So you are in the process of buying a new home and find out that your loan was just denied. Now what???
First of all, talk to your loan officer and find out why. Maybe there is something that you can easily correct to change that to an approval. It may have something to do with the property you are buying or something changed in your personal information.
Every lender has "overlay's". That means that Fannie Mae, Freddie Mac, FHA and VA have specific guidelines that lenders have to follow. However, each lender has the right to make additional requirements on top of the those guidelines. For example, I get calls all the time about refinancing to 125% because Fannie Mae will allow it on a DU Refi Plus loan. That's true, they do allow it – however most lenders will not allow you to go that high on the loan to value. They have overlays that limit the mortgage to 95%-105%. Some will allow a higher combined loan to value if you have a second mortgage.
Your loan may have been denied based on an overlay – if so, check with other lenders to see if they have the same overlay. Maybe someone will be able to do that same mortgage without changing anything. the overlay could be as simple as the maximum debt to income ratio or the credit score. Some lenders have a longer wait time after a foreclosure than others do.
Condos are another area that some lenders have a list of approved condos and some have a list of condos that they will not finance. Each lender is different. FHA has an approved condo list and if you are buying a condo, you want to make sure it's on that list if you are getting a FHA mortgage. The underwriting requirements for condos will vary based on each lender.
Another option may be to get a non-occupant co-mortgagor. Possibly a parent or other family member may be willing to co-sign for you so you can get your new home. Ask your loan officer if that will help overcome the denial.
Make sure you discuss any and all options with your loan officer – they may have another option for you. Your loan officer would rather know everything right away than wait and find out that there is a problem they may have been able to solve in the beginning. Loan officers don't like mortgage denials any more than anyone else – we have to make that phone call to tell you what is happening – that is not a call any of us like to make. We will do everything we can to help you, but sometimes it may mean using another lender.
Leslie Vanderwerf, NMLS ID#335509, Advisors Mortgage - Email – Website
