Darin Sewell asked:




Nothing is more frustrating then receiving word you have a declined mortgage refinance loan. Not being able to secure financing can make all the plans that you had seem to go right down the drain. But knowing the common reasons for loan denial can go a long way in helping to stop the potential problem before it starts.

Why Home Loans Are Declined

Home loans are declined because the underwriters at the lenders have decided your loan either did not fit into their lending guidelines or you were to risky a borrower. The underwriters act as a wall of protection for the lender so if something does not make sense to them they may either ask for clarification or deny the loan.

Common Reason For Loan Denial

One of the most common reasons mortgages get turned down is from borrowers giving false or inaccurate information. Many times this is done by accident. Even when done by mistake it is hard for underwriters to look past false information as it appears to look like potential fraud.

Wrong income levels are often stated on loan applications. The best way to avoid this is to go by last years income on your W-2. If you have had a raise and are hourly figure 40 hours a week as your base salary. Wrong income is the quickest way to get your loan terminated in underwriting.

Property values are another common reason mortgages get turned down in underwriting. People may tell their loan officer their home is worth a certain amount only to find out it is worth much less then they thought This is especially true today with the recent drop in real estate values in many parts of the country.

A credit score drop is also another common reason for losing your loan. One of the biggest mistakes people can make is to have multiple mortgage companies pulling their credit. While a few credit pulls will not hurt you having more then 4-5 credit pulls can start to damage your score. To avoid this stick with three reputable mortgage companies and get quotes from each one.

Adam

Martin A asked:


One week after our closing date, the Underwriters rejected my loan due to “The value of the home is too much for the area, and there aren’t any comparable homes in the area.”. My Real-estate agent, Mortgage Broker, and the Appraiser all said “that is discrimination based on geographical location” and we have a law suit. This would have been my first home (as of 9/28/07) but they ‘pushed’ the date back to 10/02/07, and at 5:15 PM they told my mortgage broker that the loan was rejected, and they knew since 11:30 am that morning. My apartment lease was over on 9/30/07, so now, my wife and 2 daughters, are homeless; staying at a friends apartment until this gets resolved. The Underwriters pulled our (applicants) credit 3 more times, drastically reducing our credit, which in turn is making us come $5k out of pocket through a different Underwriter. Please, someone tell me i have a case.. We have already invested $2k into inspections, appraisal, etc, and would hate for it to be for nothing.
The house appraised @ $194,600.00 with the purchase price set at $166,600.00. There were 2 appraisals done; One i paid for, which lists 6 comparable homes, and the other that the Underwriters had done, listing 4 comparable homes. All homes in the area are from $130k to $200k. Which is why i am so frustrated as why they would say that. It makes NO sense.
Just in case anyone was thinking that they might have reasonable doubt that i would default on my loan…

I have a 30 yr fixed @ 6%, so the problem with the thousands of people that defaulted on their variable rate loan shouldn’t effect me what so ever. Those thousands of people are all moron’s for letting it happen to them. They should have either;
1- Refinanced into a fixed rate
2- Sold the house BEFORE they defaulted. It is very easy to find out what your payment is going to be 1, 2, 5 years down the road, even with a variable rate loan. Their fault for not planning ahead.

I make enough to pay 2x the mortgage payment, and have been @ the same job for 4 years now (only 21 yrs old). That’s not including my wife’s income, who makes almost twice more than me.

RAY

Patrick Markert asked:


While shopping for a home loan, brokers and lenders will offer to pre-qualify or pre-approve you for a mortgage. Home loan pre-qualification and pre-approval are different and distinct processes, so it is important for you to understand the difference.

Pre-Qualified

A loan officer or loan processor working for a mortgage lender or broker can typically pre-qualify you for a home loan within an hour. Getting pre-qualified for a home loan is a good first step that will let you know if you should proceed to the pre-approval process. To get pre-qualified you will need to complete a mortgage application and allow the broker or lender to pull your credit. They will review the mortgage application and your credit and let your know if you are pre-qualified.

Pre-Approved

Only a mortgage underwriter can pre-approve you for a home loan, loan officers and processors can not. Typically mortgage brokers do not have underwriters on staff, so they typically can not pre-approve your home loan. A valid pre-approval is the best tool you can have when shopping for a new home. The key is to ensure that it is valid. A valid pre-approval has been underwritten by an authorized underwriter (an underwriter is the final person that says your loan is approved). If an underwriter pre-approves your home loan application upfront, all you have to do is find the home you want, have it appraised, and then you should be able to close in just a few days. Some mortgage brokers and lenders will issue pre-approvals that have not been reviewed by an authorized underwriter, be sure to ask.

To get pre-approved for a home loan you will need to provide the underwriter with your income and asset documentation (W2′s, Bank Statements, etc). The underwriter will review your credit, mortgage application, documentation, and then approve you for a set loan amount and property value. Once you have been pre-approved for a home loan you are ready to start shopping. The process typically takes a couple of days.

Knowing exactly what type of home loan you can obtain will allow you to shop and negotiate with confidence. For example, you could inform a seller that you are pre-approved for the mortgage and you are prepared to close next week. If the seller needs to close quickly, it will not matter if there is another buyer that cannot close for weeks or months. Plus, sellers do not like to take their properties off of the market for long periods of time. The ability to close quickly is one way to get a great deal.

Realtors will work much harder for you if they know that you have a valid pre-approval. Think about it, if the realtor is spending days or weeks driving you around, they want to make sure that they are going to be compensated for their efforts. By ensuring the realtor that you are approved, they will be willing to spend more time working for you.

In summary, a pre-qualification is a good place to start. Once you have the pre-qualification, you should proceed to the pre-approval process. Watch out for mortgage brokers and lenders offering pre-approvals that have not been fully underwritten by a mortgage underwriter.



MARCEL