What To Do If Your Mortgage Financing Is About To Fall Through

By
Mortgage and Lending with First Heritage Mortgage NMLS #: 938761

It Happens for Many Reasons…

  • Your debt to income ratio sneaks up higher than the underwriter will allow because of higher property taxes or homeowner’s insurance than your loan officer estimated.
  • You loan officer wasn’t aware that you pay child support and your debt to income ratio is now too high.  (Remember to tell your loan officer EVERYTHING at application.)
  • You went under contract within 90 days of the prior acquisition of the home by the seller (a home flip) and your loan now requires more stringent underwriting.
  • The underwriter calculates your income differently than your loan officer did–usually when tips, overtime, or bonuses are involved.
  • Your credit report expired and when your loan officer repulled it, your score was no longer high enough to qualify.

What Happens Next?

So, what do you do when you learn the mortgage company who pre-approved you will not be able to underwrite your loan?  Much of the time the borrower and realtor throw in the towel on the deal, take a step back, fix the problem, and start again with a clean slate in two to six months.

Here’s My Advice:

Before you throw in the towel on the house, try another lender.  Most people believe all mortgage companies are the same–that we all require our borrowers to adhere to the same guidelines, but that is simply not true.  The world of lending is a very competitive environment, and some lenders are more flexible than others.  (Just FYI–my company is on the limber side–very limber.)

What Can Differ From Lender to Lender?

  • Some lenders have lower minimum qualifying credit scores.
  • Some are more lenient when it comes to your source of a down payment.
  • Some source fewer deposits into your bank account which could mean you have more eligible funds for down payment and/or closing costs.
  • Some require tax returns for the past two years, while others will allow you to get away with only W-2 transcripts if you are a salaried employee.
  • Some have higher debt to income ratio limits meaning you can qualify for a higher monthly mortgage payment.

True Story From A Richmond Realtor

Shannon's Headshot

I was having lunch with realtor Shannon Milligan at RVA Home Team with Long & Foster Realtors about two months ago.  She was telling me that her client was about to lose his dream home in Varina because his financing was about to fall through.  Because she’s one of the most determined Richmond VA realtors I’ve ever met, she agreed to introduce the borrower to me in the hopes that I might be able to help him.  And, it just so happens that we were able to close on the home:

When I spoke with Whitney about a transaction that was about to fall through with another mortgage company, Whitney immediately sprung into action. And, you know what? She was able to deliver! What’s the saying?–”Everything is impossible until somebody does it.”  As a Richmond Realtor who looks out for my clients best interests, I will certainly refer to Whitney as she has demonstrated her ability, skill, and same passion for getting a client his HOME!  -Shannon Milligan, RVA Home Team, Long & Foster Realtors 

Conclusion

Can I save every deal that comes my way?  No.  However, when it comes to making one of the biggest purchases of your life, it never hurts to get a second opinion.  Before your dream house slips through your fingers ask your friends or realtors to refer you to another mortgage advisor for another review.

If you are considering purchasing or refinancing in Virginia please contact me for a mortgage consultation. To stay informed, follow me on Twitter and like me on Facebook.  Also, I work with the best realtors in Richmond VA, and I would be happy to recommend someone who specializes in the type of home you are searching for.

If you are interested in purchasing or refinancing in one of the following states, I will be happy to connect you with a licensed loan officer or connect you with a realtor in your state: Maryland, Delaware, Connecticut, Florida, Georgia, Maine, Massachusetts, New Hampshire, New Jersey, North Carolina, Pennsylvania, Rhode Island, South Carolina, Washington D.C., or West Virginia.

Comments (8)

Mike Rankin
ClearPath Mortgage Solutions, Inc. NMLS #1394615 - Albany, NY
Mortgage Consultant

Great tips. Having a game plan for when a loan might fall apart is vital. Seems like you have some great lender options!

May 09, 2014 09:54 AM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

That is exactly what I have done many times. It works most of the time, too.

May 09, 2014 01:26 PM
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Whitney, I've never let one go without at least trying a second lender.  And this is even better advice when the buyers are being declined by one of the big guys.  I've found that our small, local lenders are so much more agile when it comes to finding alternatives that can work. 

May 10, 2014 01:19 AM
Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

Whitney, those situations can get very sticky especially when the problems arise toward the end of the process and sellers and buyers have been making moving arrangements.  It's always better to exhaust all possibilities including going to a different lender if that will save the situation than giving up right away.

May 10, 2014 11:42 AM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi Whitney - finding the right lender match is crucial.  Excellent advice.  

May 10, 2014 05:09 PM
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Hey, Whitney!  I included this post in today's Last Week's Favorites.  Enjoy your Sunday.

May 10, 2014 09:45 PM
Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

Great advice - try another lender. Requirements vary, and there's often a solution at hand.

May 11, 2014 02:12 AM
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Whitney, yes, it happens once in a while - and if we are prepared for alternate options, we can still get through! 

May 11, 2014 01:57 PM