Financing in Gilbert>Question Details

Joe, Home Seller in 85143

Financing question

Asked by Joe, 85143 Tue Nov 29, 2011

We are on the process of purchasing a short sale property. The lender (wells fargo) pre-approved 175K to buy the house. The Buyer (short sale bank) agreed to sell us the house with this price. We paid for inspection, deposited earnest money to open escrow. Closing date is Dec 7, a few days ago Lender called us and said our loan is not approve due to decreased in income ? But our income has not changed since we submitted the paper works for the preappoval . I don't get it ? I called the loan officer, she said the preapproval she did was based on stated income. Now that they review w2 they take the average of 3 years income. Are they playing game with us or what ? Should not' we be noticed from the beginning so we don't waste our time, efforts, money ? My questions is if the loan don't get approved are we losing our earnest $ ? are we going to get sued by the buyer ?? What 's going to happend ?? YOur expert advises are greatly appreciated.

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Joe’s answer
Thank you all for your informative suggestions and feed backs. We did had a co-signer under this loan originally. I talked to my broker, he made several calls to Wells fargo to find out what's happening and asked from the seller extention the COE for another 2 weeks. Meanwhile I'll seek around a few local lenders . It's such frustrated how Banks (specially the Big banks ) do business nowadays. Hopefully things will work out !!!!
Happy holidays to all !
3 votes Thank Flag Link Wed Nov 30, 2011
Hello All:

If I may, this speaks to what I was saying last week. At this time in the residential mortgage industry, you will find the more competent loan officers (officially known as "Mortgage Loan Originators" or" MLOs") at Mortgage Banks and Mortgage Brokers. It is we who have to take 20 hours of education, pass two exams (federal and state), have our credit reports pulled, have our finger prints taken (criminal background check), and get bonded, to perform our job.

Those at federally chartered banks (oh, how coincidental, this is a Wells Fargo loan officer) and credit unions do not. Where do you think those who could not pass the exams and back ground checks have migrated?

Sorry, Joe, this does not help you at this time, but it may in the future, and it may help real estate agents decide who to work with and to whom they should be directing their clients. Good luck! Good people can get good results, so I hope you hook up with a great MLO!! :)
2 votes Thank Flag Link Tue Nov 29, 2011
Good evening Joe,

I'm sorry to hear that you find yourself in the usual dilemma when dealing with THE EVIL EMPIRE (The Big Banks).

Here's what I recommend in this nuclear reactor meltdown moment:
1. Have your attorney contact the short sale bank IMMEDIATELY. Explain the issue and get an extension.
2. To get the extension you'll need to find a new mortgage lender to work with...

And here's the BEST ADVICE I can give: get a referral to a Local Mortgage Banker. Mortgage Bankers in your community will provide you with a much higher quality of service and financing options than any "Big Bank." Local Mortgage Bankers have long been the source of excellent financing options for homebuyers. Further, Loan Originators who work at Mortgage Banks are LICENSED whereas Loan Originators who work for the "Big Banks" are only REGISTERED. There's a BIG difference.

Sit down face to face with your Mortgage Banker to be thoroughly prequalified. The Mortgage Banker will review all facets of your loan request to answer your questions with regards to the types of loans and maximum loan amounts you could qualify for.

Consumers have been led to believe---thanks to huge advertising budgets with the BIG BANKS---that they should go to their bank for a mortgage loan. This is the WORST place to get assistance with the BIGGEST PURCHASE of your life! These BIG BANKS are basically BIG CORPORATIONS. You're a number, at best. With a Local Mortgage Banker you will be treated like a friend and a client for life. You can't imagine the high quality of personalized service you will receive from a Mortgage Banker until you try.

As to price---rate and fees---competitive if not better than the BIG BANKS.

You can verify the License of any Licensed Mortgage Loan Originator at

Good luck!
Trevor Curran
NMLS #40140
Web Reference:
1 vote Thank Flag Link Tue Nov 29, 2011
Sounds like you had an idiot for a loan officer - not sure why they would pre-approve you based on verbal income and let you go out and spend all of your time and some money and THEN review your W-2's. This loan officer and their company (if it is company policy to issue a pre-approval letter without verifying income) should never participate in originating mortgages again - period. It's reminiscent of how Bank of America does their pre-approvals.

But now you are at this point, where the income has finally been reviewed, and they determined that it's not enough to qualify. The choices won't be pretty, you'll either need more income or less debt... which means you'll possibly need a co-signer or you will have to pay off or perhaps refinance your debt into lower payments. A 3-year average of income is a bit strange, may I ask what you and your spouse do for a living? If it's salary, then they should be using the current salary. If it's hourly, then usually the current rate of pay times the average hours per week is used but sometimes a 2-year average is taken. If it's self-employed then it's often a 2-year average. Bonus/commission/OT income is also a 2-year average. Only situation where a 3-year average would be needed is if the income has been inconsistent and a 3-year average paints a more accurate picture than a 2-year average.

As far as your earnest money, in the standard Arizona purchase contracts there is a financing contingency that says the contract shall be cancelled & the buyer should be entitled to a refund of their earnest money if the buyer is unable to get a loan approval with all of the "prior to document" conditions being satisfied at least 3 days prior to the closing date. So hopefully your contract has similar verbiage, but you should definitely talk to your real estate agent ASAP in order to figure out what *your* actual options are when getting out the contract while getting your earnest money back.

Sample Arizona Purchase Contract (see page 2 for financing), your contract may be different though, this is just a standard one.…

Next time you go for a pre-approval, make sure they are doing all of their verifications prior to you making an offer. I know it's difficult to determine if they've done that or not, but the only way to know for sure is to ask. You need to ask tough questions to your loan officer. If not, what just happened to you may happen again.
1 vote Thank Flag Link Tue Nov 29, 2011
Bottom line is you have a very incompetent loan officer. If your loan is declined then unless you have signed something waiving the financing contingency then you can get a refund of your earnest deposit. You should contact a good mortgage broker to see if you can still get approved before you forfeit your expenses you've incurred for the inspection and appraisal. There are other lenders that will likely be able to have more flexibility than Wells Fargo with their acceptable debt to income ratios. I'd love to help you if you'd like. I have 19 years experience, so I can assure you you'll get the right answer the first time.

Brian Cardenas
Sr. Mortgage Loan Originator
1st Rate Home Mortgage, Inc.
Mobile: 480.233.7897
1 vote Thank Flag Link Tue Nov 29, 2011
Joe -

I'm glad everything worked out for you. Merry Christmas.

Brian Cardenas
Sr. Mortgage Loan Originator
1st Rate Home Mortgage, Inc.
Mobile: 480.233.7897
0 votes Thank Flag Link Wed Dec 28, 2011
Wow!! Wells Fargo pre-approved you based on what you said, rather than what they are supposed to verify. Again, big names do not equal big results. I know there are good loan officers at Wells Fargo but you hear more stories like this about them and Bank of America and it drives me up the wall.

This is clear example of a lazy and incompetent loan officer.

Joe, I am glad things worked out for you with Cobalt Mortgage. That is great turnaround time!
0 votes Thank Flag Link Wed Dec 28, 2011
Hi all,
Thanks all once again for your advices and feedbacks....We finally got "approved" through a different lender . OUr Broker and the selling agent extended the closing on the house , it is supposingly go on forclosure and our New Lender (Cobalt Mortgage ) was able to get the loan approved within 7 business days right before it forclosed ..AMAZING !!! We settled a day right Xmas . Truly a gift for us ...
For those who lives in AZ and wanted to buy a home I recommend you to get a loan with COLBALT Mortgage . Beth Reiswig was our loan officer, she did an awsome job in getting this done . My broker wrote a letter to complain the other loan officer who does not know what the heck she was doing !!!
Have a happy and safe holidays to all !!!
0 votes Thank Flag Link Wed Dec 28, 2011
Good Luck Joe! You have been given lots of advice on the board.

Matt Puzz
Amerifirst Financial, Inc.
Licensed Loan Originator
apply online:
Web Reference:
0 votes Thank Flag Link Wed Nov 30, 2011
I have had many, many clients complain about Wells Fargo. I have see them at closing, tears in their eyes when Wells changed the terms on them. What does your Realtor suggest for you to do?

I would call a local lender (Nova Home Loans), call several and see about getting pre-approved. It will push closing back but at least you can requalify for a loan and might be able to still purchase it.

Another idea, see about getting a co-signer, and you can alway refi later, down the road & take them off. Since closing is so close, and if you want the house, you should ask Wells (or if I misunderstood, whoever your lender is) what you can do to get the loan and proceed, like getting a co-signer.
Good luck.
0 votes Thank Flag Link Wed Nov 30, 2011
Sorry to hear about what has transpired to this point.
We have many great opinions here, my thoughts are get with your Realtor immediately and know what is in the contract you signed with the bank. Given the circumstances that the "preferred" Wells Fargo loan officer could not approve your loan, your agent should ask for an immediate extension to the close of escrow so that you can seek financing from a compitent loan officer. All of the speculation about your situation without knowing the details is secondary at this point; get with your Realtor.
Should you need some help, I am in Mesa and just across the street form Gilbert; and I answer my phone.

Matt Puzz
Licensed Loan Originator
Amerifirst Financial, Inc.
1910 S. Stapley Drive #209
Mesa, AZ 85204
Direct: 602-410-9333
Office: 480-682-6617
Fax: 480-344-3687
NMLS# 213777 AZ LO-0915068
Apply Online:
Web Reference:
0 votes Thank Flag Link Tue Nov 29, 2011
I estimate 30 % of the preapproved buyers in my market do not qualify for the loan they think they are approved for because they never furnished copies of their support documents during the pre-contract stage. While the credit report is important it is only a piece of the application, the rest is just as important. I blame the loan officer for issuing a preapproval letter without reviewing your support documents and you for not taking the time to provide them to the LO. On the next home, make an appointment with a different loan officer, meet with them face to face and provide all of the support documents that will be needed to decision the loan. Sorry about the predicament it puts you in, I hope others that may read this will not fall into the same trap. Good luck,
0 votes Thank Flag Link Tue Nov 29, 2011
Hi Joe,

I am sorry to hear about your situation. It sounds as though there could be some bonus, commission or self employed income that declined in 2010 verses your 2009 & 2008 reported income. Underwriters will usually average the last two years of income, plus your year to date income, to derive your monthly income which they use to qualify you based on your DTI (debt-to-income ratio). Maybe you had a great year in 2008 & that's why you submitted 3 years of tax returns, otherwise, I don't why you would have submitted 3 years of tax returns. If your income shows you made less in 2010 than in 2009 (by I believe more than 10%), then they will use your most current year of reported income, 2010, plus your current income year to date, to derive the income used to qualify your loan.

Now, it has been said that some of the larger "Big Banks" are known to use a lower DTI (debt-to-income ratio) than other direct lending mortgage banks, making it harder to qualify.

I would talk to your real estate agent about seeking an extension so you have time to get your loan approved elsewhere. With a full loan package already in place, you should be able to close on a new loan approval within 10 to 15 business days, provided all other qualifying requirements can be met.

Please feel free to contact me if you have any further questions, I'd be glad to help.

All the best,

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite, fund, AND SERVICE our loans, in-house, with FHA (starting at a 580 score AND still only 3.5% down), FHA Streamline loans (no minimum credit score, no appraisal required) Go Green rehab loans, HomePath, Investor Friendly (10 financed properties), VA, USDA, Jumbo, Conventional, plus, we allow Escrow Repair HoldBacks!
NMLS ID 263779 | AZ BK 359295
0 votes Thank Flag Link Tue Nov 29, 2011
Joe -

Just a follow up to my previous answer from the loan side of things. If you are a W2 employee and are salaried or hourly with a consistent number of hours per week, then underwriters do not average your income over three years. Only if you have inconsistent income (i.e. commissions, overtime, etc.) from your employment will an underwriter average your income over two years, and almost never over three. They may look at the average of your YTD, 2010, and 2009 if your income has varied due to those type of income sources. If you don't have those variable income sources from your W2 employer, then they should only be looking at your current salary or hourly rate to calculate your debt-to-income ratios. Having said that there are many lenders that will limit the maximum debt-to-income ratios to 45 or 50%. Others will take whatever the automated underwriting system will approve (I have often seen up to 57% get approved).

It sounds like your loan officer just didn't know what they were doing and is either making up an excuse or is not properly communicating the issue to you. Either way it is inexcusable incompetence. I would just suggest that you find a good, experienced loan officer to help you determine if you truly can get approved for your financing. It is often possible to get the seller's bank to give you an extension of time to close in this market if you need it. Don't give up yet!

Brian Cardenas
Sr. Mortgage Loan Originator
1st Rate Home Mortgage, Inc.
Mobile: 480.233.7897
0 votes Thank Flag Link Tue Nov 29, 2011
Hello Joe.

As Doug stated it is important for you to read over your Purchase and Sale Agreement (PSA) and any Contingency Exhibits that were or should have been apart of the PSA, so that you are aware and understand what you have signed and your Realtor should be able to explain the implications of that contract to you. You still have options, so begin asking questions so that you know what those options are. Before you begin thinking you have to sign a Termination Agreement and forfeit any funds you have already invested as Brain has stated contact a competent Mortgage Broker who is certified and qualified to look at your docs and give you answers that may shed light on your current situation. Time is of the essence so it is imperative to:

1. Speak with your Realtor and find out if a Financial Contingency is in place to protect you.
2. Contact a competent Mortgage Broker that may be able to assist you by giving you accurate info based upon the docs you have regarding your debt to income ratio.
3. Keep your Realtor in the loop so that he/she is prepared to negotiate an extension on your Finance Contingency and closing date, the price of the house, or worst case scenario having your earnest money released to you.

Much success to you.
Cassandra Dennis, Realtor
Better Homes and Gardens Real Estate Metro Brokers
0 votes Thank Flag Link Tue Nov 29, 2011
If you had a financing contingency in your contract or short sale addendum and the lender has turned your loan down for any reason then you should be protected for both your earnst money and seller action. Since few realtors or loan officers are attorneys I recommend you contact one down the road if you cannot resolve this. In the meantime go to the lender and speak to the VP of the residential mortgage department. Take all of your previous paperwork and approvals you received from the bank. It has been a long time since a bank has accepted "stated income." I doubt anyone is playing games but appears like your loan officer and realtor just didnt know what they were doing. Also make sure your realtor's broker is involved at all steps along the way. They are more experienced and knowledgeable about the short sale process and should have direct contacts to get you the hep you need asap.
0 votes Thank Flag Link Tue Nov 29, 2011

I first of all hope you have someone representing your interests (Realtor). You should have your own agent and go to them for advice. Your agent is the one that owes you the fiduciary to explain what is happening based on the contract you have entered into.

Its really hard for any of us to speculate because we don't know what your documents actually state. If your agent (Realtor) can't then ask to speak to the broker.
Web Reference:
0 votes Thank Flag Link Tue Nov 29, 2011
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