What Happened to My Loan Approval

By
Real Estate Technology with Imagine WOW! Digital Marketing Agency

what happened to my pre approval

Murphy's Law says "Anything that can go wrong will go wrong."  Unfortunately, that adage holds true in the mortgage approval process.   Any number of things can take your pre-approved client from homebuyer to sideline sitter.  

While the list of issues that can arise between initial pre-approval and closing is long and varied dependent on the client's situation, one thing is always consistent.  Problems, last minute surprises and cancelled closings are everyone's worst nightmare.

Here are a few of the hiccups I've encountered recently and while some may sound funny, there's never anyone chuckling when the loan is denied. 

What Can Go Wrong After Pre-Approval?  A lot! 

  • Your landlord refuses to verify how much you pay in rent and how long you've been renting.
  • Your employer declines to verify that you work for them and will not supply us with written or verbal proof of your employment.
  • You thought the paperwork I requested was something everyone but you needed to provide and that it could be returned to me when you felt like getting around to it.
  • You failed to mention that your income is made up of a very small hourly wage and a very large part comes from cash tips and cannot be verified.
  • There are large tax deductions for non-reimbursed employee business expenses and I now have to subtract those from your income.
  • You changed jobs 2 weeks ago and forgot to tell me until we tried to verify your employment and were told you no longer work there.
  • Your new home is located in a flood zone and you don't want to pay for the hefty flood insurance policy.
  • Your down payment gift for $10,000 is accompanied by a $6,000 gift letter.
  • The house you're purchasing appraised below the purchase price and the seller is not willing to budge.
  • You shredded the bank statements and pay stubs I need and do not have internet access, email or apparently a phone since you're unable to now supply them to me.
  • You forgot to tell me that your current rental lease does not end until 3 months after closing and you cannot afford both house payments.
  • You supply your tax returns only for me to find that you own 3 companies, not the 2 you initially disclosed.  You also forgot to mention that all of them have taken a loss in the last 2 years.  Loss = no income = no longer qualified.
  • I told you to lock, but you thought rates would go down.  They steadily moved up and now you don't like the payment. 

I know we all have our stories.  What one deal breaker have you run into recently?

 

What Happened to My Loan Approval was written by Rebekah Radice.

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Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Sinead McAllister 06/14/2011 04:10 PM
  2. John Saari 06/14/2011 04:42 PM
  3. Terri Poehler 06/14/2011 04:51 PM
  4. Aaron Silverman 06/15/2011 11:25 PM
  5. Camille Tilton 07/13/2011 12:15 PM
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what happened to my loan approval
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Ambassador
717,578
Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Murphy is ever present and always lurking in the wings.

Jun 15, 2011 08:41 AM #20
Rainmaker
360,560
Rodney Mason
On Q Financial - Atlanta, GA
FHA 203(k) & HomeStyle Renovation-AL,GA,TN

Each and every one of those happens on a regular basis.  In the last month, I've had two borrowers to lose their jobs.  Guess who they forgot to tell?   ME  One said that he thought it didn't matter since we had already verified his employment.

Jun 15, 2011 08:53 AM #21
Ambassador
2,046,386
Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Palm Harbor, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

I really love the people who get the loan preapproval and then go out and start purchasing furniture for their new home...............and wonder what happened to their debt to income ratio! Go figure!

Jun 15, 2011 09:14 AM #22
Rainmaker
204,012
Adam R. Cohn
STANDARD MORTGAGE CO. - Boca Raton, FL
We actually get mortgages closed FAST!

Good Blog!  Thats why its so important for the client to be upfront and honest about everything, also its even more important to have a good loan officer that asks the right questions from the start!

Have a great day!

Adam

Jun 15, 2011 09:23 AM #23
Ambassador
541,296
Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

REbekah: Thanks for the list. It can be a horror show at times. The biggest up here is value. I had a super jumbo go down about a year ago because of a low and bad appraisal. The ironic thing is we refinanced my client this year and value was fine. My client said the original appraiser was odd, old and he had a bad feeling about the whole thing. It's a great story to laugh about now. It just wasn't very funny at the time. Thanks again for the post. I wish you well!

Jun 15, 2011 10:04 AM #24
Rainer
157,994
Anthony Daniels
Coldwell Banker - San Francisco, CA
SF Bay Area REO Specialist

The best way to mitigate that problem, is to work with a very competent loan officer.  One that has some pull in the underwriting department.

Jun 15, 2011 10:29 AM #25
Rainer
116,774
Nick Krehnke
Zero Down Home Mortgage Loans FHA VA Jumbo Credit Repair Wa - Kirkland, WA
1-800-88-ZERO-DOWN.com "Lets Co-Market together an

You forgot one:

"Hey Mr Business Man, I need to know how much income you ACTUALLY make, not how much you tell your

friends you make.....so yeah...what is the REAL number on line 31 of that 1040?" :)

Jun 15, 2011 10:49 AM #26
Rainmaker
284,211
Rebekah Radice
Imagine WOW! Digital Marketing Agency - Burbank, CA
Social Media Marketing, Coaching & Training

Praful - Greeat point!  You definitely need to listen and pay attention to all of the signs.

Rich - I had a very similiar situation and how devestating t oeveryone when it happens at the last minute.  Writing a half dozen offers doesn't make it any easier either!

Adam - Great question, right??!  It was a small business that they didn't think was important.  Unfortunately it's always important when there's a substantial loss.

Ouch, ouch and ouch Ed!  #1 is something I run into almost daily.  And you're right - there is a never ending list!

Leilani - They are true but, I certainly had fun with them.  It's better to interject a little humor than to cry which is what I wanted to do at the time!

It is amazing isn't it Melissa?  The onus is on us for sure to help them understand the consequences.

Jun 15, 2011 10:54 AM #27
Rainer
50,837
Russ Msrtin
Perl Mortgage - Chicago, IL
Residential Mortgage Advisor

The sad thing is when a deal falls apart because of anyone of those issues plus all the others, all that gets communicated is "XYZ bank and/or Joe LO sucks!"  We try our best to anticipate, predict, and prevent all those things from happening, but it is just next to impossible to do so.

I can just hear the Realtors bitching now about why the deal didn't close and no one ever actually mentions the real reason...

Jun 15, 2011 10:57 AM #28
Rainer
208,941
Jack O'Neal
Solutions Real Estate - Phoenix, AZ
High Touch High Tech

Great post, The reference about I do not have internet access. I do no take clients that do not have email, if you are young and do not have it, your credit is bad, and you do not have a free account, wast of timme

Jun 15, 2011 11:38 AM #29
Ambassador
1,142,476
Bryan Robertson
Catarra Real Estate, Inc - Los Altos, CA
Broker, Author, Speaker

Some of my favorites include:

  • Opening up one or more lines of credit to buy furniture and decorations for the new home
  • Shifting significant assets including closing bank accounts and opening new ones
  • Not disclosing pending litigation
  • Having a large bank balance with a "hidden" agreement to repay it to the person who loaned the money

 

Jun 15, 2011 12:17 PM #30
Rainer
122,693
Cory Barbee
San Diego, CA
Broker (760) 563-4022

Great post..it is critical that we educate our buyers as lenders now are having a tougher time making sure the buyers are qualified through the entire escrow process...a lot of things can happen in 30 days...

Jun 15, 2011 12:20 PM #31
Rainmaker
1,109,961
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Rebekah, I had one a few years - "Your loan has not been denied, we just aren't giving you the money." Go figure.

Jun 15, 2011 02:38 PM #32
Rainer
178,156
Rosalie Evans
Meritus Group Real Estate - Sioux Falls, SD
The Evans Group, Sioux Falls, SD Homes For Sale

I have had a couple of these in my time. One bought new furniture for the new house and was convinced that it couldn't show up on her credit report that fast before closing. It did... underwriters find everything! The other was laid off...two weeks before closing. This was hearbreaking to everyone...first time homeowners very excited....and  me well I  already had the money already spent. But what do you do, there are bumps in the road of life. All you can really do is readjust and keep on going.

Jun 15, 2011 05:01 PM #33
Rainer
227,527
Ray Waisler
Evolve Bank & Trust-Atlanta, GA Lending Nationwide - Atlanta, GA
NMLS #6621 - Specializing in Jumbo FHA & VA

Rebekah, been there, done that soooooooo many times. I have one right now with a self employed borrower that filed his tax returns on 4/18 and the IRS cashed his check but still has not recorded the returns so we can't get the transcripts to verify the returns. You gotta love it.  

Jun 15, 2011 05:04 PM #34
Rainmaker
602,501
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

My most recent two favorites are:

1. Buyer bought a new truck ($700 per month payment) and $3000 for new furniture and he hasn't closed, nor will he.

2.  Buyer had over $15000 in unreimbursed business expenses on their tax returns and took the first time home buyer credit the year before they bought the house.

 

Jun 15, 2011 07:09 PM #35
Ambassador
1,383,045
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

We just had a buyer laid off, a week before her settlement. That was a biggie.

Jun 15, 2011 10:42 PM #36
Rainmaker
148,624
Aaron Silverman
SuccessfulRental.com, Bluewater Property Management, LLC and Lowcountry Turnkey Properties, LLC - Charleston, SC
Improving Real Estate Experience through Education

You can also add "applying for other credit before closing" to the list.  I have heard numerous stories where a new credit purchase before closing raised a flag to the bank and caused a problem with the loan.

Aaron

Jun 15, 2011 11:25 PM #37
Rainer
15,824
GinaMarie Latham-Howard
Carrington Real Estate - Corona, CA
Your IE Specialist

So, so, true and like the saying goes the truth hurts.....These little deal breakers can be very painful.

Jun 16, 2011 07:26 AM #38
Rainmaker
600,230
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Rebekah - Here in Los Angeles & Ventura counties, sub-par property conditions and declining values have been the biggest deal killers for me and my borrowers for the past few years now.  This year has actually been the worst.  Almost all of my cancelled transaction this year have been the result of sub-par property conditions that the sellers (usually bank sellers) refuse to correct and/or repair.

Other than that, I have had borrowers lose jobs during escrow and the ones who ran up their credit during escrow too.  I have even had a couple of borrowers and/or co-borrowers die during escrow (one of those buyers had to show proof of death in order to get their EMD back).  I once had a couple decide to get divorced during escrow. 

Then there have been a couple in the past few years that cancelled when they did their final walk-thru and discovered the sellers stripped the home.  Then there was the father and son who got pissed off at each other and the father pulled out.  Oh and lest I forget, the few that cancelled when the short sale lenders suddenly insisted that the buyers come in with more funds - OFF THE HUD1!!!  SERIOUSLY!!!

Welcome to my strange and wacky world.

Jul 13, 2011 12:32 PM #39
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Rebekah Radice

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