loan to close too.

When a lender denies you credit they are required by law to send you a letter stating why not. What did the letter say?

FHA Loan Eligibility Requirements

There are no special eligibility requirements for FHA loans like other government-backed loans. Though, the loan will need to be used to purchase a primary residence and can't be used on second homes, vacation properties, or other investment units.

FHA loans have more lenient credit score guidelines than other loan types. Credit scores over 580 are eligible for 100% financing; scores between 500-579 are eligible with a 10% down payment. Lenders may have stricter credit score guidelines, though, even if the FHA allows for lower scores.

You'll need to meet specific debt-to-income (DTI) ratios - your gross monthly income compared to your debt payments - but they're inline with other loan programs. The FHA allows up to 31% of your gross monthly income to go towards housing costs like mortgage principal, interest, property taxes, and property insurance, while your debt ratio can be as much as 43% of your monthly income. For example, a household that earns $85,000 per year has roughly a $7,000 gross monthly income. That means the FHA loan allows for as much as $2,200 (31%) for housing costs and $3,000 (43%) for your debts.

Youve had it tied up since May?  I feel bad for the sellers. Hope you can pull it off, since everyone seems to have some sunk cost into this.

@JM Payne it’s not that I don’t quality because of my background. The issue is the lender does not want to give the loan since taxes and flood insurance went up. I also am doing this deal solo.

@Wayne Brooks I’m not to sure just yet as to why they are verbally telling me that I won’t get the loan. I haven’t received a letter. The lender (Americans Mortgage Lender, Whippany branch) went through a split in July. The original guy I was with left the company. And that left my loan in the air. I’ve explained this all to my lawyer, who is AMAZING!!! He has been helping me get the lender on track. The blank spot is the guy I am dealing with @ the office is a terrible communicator (James). I will be going to Chase bank today to see what they can do. As I have had chase for 15+ yrs.

I'm thinking maybe it's your DTI ratio that's too high therefore not qualifying you for the loan but that's just speculation from me given the information you provided. I'd start reaching out to a bunch of lenders to try and get someone who will say yes and make this deal go through. Maybe try and go to a small community bank or credit union since many times they tend to keep loans on their books vs. selling it after they originate it.

Also, how did taxes go up $2,300?!  I'm a New Jersey resident and my taxes don't go up THAT much each year.

Originally posted by @Jonathan Valdes:

@JM Payne it’s not that I don’t quality because of my background. The issue is the lender does not want to give the loan since taxes and flood insurance went up. I also am doing this deal solo.

Right.  They are specifically saying that you can't afford it based on their tables, and that lending the money to you is not worth the assumed risk.  Also keep in mind this isn't a personal decision by the bank or an attack on you, it's just the way they run their math.  Most lenders aren't looking at rental income on a duplex. 

All of that said, it sounds like you got pre-approved and then lost out in the merger, so I'd be looking for a new lender.  I think you're on the right track by talking to Chase.  Good luck!

- JM

To All: I was able to get the finances through a different bank. It turned out the original lender was doing some shady stuff. Their numbers were off. This filing of my FHA appraisal wasn't incorrect. I am just happy to have found an alternative route to close on this deal.

Great News!!!!

I managed to close on the property last week.

now the work begins...well it began last week and the family will move in by Friday.