Preapproved twice and then denied- UPDATE!

[Anonymous]

Last week we got the clear from two different lenders to make an offer on our dream home. They had all the paperwork they needed and gave us thumbs up to move forward. 
 
Now both say no. So devastating. We have another property and that seems to be the hold up. We have other factors too  like an employment gap and score right under 680. They had all these factors before and still approved us. 
 
We would have never made an offer if they were more thorough and told us no from the beginning. Don’t know where to go from here. 
 
Other house is for sale but no idea when it’ll sell and pretty certain not within the next 2 months. We can boost the score by paying down a credit card but that’s not guaranteed. That would also bring our ratios down since it’s right at 43-44.  And the employment gap just disqualifies us from FHA. Just seems so much against us. 
 
Deciding whether her to let go of our dream home that we got for an incredible price or keep fighting for it. 

[ShanetheMortgageMan]

How long ago and what periods of time was the job gap?

How long have you been back at work?

If the job gap was over 6 months, then FHA requires you to be back at work for 6 months + document a 2-year work history prior to the job gap.  Conventional isn't as rigid on those requirements, it's more or less up to underwriter discretion.  If have been working a majority of the time recently, other than the job gap, and your new job is on the professional level, then underwriters could be OK with as little as 30 days on the job.

Owning another home that you are in the process of selling usually isn't a problem unless your income doesn't qualify for both the new + existing mortgage, and a DTI of 43-44% rarely has trouble qualifying (for FHA or conventional).  Why are they saying owning your current home is the holdup?

Finding out the specific reasons these two lenders didn't approve your loan will help other lenders determine chances of approval more quickly.

[silvius]

I hate to be that guy but can you really afford the home?  After managing properties for a number of years, the one term that usually seemed to come up that spelled trouble for buyers was 'dream home'.   The inside joke was always that the buyers could afford it.....'in their dreams'.  

I have a dream home as well, but I can't afford it, so I don't try to overextend myself to get it.   All I am saying is perhaps review if your monthly income truly supports the payments on this house.  Go for a home that you really can afford, not the one you 'qualify for'.   Banks will almost always finance more than what you can truly afford; it is more profitable for the seller, the real estate agent, and the mortgage banker to sell you a 'dream home' vs a more realistic one.

I just wouldn't want you to get in over your head.  Buying too much house is a very common mistake in the credit world, and it can be almost impossible to overcome depending on other factors in your future.

[Anonymous]

Job gap is from May 2017- March 2018. 

Starting new job next week in same exact field and position. 

Job gap, 670s score, second home, and no extra assets. Its seems all all those factors combined make it too risky. 

All this was disclosed in detail with paperwork before preapproval it just seems their automatic underwriting systems won’t allow it now. Shouldn’t they have done this before telling is to go ahead and make the offer?!

[Anonymous]

The first thing I do when getting a pre-approval is looking for an experience and reliable mortgage broker. Informing myself of the downfalls that can happen is also a plus. I bought properties multiple times both FHA and conventional and I'm on top of every information on my credit report. If I were you, I'd wait to have a more stable credit/income and then start looking again. The last thing you want is to have all of those expectations and then be declined.

[Anonymous]

We are trying to decide if it’s worth the stress to keep going or give up and try again later. 

Our dillema is is we got a super low offer accepted on an incredible house that we absolutely fell in love with. A forever home for us that nothing in the market past or present can compare. We don’t want to lose the opportunity to buy this home.

We can definitely afford both house payments as they aren’t counting husbands overtime and bonuses which will put him over 100k / year. Also we plan to sell/ rent the other home within this year so we won’t be making two payments for long. 

[ShanetheMortgageMan]

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@Anonymous wrote:

Job gap is from May 2017- March 2018. 

Starting new job next week in same exact field and position. 

Job gap, 670s score, second home, and no extra assets. Its seems all all those factors combined make it too risky. 

All this was disclosed in detail with paperwork before preapproval it just seems their automatic underwriting systems won’t allow it now. Shouldn’t they have done this before telling is to go ahead and make the offer?!

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So there was a job gap from 5/2017-3/2018, you began a new job in March, and then are starting a new job in mid-May?  Was the job in March just a stepping stone so you could start making money again?  The history wouldn't work for FHA at this point, as you'd need to be working from 3/2018 to 8/2018 to meet the 6 months back on the job requirement.  Conventional would have a better chance of working, but you'd need to get an approval through automated underwriting. 

Your eventual loan officer will need to fiddle around with automated underwriting to see exactly where the issue is - lack of reserves can be solved by the loan officer adding reserves to your file to see if that is the difference or not (if it is, are you able to get gift funds for the down payment and use your own funds as reserves?), DTI issues can be solved by reducing the DTI to see if it's the difference (if it is, then is there debt you can pay off or are you able to wait until your current home sells?), employment gap issues can be narrowed down by adding time to your current job to see if that makes a difference.  Your loan officer has the answers on what needs to happen for you to get an automated underwiting approval, they just need to mess around with it enough to find those answers.

[Anonymous]

Yes that job in March was a stepping stone to getting the job now. Can we use that temp job for the 6 months needed? He starts his new job next week. So that would put August at 6 months.

It’s totally possible that the seller is willing to push closing.

Can we qualify with FHA now to close in August when he hits 6 months total working?

[ShanetheMortgageMan]

Yes, the job from 3/2018-5/2018 can be included as part of the 6 months back on the job requirement that FHA has.  And yes, it's possible to qualify now to close in August at the 6-month mark.

[Anonymous]

I passed this information to the lenders. Hopefully they can still work with us.

lender #2 did say paying down a credit card would pull our credit up to 733 and lower the ratio a bit which would possibly help get through automated underwriting for conventional but not guaranteed. 

We have sometime to keep trying. I contacted a different lender and I old them the issues we had with the other lenders. She thinks it sounds doable. 

I just got a call from the seller. I didn’t tell her anything. Should I?

shes so excited about us buying the house 😔