Denied Loan just before closing due to not beleiving i'm moving

13 Replies | Boston, Massachusetts

So I was a week out before closing on 2 unit in South Portland and the underwriter denied my loan. First of all I feel like the bank I used should have never had me pay for an appraisal if the suspected my loan with be denied. The underwriter said that they don't believe I'm going to be moving into the new two unit.

Right now I have been living in a 2 unit for over three years that I bought Conventional. The new 2 unit is 1.5 miles down the road but has larger units along with a dining room, full back yard fenced in, deck and 3 bedroom unit. I'm 100 percent moving into this new two unit and showed the underwriter my lease agreements on my current house.

The new 2 unit i'm buying with 15% down Conventional. Is this normal to have the underwriter deny the loan 1 week before closing??

They said the only scenario is that I either buy it as investment property or refinance my current house as an investment property. So i'm headed in the route of refinancing my house now which was currently under a different bank mortgage at a much lower rate than i'm having to refinance too.

Any comments and suggestions??

@Jacob Dimick Sounds like maybe you have a sucky lender.  It looks like you’ve given sufficient evidence, even though this issue is common.  Maybe the Chris below can suggest how to escalate/overcome this.

@Chris Mason . It really makes no sense to me that having the OP refi his current house into an investment loan makes it any more truly likely he will move into the new property....you can certainly remain/live in a house with a non owner occupied loan.

Originally posted by @Wayne Brooks :

@Jacob Dimick Sounds like maybe you have a sucky lender.  It looks like you’ve given sufficient evidence, even though this issue is common.  Maybe the Chris below can suggest how to escalate/overcome this.

@Chris Mason. It really makes no sense to me that having the OP refi his current house into an investment loan makes it any more truly likely he will move into the new property....you can certainly remain/live in a house with a non owner occupied loan.

 This one is pretty straightforward -- find a new lender.

If you're working with an independent wholesale broker, should be pretty easy. They already have your paperwork, just needs to be submitted with a new lender. If you were my client (this would have been unlikely to come up given the evidence you cited, but if it somehow did....), I'd cover the new appraisal fee, since I share responsibility for this due to having been the one to pick the lender.

If you're working with a direct lender, then it's more  of a pain in the butt, and you will likely be on the hook for the new appraisal fee.

Not that big of a deal. Just like @Chris Mason said, just find a new lender.  Do not use big box lenders with lots of internal overlays like BOA, Wells Fargo, PNC etc. Use a mortgage broker with access to many different lenders.

I just had this happen, CD's issued and 3rd party QC risk department denied it.  In my case it was 250 miles away from primary and we where running it as 2nd home, and the QC risk department said it's not in a tourist area.  Complete load of horse crap, but have to change gears. All parties where super pissed, but we just quickly flipped it to a different lender and hoping to close next week fingers crossed.

@Jacob Dimick

Yes this sounds like the underwriter doesn't believe that you're actually moving in the new home. That said, if the house is very similar to the one you're currently living, underwriters have the discretion to deny the loan. Doesn't sound like your income is the issue, which is good.

If you don't want to lose the deal, maybe purchase it as an investment, and two months down the road go to a different bank and refinance it as a primary and you will have sufficient documents (utilities, electric bill) to show that you actually reside at your new address.

Hope this helps!

Same thing happened to my wife and I recently when we were trying to house hack a 4-plex fha. 2 different underwriters didn’t believe we would live there.

Some tips I got that weren’t successful for me, but maybe will work for you...

Write a letter explaining your full plan. How long you plan to live there, what you plan to do with the current property you live in. You can also throw your current  property on the mls to show it is for sale. Just price it high if you don’t really want to sell it.

Anyone planning on house hacking, it will be easier for you if it’s your first purchase. I assumed I could wait and save that one for a higher priced deal, but it backfired. I plan to try again one day with a really nice waterfront 4-plex in the $850k range while I don’t own a primary residence. Then let them tell me I won’t actually live there. I’m convinced it’s still possible.

Hi Jacob

its so nice how people can be helpful on this site.  Gives hope.   This might not be the right answer as I am a smaller investor but having to refi your current primary house into a higher intetest rate does not seem to be appealing if the total interest paid is going to be a higher overall expense long term too.  One option that I have done to purchase income property was to use a hard money lender short term to obtain the property and then I refinanced to convential but already now owned the property which made it easier.  Having equity in your current property and some down payment funds you had already mentioned may put you in a good position when you do the refi.  Yes the hard money will cost you in the beginning but its short term not a 20-30yr commitment.   Just a thought.  Im down in MA so not too far.   If you are part of any investment clubs up there ask around.  Some investor friendly mortgage brokers even have hard money from accross the country in their portfolio for the quicker process if needed.  Just a thought.  Do an amortization schedule to see how much more it will cost you if you refi your primary to a higher rate from the existing one. If its a lot then maybe pay the hard money. Average is 12%  but you can refi out within 4- 6 months.  Short term loss for longterm gain maybe....

Good Luck!

Steve

Awesome thanks everyone for the help. Right now I'm looking into another lender and not doing a refi on my current house. The big issue is that I'm crunched against time and got this house under a 10 plus multi offer situation. So I can really push closing date more then the two weeks I already have.

Thanks,
Jacob