Being denied because I'm a first time buyer...

[Anonymous]

Found out today that my mortgage application was denied by UW because we are first time home buyers, and because the dollar amount change from our rent to our mortgage price would be too great.

Some background: Live in CA, have a high salary, however we are a single income family. Company I work for was recently acquired which gave us a healthy equity and bonus pay out which we were using to buy the house and put towards retirement/investing. Previously, we had never bought because we hadn't saved up for a downpayment.

We were going for a jumbo loan with 20% down, however with our score under 700 we had to go with a loan program that required cash reserves worth 36 months of payments. No problem, we had that. Income level was fine, DTI was fine. So issued pre-approval, made offer, everything good.

Application went to UW, came back today with that as the reason for being denied. I am just beside myself, it doesn't compute. So trying to be responsible and living below means while we repaired credit, paid things off, save money, and waiting to buy a home, is hurting us. We got the money from the acqusition and it was "yes! finally can buy a house and awesome things for retirement!"

We will likely need to back out. The only alternative is to do a conforming loan, which means putting nearly everything we have into the house, leaving nothing to put towards retirement. Or, we let this house go (which we absolutely loved) until my score gets over 700 and we get more options for loan programs.

[Anonymous]

Guess our mortgage situation doesn't matter, since found out the sellers are having complications on their end and have chosen to back out of the deal and take the house off of the market. I suppose that means should have time to get our score over 700.

[ezdriver]

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@Anonymous wrote:

Guess our mortgage situation doesn't matter, since found out the sellers are having complications on their end and have chosen to back out of the deal and take the house off of the market. I suppose that means should have time to get our score over 700.

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All the best building up your scores and credit profile for you next shot at home ownership.

The situation that you faced with that underwriter is nothing personal to you or by the underwriter. Most mortgagors sell their mortgages after closing. The buyers of those mortgages set rules/guidlines that the mortgage must meet in order for them to buy it. One of those rules is a test for "high cost mortgage" which involves the delta betwwen current housing costs and future housing costs. My recommendation is to find a banker that can also broker the loan if necessary. You chances will be much better.

[StartingOver10]

Yes, that payment test is run on all applicants.  The exception might be if you went with a portfolio lender. They can ignore the payment stress test if they choose to do so.

[sports1965]

So if you go from an $600 RENT to an $1000 MORTGAGE payment it's going to create  problems?

[ezdriver]

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@sports1965 wrote:

So if you go from an $600 RENT to an $1000 MORTGAGE payment it's going to create  problems?

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Yes ... as stated in previous post, it has to do with the lender's ability to sell you mortgage. If they can't sell it, they won't approve it.

[StartingOver10]

There is a way around this issue: have compensating factors.

An example might be large savings or make a payment equal to the new housing payment on time every month into your savings account for over a year. This shows ability to pay the payment timely plus it builds up your savings. Speak to your LO to see what compensating factors you might have in your file.

[Jess21]

 this is interesting because I have seen people go from no rent to a $800 mortgage with no problem.  Right now we own a mobile home so we only pay lot, and it is a very low payment and our loan officer has not said anything about that being a problem and we do not even have savings .