Home Buying in Terre Haute>Question Details

Gina, Home Buyer in Terre Haute, IN

After being pre-approved for over $110,000 , we were just denied the loan for a 107,000 house

Asked by Gina, Terre Haute, IN Sat Nov 26, 2011

This after spending 2 weeks with the loan agents on the phone making sure everything was OK and them reassuring us that there was no problem ..... grrrr... what can we do now ? :(

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Hi again Gina, were you applying for VA financing? You said you were military so I was just wondering. The reason being is that with a VA loan there is no maximum debt to income ratio per se - lenders prefer that it doesn't go over 41% but in many situations debt ratios above 41% can qualify, I even got an approval for someone who was over a 60% debt ratio. Another benefit with VA financing (FHA financing too) is that when there is an appraisal done, it is "mated" to the property for a certain amount of time no matter who the lender & borrower is (conventional financing is not that way though). So if you are using VA financing (or FHA) and have had the appraisal done, then even though USAA said your debt to income ratio was too high for them, it may not be for another lender, and you could switch to a new lender and still utilize the appraisal for a quicker closing (quicker than starting from scratch). If you are using conventional financing then with a new lender it would be pretty close to starting over from scratch. That way you may be able to salvage the home inspection fee & the $350+ it appears you also paid.

However if you have already cancelled this purchase, then like Robert Chomentowski said, on your next pre-approval make sure it goes all the way to the underwriter. For your own information FHA financing permits debt ratios up to about 56.99% get approved, and conventional cuts off in the 50-55% range (most lenders won't go above 45% though). If you have a VA mortgage as an option then with a low down payment it usually is the best option.
1 vote Thank Flag Link Sat Nov 26, 2011
Make sure you find someone next that is going to do a full underwriting approval for you. Not just take your application and run your credit, but actually submit your full loan package to the underwriter. That way BEFORE you get into escrow you know all the kinks are worked out up front.
1 vote Thank Flag Link Sat Nov 26, 2011
By underwriter do you mean in person or automated underwriting?
Flag Tue Oct 29, 2013
Gina,
This goes to either your income or your debt. For example, you may think you earn $3500 per month, but the way the bank calculates, it may be only $3200. You may think your debts are $500 per month, but your credit report shows them as $750. Between the two you are $550 off.
The solution is to either prove more income or less debt. Less debt may be easier if you have statements from each creditor showing a monthly payment different from what the credit report shows. Your loan officer can go over both sides of this with you and work toward a possible solution.
I wouldn't jump ship on this lender just yet, get information from them and counter it with better information if you can.
1 vote Thank Flag Link Sat Nov 26, 2011
i have the answer USAA is a joke failed me at every step of the way ..lies lies lies....never trust them they say one thing and do another.
0 votes Thank Flag Link Wed Dec 7, 2011
If they went over your income calculations so you are both on the same page, and the payment on this home is within the amount they pre-approved you for, then what is the reason they are not approving you at this point?

You do not get pre-approved for a certain sales price, you get pre-approved for a certain payment amount, i.e. if the payment on a $120k home is cheaper than on a $110k home (say for example the property taxes on the $120k home are cheaper), and you have the down payment to purchase a $120k sales price home, then you should be able to qualify for a $120k sales price.

I see you are frustrated, but you are going to have to get clear answers or the issues with USAA have a better chance of repeating themselves with a new lender.
0 votes Thank Flag Link Tue Dec 6, 2011
YES!
I don't GET IT! I am literally pulling my hair out...... :( This can't be normal, is it?
0 votes Thank Flag Link Tue Dec 6, 2011
That is crazy - did you have them go over your income calculations with you over the phone?
0 votes Thank Flag Link Tue Dec 6, 2011
OMG!!!
It happened AGAIN!!!!
We called the bank, we told them we wanted to buy THAT house , (the same one that we were approved for before),and to let us know and since they had all our info. and the house info (taxes, ins. etc) how much we could offer for the house.They gave us a $ amount,so reluctantly (it was way to low) our R.S.Agent presented the offer, and, it was approved, whatever USAA, denied us the loan AGAIN!!!!....... WTF???!! What are we doing wrong? This is ..... CRAZYYYYYY!!!!
0 votes Thank Flag Link Tue Dec 6, 2011
Did you ask why it was denied? There will be a clear reason. Understand that a pre-approval is just that.. it is contingent upon the bank reviewing all the documentation and underwriting the loan. Since it is a much more extensive process there is a greater chance of finding something that was not caught in the pre-approval process.
0 votes Thank Flag Link Sun Nov 27, 2011
It is strange - on Monday I would really make sure they calculated your income properly. Have them go over it on the phone or via email so you fully understand what their debt ratio requirement is, what your debt ratio is, and how they are calculating your debt ratio. Perhaps it is barely over their guidelines and paying off a small credit card balance, etc. (I'm not sure what your situation looks like) would do the trick. But closing with USAA is going to be quickest, finding a new lender for your VA loan would be the second quickest. Thanks for the Best Answer.
0 votes Thank Flag Link Sat Nov 26, 2011
Shane, Yes, we are getting a VA loan and No the purchase wasn't cancelled yet.
We did get an e-mail denying the loan, but not anything official because of the Holidays???!, that's why I wanted to vent and to find out if there's anything we can do to contract what we will be receiving next week . Like I said, we were pre-approved, didn't incurred any debt after that and been in touch with the mortgage people to make sure everything was going OK...the sudden denial is very strange... :(
0 votes Thank Flag Link Sat Nov 26, 2011
No, this was NOT our case, AT ALL!
We did NOT incur any new debt, actually we had some medical bills that we paid off after the loan was pre-approved, so that it's not us.... I kind of wish it was, so I could understand, but right now, I just don't know what to think....
0 votes Thank Flag Link Sat Nov 26, 2011
I work in the mortgage industry and this is the most common theme for why this happens.......customers get prequalified based on their credit/income then go out and make new debts. Potential borrowers know that any new debts can lower their eligibility but some take on additional debt anyway. Just prior to loan approval we run a new credit report to verify that no new debts have been incurred and if they have we include those in the ratios and that will usually kill the deal.
0 votes Thank Flag Link Sat Nov 26, 2011
I am not sure, but my husband says that the money spent on the house inspection and some $350 + bureaucratic fee ???!!! isn't refundable.
We're also working with USAA, that should be good as far as military people is concerned but not in our case I am afraid.
What can I do better next time?
PS. Sorry about the bad English "where/were" I am just too upset to think :(
0 votes Thank Flag Link Sat Nov 26, 2011
I wouldn't recommend that Loan Officer to anyone.
Sorry to hear about your predicament.
But, what money did you lose?
Your DEPOSIT should be refunded because of the Contingency: You DID have a CONTINGENCY, didn't you?
0 votes Thank Flag Link Sat Nov 26, 2011
I am still waiting for the "real", "official" answer, but what I was informed on an e-mail communication was that our debt to income racial was not good, or too high, or whatever....???!!! They had all that info. before we where pre-approved, they told us to start packing when we inquirer about the loan, and 1 week after that they say NO!
I guess I am frustrated and trying to understand why this would happen when we where so careful to do everything right.Now we not only lost a house, have 4 kids heart broken, but also lost money that we can't ever get back.... :(
0 votes Thank Flag Link Sat Nov 26, 2011
Q: what can we do now ?
A: You can let us know why you were turned down, otherwise you'll get advice all over the map.
0 votes Thank Flag Link Sat Nov 26, 2011
Gina,
Pre-approvals are often based on your application data and your credit report. The credit report may be one to three months out of date, showing higher balances than may be accurate with higher payments. Your application may not reflect "bank math" on issues like your income or payment schedule.
Without knowing why you were turned down, it would only be speculation to say why. Your data may be incorrect; your lender may not have prescreened your application very well.
Ask your lender for a reason, discuss it with your agent and decide if you want to try another more responsive lender.
0 votes Thank Flag Link Sat Nov 26, 2011
Did they give you a REASON?
They have to give you a reason,
something that you could do something about.

You would seem to have three choices;
Change your OFFER to $107,
Find a $107 house, or,
Find another Lender.

Good luck and may God bless
0 votes Thank Flag Link Sat Nov 26, 2011
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