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Reasons for mortgage denial

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Reasons for mortgage denial

So, I've played a lot of scenarios in my head but I feel like I turned in a pretty strong file. I was just curios what some people might have been previously denied for?

I also wanted to know, who denied you? Did you go and get approved elsewhere or have to wait?

My mortgage is currently in processing. Scheduled to close May 6th or sooner. EX 674/ EQ 674/ TU 653
Message 1 of 15
14 REPLIES 14
Regular Contributor

Re: Reasons for mortgage denial

i feel your pain me and wife are in the same boat right now, right down to closing on the same day, congrats and good luck..

 

tje waiting part is the hardest part, my mortgage broker asures us we have nothing to worry about he's ot in the habit of sending people to under writting to get them to fail, and as long as we've been 100% honest with him we're good to go...

 

remember your mortgage broker is here to help you, you just have to be honest with him 

Message 2 of 15
New Member

Re: Reasons for mortgage denial

I'm pretty cofident in my broker. He said he submits the least loans in his office but has the highest closing ratio because he really screens his pre approvals. My biggest fear is just going through all this then getting denied last minute. I'm going to worry myself crazy lol.

Glad I'm not in it alone. I've been creeping these forums for awhile. Are you guys doing fha, conventional, or usda? We're doing fha but putting 15% down on my credit only because my husband is self employed.

We got an approved/eligible in AUS so that was a relief.
Message 3 of 15
Moderator Emerita

Re: Reasons for mortgage denial

From what I have seen with mortgage denials is the following:

 

1) Big box bank LO doesn't calculate the DTI ratios at time of app and wastes everyones time by having the underwriter deny for ratios Smiley Mad In some cases, this can be fixed if you go to another lender without the strict overlays that big box banks have now. What is irritating to me as a Realtor is that this is a calculation that can be done in 15 minutes and the LO pushes through underwriting and takes 30 days before they deny.  

 

2) Income is different from the mortgage application. For example, borrower is a W-2 type employee and they take tax deductions as if self-employed so the tax returns reflect a much lower income and a higher DTI. If it is too high, than the borrower doesn't qualify for the requested loan.

 

3) Borrower has change of circumstance during the loan process: 

  • job loss
  • income reduction
  • something else (see below)

4) Borrower runs out and buys things during the mortgage loan process (furniture for example) killing their DTI and running up debt.  I saw this once where the buyer wanted to torpedo a purchase and went out and purchased a jetski on payments knowing that his DTI was already tight.

 

5) Insurance cost comes in too high (not by borrowers doing, but because of the property). This is a specific issue in my area of S Florida. It can kill a mortgage. Most of the time a LO in my area uses an average cost of $2400 to $3000 per year for homeowners insurance. If the property insurance comes in at a higher amount it will tank the sale on that particular property if the buyer doesn't have the room in his total debt ratio (or even in the housing ratio).  

 

6) Fraud. I haven't seen this personally but have heard horror stories from a couple of LO's. 

Message 4 of 15
Frequent Contributor

Re: Reasons for mortgage denial

Congratulations to you. I'm also in processing and a nervous wreck. Hopefully I go to underwriting this coming week. Closing is 4/26.
Message 5 of 15
Contributor

Re: Reasons for mortgage denial

I'm a nervous wreck as well. I don't even know if I feel comfortable commenting on threads here for fear of jinxing myself. Lol! I am a worrier and probably could use the support of being around others going thru the same thing. Our closing is 4/29. I think we're going to underwriting this week. btw, we are doing FHA with just me on the loan. My husband is self employed.
Message 6 of 15
Established Member

Re: Reasons for mortgage denial

Nerves are normal. I'm going FHA, supposed to close on 3/30. I went to UW twice in a period of a month! Everyday they needed something signed or a copy of something certified! I swear it would've been easier to just turn my life over to them! I JUST received my clear to close last night @8pm. Try not to fret. This is a hard and long process but the reward is worth it! Good luck!
Message 7 of 15
Regular Contributor

Re: Reasons for mortgage denial


@Klmurray88 wrote:
I'm pretty cofident in my broker. He said he submits the least loans in his office but has the highest closing ratio because he really screens his pre approvals. My biggest fear is just going through all this then getting denied last minute. I'm going to worry myself crazy lol.

Glad I'm not in it alone. I've been creeping these forums for awhile. Are you guys doing fha, conventional, or usda? We're doing fha but putting 15% down on my credit only because my husband is self employed.

We got an approved/eligible in AUS so that was a relief.

we are doing FHA, my wife started back in the medical field last July, in Secember we decided we wanted to buy a house, so we've saved literally every dime we could ( super tight budget ) and it put us with about $30k in the bank since September, we got our house for $317k we are the 3rd person trying to buy this house the other 2 couldn't get a mortgage because of their DTI, we make $125k a yr and our only debit is $1500 in CC and wife has a 7k student loan, we have no car loans, or any other debit i have worked my butt off to clear up both our credits, our broker says we are a dream mortgage because of our income and our 1% DTI...

 

we just went into under writing on the 22nd,  had our home inspection on the 23rd, have the house appraisal this week, planing on what we want to change in the house before we move in. ( currently in a rent lease until Aug 1st ) plan on painting and stuff while we have the time and house is empty..

 

deep breaths and take the blow as they come if they come, things are happeneing so fast with us, 

Message 8 of 15
Established Contributor

Re: Reasons for mortgage denial


@StartingOver10 wrote:

From what I have seen with mortgage denials is the following:

 

1) Big box bank LO doesn't calculate the DTI ratios at time of app and wastes everyones time by having the underwriter deny for ratios Smiley Mad In some cases, this can be fixed if you go to another lender without the strict overlays that big box banks have now. What is irritating to me as a Realtor is that this is a calculation that can be done in 15 minutes and the LO pushes through underwriting and takes 30 days before they deny.  

 

2) Income is different from the mortgage application. For example, borrower is a W-2 type employee and they take tax deductions as if self-employed so the tax returns reflect a much lower income and a higher DTI. If it is too high, than the borrower doesn't qualify for the requested loan.

 

3) Borrower has change of circumstance during the loan process: 

  • job loss
  • income reduction
  • something else (see below)

4) Borrower runs out and buys things during the mortgage loan process (furniture for example) killing their DTI and running up debt.  I saw this once where the buyer wanted to torpedo a purchase and went out and purchased a jetski on payments knowing that his DTI was already tight.

 

5) Insurance cost comes in too high (not by borrowers doing, but because of the property). This is a specific issue in my area of S Florida. It can kill a mortgage. Most of the time a LO in my area uses an average cost of $2400 to $3000 per year for homeowners insurance. If the property insurance comes in at a higher amount it will tank the sale on that particular property if the buyer doesn't have the room in his total debt ratio (or even in the housing ratio).  

 

6) Fraud. I haven't seen this personally but have heard horror stories from a couple of LO's. 


+1 I'm a Realtor also and those are the biggest killers.....#1 is people look for the most deductions on their taxes and don't realize when it comes to a mortage it goes by the AGI but like you said most LO will write the pre-approval based off Gross Income and that number isn't realistic for what you pocket

 

...And insurance.....This right also is a big killer....it almost cost us our loan in underwriting...quoted $1380/annually which was $200 over the estimate used...The LO wanted us to use his "preferred insurance" company until I checked the cover, had no water back coverage or sump pump coverage...I'm not stupid...the moment I seen that I knew it was just a push to get us through underwriting and the moment we closed we would have got that new bill much higher and it would have caused our annual escrow amount to jump further increasing the mortgage payments....I paid out of pocket with the insurance company I've had for years.

Fico 8 starting scores 09/27/15 EQ: 646 TU: 622 EX: 668 5 collections 1 PR reporting across the board
Scores 06/30/16 EQ: 685 TU: 699 EX: 695 1 collection now reporting on EQ and EX and 1 PR on EQ
Current scores 11/4/2016 EQ 688 TU: 705 EX: 736 No collections no PR/Judgements Finally Clean
Message 9 of 15
Established Contributor

Re: Reasons for mortgage denial


@caspersmom wrote:
@Nerves are normal. I'm going FHA, supposed to close on 3/30. I went to UW twice in a period of a month! Everyday they needed something signed or a copy of something certified! I swear it would've been easier to just turn my life over to them! I JUST received my clear to close last night @8pm. Try not to fret. This is a hard and long process but the reward is worth it! Good luck!

Congrats...Clear to close is good...You're 99% of the way there Smiley Happy I think mine went a little smoother since I was already all over them...I faxed my LO so much stuff and secure emailed it...When he was asking for stuff I was like check the email dated xxxx you already have it.

Fico 8 starting scores 09/27/15 EQ: 646 TU: 622 EX: 668 5 collections 1 PR reporting across the board
Scores 06/30/16 EQ: 685 TU: 699 EX: 695 1 collection now reporting on EQ and EX and 1 PR on EQ
Current scores 11/4/2016 EQ 688 TU: 705 EX: 736 No collections no PR/Judgements Finally Clean
Message 10 of 15
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