Home Buying in Westland>Question Details

Ron Fisher, Home Buyer in Westland, MI

My pre approved offer was rejected by seller stating: Buyer cannot mortgage this offer. Why would I get this?

Asked by Ron Fisher, Westland, MI Tue Apr 14, 2009

My full price, pre approved offer was rejected from the seller stating: Buyer cannot gain mortgage for this offer. What does this usually mean?

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Answers

5
Hi Ron and thanks for your answers.

I agree with Andy that the only reasons for the rejection are: 1) Property that cannot be purchased with an FHA loan and 2) Purchase Concessions that cannot be accommodated under the FHA's seller/servicer guidelines.

In this case, I think it more likely that the request for 6% money 'back' from the seller to cover the closing costs is what squelched the deal. The FHA's lending guidelines usually require the buyer to cover all costs for the purchase of the home, so while some of the closing costs can be "wrapped" into the loan balance, the completion of the purchase cannot rely upon money coming back from the seller to cover costs. Also, FHA usually requires the buyer to have "seasoned" funds (money sitting for about three-six months in a bank account) available to cover the 3.5% down payment. If you're asking for 6% back and the downpayment is only 3.5% percent, it would seem to the seller (who is also a lender) that you don't have the funds to necessary to complete the FHA loan without getting it from the seller. This is, unfortunately, a "no no" on FHA loans.

My suggestion is that if you may wish to consult with a qualified mortgage broker who handles FHA loans to determine what you can offer for this property. Make certain that you understand all of the requirements for an FHA loan before writing another offer. Also check out these sites for more information about FHA loans: http://www.fha.com and http://www.hud.gov.

Good luck and happy house hunting!

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, CA
0 votes Thank Flag Link Thu Apr 23, 2009
A few possible reasons:

1. Maybe the bank knows the property isn't FHA-able. Meaning that the property could be in poor condition that they know FHA will reject the appraisal.
2. Maybe your concessions exceed the maximum amount of allowable concessions.

I would suspect option 1 is most likely. FHA has a minimum set of safety guidelines that a home must meet and if any violate those, FHA will decline the loan due to the appraisal pointing out where the property did not qualify.

Your agent should identify on the listing whether the listing agent showed the property to be FHA approved/finance-able. Even if it does list as being FHA-able, most agents know when a property will violate FHA guidelines.

In this case, the home is most likely only available via CASH.
This can be from a number of reasons, but generally, a home can only be financed FHA when it is somewhat immediately liveable. If you miss anything -- carpet, counters, window, pipes/plumbing, etc...you cannot do a FHA loan.

The listing bank likely knows that the property will violate and doesn't want to waste any potential marketing time.
0 votes Thank Flag Link Tue Apr 14, 2009
Ron,

Actually, real estate professionals cannot interfere with the contract you currently have with your agent. They should be able to explain this fully to you. If you cannot contact your agent, then contact your lender.
Web Reference: http://mi-living.com
0 votes Thank Flag Link Tue Apr 14, 2009
The list price is currently $38,325 for this 1000 sq ft Ranch. We offered nothing more than a full price bid along with asking for 6% back for closing costs. We also sent them the pre-approval letter for our FHA loan. This was roughly a week ago. This property is bank owned
0 votes Thank Flag Link Tue Apr 14, 2009
Hello Ron and thanks for your email.

Can we get a little more information from you in order to help out? For example, was this the purchase of a home from a bank (e.g. foreclosure property)?

What were the terms of your mortgage? Were you proposing an unusual or extraordinary financing arrangement?

How soon after you presented the offer did the seller provide you with this response? Is the seller a real estate professional with information not necessarily available to the general public?

As with all things pertaining to credit, you and your real estate professional may always ask for specific reasons regarding a rejection when that rejection is based on credit. I would suggest you start there. In the meantime, if you can provide us with more information, I'm sure the Trulia community of professionals would be very happy to help!

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, Cupertino, Santa Clara and Sunnyvale, California
0 votes Thank Flag Link Tue Apr 14, 2009
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