If you are considering buying or selling a home without the aid of professionals, please, please please read this entire blog. The price of getting real estate experience could be more than you bargain for.
On May 7th, I wrote an offer on a home for sale in Joliet, IL. The home had been purchased in March as part of a block of 11 foreclosed homes by an investment group. May 17th is the date of acceptance on the contract and closing was set for June 24. The mortgage broker had a few issues to work through between the buyers debt to income ratio, credit score and the anti-flipping rules that many banks adhere to. Needless to say, the buyer worked hard to get his credit score up over 640, sold a car (with a +$700/mo payment) to lower debt ratio and the mortgage broker found a lender that would do the loan. FHA financing is being used.
The conditional approval was given June 23rd. There were 3 to 4 minor conditions and the loan was expected to have final approval within a few days. June 29th we started praying for Congress to extend the tax credit because the lender was not ready to give the clear to close. July 1 I was told that the conditions take 4 days to clear and we'll close after the 4th of July. We're getting close, I thought.
But no. The lender asked for a letter of explanation for a deposit the buyer made on March 30th (really). They also wanted to see the HUD-1 from the seller's purchase of the home, which we provided along with a letter of explanation and a cost basis for the home since it was purchased with 10 other homes. Now we got this done, we believe. Oh no, now the lender wants a 2nd appraisal because the purchase price is $4,000 more than 20% higher than the price the seller paid for it. This was from a lender who said that the flipping rules most banks follow wouldn't be a problem. We ask the seller to lower the price $1,000, the buyer agrees to give up $3,000 of closing cost credit and the mortgage broker cuts fees by $1,000 so we can get under 20% and avoid having a 2nd appraisal because that would add more time and could sabotage the whole deal if it comes back too low. Problem solved?
Not yet. Told that Tuesday, July 15 there would be CTC so that the closing could occur on July 20. BUT WAIT.....the underwriter who issued a conditional approval denies the loan. WTF is going on here (F stands for fudge)? No explanation or written notice is given. Mortgage broker threatens filing complaints with the president of the Bank, HUD, BBB, and Attorney General. Buyer is furious. Seller is tiring of waiting. AAAAAHHHHRRRGGG!!!
I was able to calm my buyer somewhat, seller is willing to wait (a few more days at least). Mortgage broker appears to be biting off the heads of those responsible. Managing transactions can be very difficult. Nobody wants to start over, but emotion often gets in the way of logic.
Next up.... Mortgage broker contacts lender appealing decision. Lender VP is supposed to call....doesn't. Lender can't explain why the loan is denied. Broker thinks all the rules were followed. I find out today (July22) that the underwriter is possibly being fired for his handling of this case. We are now waiting for someone to review the file.
Please feel free to share your own nightmare loan approval story, happy endings please. I'm sure there are worse situations than this, but this is the hardest one I've had.
Please pray for me and my buyer and the seller and everyone who has worked hard to get his home sold.
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Steve Roake(SFR) works with buyers and sellers in Plainfield, Shorewood, Joliet, New Lenox, Homer Glen, Lockport, Mokena, Frankfort, Orland Park, and Tinley Park, IL.