Loan fell thru week before closing

[StartingOver10]

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@mccallb wrote:

SO: Out of curiousity, what happens to the good faith money if something like this falls apart?

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Normally you get it back. Take a look at your contract, there should be provision for return of your EMD if your loan isn't approved.  However, some builders contracts don't have that provision so read your contract carefully.

[Jazzzy]

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@mccallb wrote:

15K worth of debt mattered when you're buying a half a million dollar house?

What gives?  Is your dti really high?  I'm confused as to how it got so far and then at the last second  they changed their mind.

I actually owe the IRS around 25K and am trying to buy a 288K house right now. Going tomorrow to sign paper work for first underwriting in fact. (Building)

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No, we have hardly any debt. DTI wasn't the issue. What they finally looked at was my income. My husband and I are both self-employed. My income now is $120,000+, and when they took a look at it, they decided to only count about 30-40% of my income because I recently switched from part of my income being W-2 income to being totally self-employed. I am a family nurse practitioner, and with the shortages, temp work is paying much higher...so, my income is much higher now, but they decided to be "conservative."

Banks don't like self-employed individuals. I know the reality, however, is that I am much safer with my self-employment income coming from several different facilities that it ever was coming from just one facility as an employee. I'd have to screw up a bunch of different contracts to lose my income now...yet a W-2 employee only has to screw up one. But, that is the reality of mortgages. They don't like self-employment. And then...there are two of us. But my husband has been a real estate appraiser for 30 years, so they decided his income was OK.

Frustrating part is that the bank has known about my income, where it comes from etc. for weeks and weeks. They have last year's tax return to support it. They just didn't really look at it until now. All of our stuff apparently sat on the underwriters desk until today.

My son works for a national homebuilder (VP and Treasurer), and he says they have come to the realization that many "preapproval letters" aren't worth the paper they're printed on anymore. They even had to lower their estimated sales a while back based on failed preapproval sales that they had throught they'd made. Many banks/brokers are giving the letters to keep the business "in case" the mortgage will fly. We're lucky we could pull ours out of the fire.

[Max2014]

@mccallb, I'm the original poster of the thread. I'm confused as to how the deal got so far and fell apart as well. DH was just told that the u/w had reservations and didn't feel comfortable. Maybe it is the fact that it was self employed income. Although the business is stable and has been around almost 10 years.

I'm most upset because we spent time preparing to apply by paying off DH's car loan, paying down/off his credit cards, etc. his DTI is low. I'm baffled as to what to do. I now worry that this other lender won't want to touch his application because the first lender declined. I don't know if that tarnishes him in some way.

I guess we'll see.

I hope I haven't scared anyone else off by posting what happened to us. It obviously doesn't happen often, but I just needed to vent.

[coldmornings]

I'm still in this myself. Pre-approved in February, had to switch lenders multiple times. We are on our 10th mortgage broker now, in Underwriting for the 4 time. We've been in U/W for 3 days as of today.

Mostly, I am just going through the motions because I've been through this so many times. I am hoping that our credit union (who we are in U/W now) will make this happen, but I also have to appear to try as hard as I can so that I can get my EMD back. Original close was scheduled for May, then June 2nd, now June 30th.

Sometimes it just happens.

[Max2014]

Coldmornings, I'm really sorry to hear you're going through something similar. It's a terrible feeling. May I ask what has been the reason for your denial?

We are in underwriting with the new lender right now. I had hoped to hear something today, but it's not looking like that'll happen. Maybe Monday. If this one can't make it happen for us then I think we will just hang it up and try again once we've addressed the tax debt some more. I admire your resolve.

[itgirl74]

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@Max2014 wrote:

I hope I haven't scared anyone else off by posting what happened to us. It obviously doesn't happen often, but I just needed to vent.

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I, for one, am happy you posted this. I am also in an IRS installment agreement with no tax lien (I might have have gotten one, but I hired a tax lawyer to handle my case), and while I'm probably 2 years away from being ready to apply for a mortgage, I'm glad to know so far in advance that this could pose a problem. It makes me more motivated to pay down this agreement as quickly as possible.

[coldmornings]

If you look in my posting history, it's all there but in a nut shell:

Moving jobs across the country and back within the last year to an employer that paid partially under the table + converting my house to a rental = too much headache for most loan officers to deal with.

Basically, each loan officer would overcome one or two issues relating to that and send it to underwriting where a new issue would come up and they didn't want to deal with it. Every time that happened, I would take the entire library of documentation plus the latest issue and resolution to a new loan officer and they would pick up from there.

If any one of them would have just told me the issue and what I needed to do to resolve it, I could have just stayed with the very first guy.

[ezdriver]

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@Jazzzy wrote:

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@mccallb wrote:

15K worth of debt mattered when you're buying a half a million dollar house?

What gives?  Is your dti really high?  I'm confused as to how it got so far and then at the last second  they changed their mind.

I actually owe the IRS around 25K and am trying to buy a 288K house right now. Going tomorrow to sign paper work for first underwriting in fact. (Building)

---

No, we have hardly any debt. DTI wasn't the issue. What they finally looked at was my income. My husband and I are both self-employed. My income now is $120,000+, and when they took a look at it, they decided to only count about 30-40% of my income because I recently switched from part of my income being W-2 income to being totally self-employed. I am a family nurse practitioner, and with the shortages, temp work is paying much higher...so, my income is much higher now, but they decided to be "conservative."

Banks don't like self-employed individuals. I know the reality, however, is that I am much safer with my self-employment income coming from several different facilities that it ever was coming from just one facility as an employee. I'd have to screw up a bunch of different contracts to lose my income now...yet a W-2 employee only has to screw up one. But, that is the reality of mortgages. They don't like self-employment. And then...there are two of us. But my husband has been a real estate appraiser for 30 years, so they decided his income was OK.

Frustrating part is that the bank has known about my income, where it comes from etc. for weeks and weeks. They have last year's tax return to support it. They just didn't really look at it until now. All of our stuff apparently sat on the underwriters desk until today.

My son works for a national homebuilder (VP and Treasurer), and he says they have come to the realization that many "preapproval letters" aren't worth the paper they're printed on anymore. They even had to lower their estimated sales a while back based on failed preapproval sales that they had throught they'd made. Many banks/brokers are giving the letters to keep the business "in case" the mortgage will fly. We're lucky we could pull ours out of the fire.

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I know that it may seem that way to you but there is a bigger issue involving your income as a nurse practioner than you and others are missing. Unless your contracts state guaranteed hours AND hourly rate, your income is unreliable from an underwriter's perspective. PRN employment in the healthcare field is very problematice for underwriters. YOU control how many hours you work and can cut that back at any time so your income is not reliably predictable in a traditional sense.

What your son says about preapprovals is correct. I am employed by a national home builder too. We insist on buyers being preapproved by our preferred lender in order to sign a purchase agreement. We also offer closing costs assistance if our preferred lender does the mortgage. It is the only way for us to manage the risk associated with building a house based on a tiny emd.

[Jazzzy]

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@ezdriver wrote:

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@Jazzzy wrote:

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@mccallb wrote:

15K worth of debt mattered when you're buying a half a million dollar house?

What gives?  Is your dti really high?  I'm confused as to how it got so far and then at the last second  they changed their mind.

I actually owe the IRS around 25K and am trying to buy a 288K house right now. Going tomorrow to sign paper work for first underwriting in fact. (Building)

---

No, we have hardly any debt. DTI wasn't the issue. What they finally looked at was my income. My husband and I are both self-employed. My income now is $120,000+, and when they took a look at it, they decided to only count about 30-40% of my income because I recently switched from part of my income being W-2 income to being totally self-employed. I am a family nurse practitioner, and with the shortages, temp work is paying much higher...so, my income is much higher now, but they decided to be "conservative."

Banks don't like self-employed individuals. I know the reality, however, is that I am much safer with my self-employment income coming from several different facilities that it ever was coming from just one facility as an employee. I'd have to screw up a bunch of different contracts to lose my income now...yet a W-2 employee only has to screw up one. But, that is the reality of mortgages. They don't like self-employment. And then...there are two of us. But my husband has been a real estate appraiser for 30 years, so they decided his income was OK.

Frustrating part is that the bank has known about my income, where it comes from etc. for weeks and weeks. They have last year's tax return to support it. They just didn't really look at it until now. All of our stuff apparently sat on the underwriters desk until today.

My son works for a national homebuilder (VP and Treasurer), and he says they have come to the realization that many "preapproval letters" aren't worth the paper they're printed on anymore. They even had to lower their estimated sales a while back based on failed preapproval sales that they had throught they'd made. Many banks/brokers are giving the letters to keep the business "in case" the mortgage will fly. We're lucky we could pull ours out of the fire.

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I know that it may seem that way to you but there is a bigger issue involving your income as a nurse practioner than you and others are missing. Unless your contracts state guaranteed hours AND hourly rate, your income is unreliable from an underwriter's perspective. PRN employment in the healthcare field is very problematice for underwriters. YOU control how many hours you work and can cut that back at any time so your income is not reliably predictable in a traditional sense.

What your son says about preapprovals is correct. I am employed by a national home builder too. We insist on buyers being preapproved by our preferred lender in order to sign a purchase agreement. We also offer closing costs assistance if our preferred lender does the mortgage. It is the only way for us to manage the risk associated with building a house based on a tiny emd.

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You are absolutely right about my contracts. I get to pick and choose when and where I want to work. That is very profitable for a hard worker.

My gripe is that the bank had all this information weeks ago. Nothing changed with my situation. It would have been nice to have the 6 weeks to come up with the additional $125k instead of 24 hrs. By the time we were asked for the additional cash the seller has moved out for the supposed Jun 1 closing. Sloppy banking doesn't just affect the buyer. This could have been devastating for this seller as well.

Sloppy, sloppy, sloppy.

[StartingOver10]

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@Jazzzy wrote:

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You are absolutely right about my contracts. I get to pick and choose when and where I want to work. That is very profitable for a hard worker.

My gripe is that the bank had all this information weeks ago. Nothing changed with my situation. It would have been nice to have the 6 weeks to come up with the additional $125k instead of 24 hrs. By the time we were asked for the additional cash the seller has moved out for the supposed Jun 1 closing. Sloppy banking doesn't just affect the buyer. This could have been devastating for this seller as well.

Sloppy, sloppy, sloppy.

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^^^  I agree here. There is no excuse for the bank rep (LO) to wait to the last possible moment to advise you of the issue. I see this when a LO is either inexperienced or incompetent.  Many of the big box lenders have moved to inexperienced LO's because it is "cost effective" for them (read 'cheaper') to have a LO that isn't trained well.

It is a shame if the smaller banks choose to use this type of processing - it does create issues for all the parties in the closing when a LO fails to communicate well in advance what the actual issue is that is preventing a CTC. How do you address an issue if your head is in the sand?