Home Buying in Washington>Question Details

Nena, Home Buyer in Washington, DC

After 4 weeks of loan underwriting and 2 months under contract, my 203k loan is being denied. Any advice for not losing the property?

Asked by Nena, Washington, DC Wed Nov 13, 2013

Do I have any options or alternatives?

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5
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1 vote Thank Flag Link Sun Dec 15, 2013
It really depends what the debt-to-income ratio is.

Basic FHA guidelines allow for a housing ratio up to 31% of your income and total debts of up to 43%, however, these figures can be exceeded if your loan can be underwritten using FHA's automated underwriting system AND if the lender permits it.

Find out from your loan officer if this loan requires manual underwriting or will accept an automated decision. If it requires manual underwriting (as many 203k loans do) then you are probably out of luck unless you can pay off and close some credit lines. If the lender will accept automated approval you need to find out if DU or LP approved the loan at the higher debt-to-income. If so, then the issue is probably a lender issue or requirement and technically you could seek another lender.

But at the end of the day I'm not so sure the seller would be accepting of starting the loan process over elsewhere. So you should do your best to try and work things out with the lender you are with. Lean on your realtor for advice and influence as well.

Best of luck. 203k loans are a pain and few lenders do them well which is why most lenders shy away from this business. Hopefully you have a good, experienced lender.


Tony
1 vote Thank Flag Link Wed Nov 13, 2013
DTI is currently at 44%. I will talk to my realtor to see if the seller is willing to stall and allow me to try a different lender. I don't have the confidence in the current bank because we've wasted so much time and resources with something that I feel could have been discovered 6 weeks ago when they all of my income information, liabilities, assets and bank statements. But I am a first time homebuyer so maybe these things aren't typically foreseen. Thank you for taking the time out to reply.
Flag Wed Nov 13, 2013
Finding a quality lender can be a challenge in this new market. Call my preferred 203K lender and see if he can help you. He has been in the business 27 years and is very well versed in construction loans.

Steve Yeagher
Prime Lending
301-466-2708

Let him know Tony Taylor referred you.
1 vote Thank Flag Link Wed Nov 13, 2013
Thank you. DTI is currently at 44% and the threshold is 41%. I've gotten the contractor to decrease the renovation budget about 15k. I'll give Steve a call. Thank you.
Flag Wed Nov 13, 2013
I know Prime Lending can go up to 50% DTI
Flag Wed Nov 13, 2013
Talk to a hard money lender who could carry the loan for you until the renovations are done and then refinance with a traditional mortgage.
0 votes Thank Flag Link Tue Nov 19, 2013
Did they tell you why it's being denied? That would be the first step in figuring out if you have a solution.
Please let me know. I'd be glad to help.
0 votes Thank Flag Link Wed Nov 13, 2013
Yes, the loan was denied due to layered credit risk. The monthly mortgage with PMI would have been over the debt to income ratio threshold of the bank. My loan officer is in the process of appealing it to an underwriter that is over the underwriter that denied the loan.
Flag Wed Nov 13, 2013
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