Home Buying in 32835>Question Details

Segjr5555, Home Buyer in 32835

$400K Preapproval from Chase = My Fail

Asked by Segjr5555, 32835 Tue Aug 3, 2010

I have been looking around at houses to buy and I found a foreclosure that is being dropped in price aggressively. I think the house can be had for abuot $360-370K max. I would like to make an offer on the house. Problem is Chase Bank takes into account my last 2 years tax returns (mainly). My last 2 years are $99K gross and $72K gross. This year, I have made $150K gross, or about $25-30K gross monthly. My FICO is an 800. I have $150K cash in my bank account. I have $40K in my 401K. I spoke to a Chase home loan specialist who spoke to a couple underwriters and said I would not get preapproved for an FHA loan @ $400K. Whether I put 3.5 or 10% down. I could put 20% down but I don't want to because the house needs to be fixed. I am only able to go through Chase for preapproval because the foreclosure I am interested in is owned by Chase. I understand my last 2 years tax returns are the issue, but it just seems crazy that I cannot get that loan with my situation. Any thoughts from you all?

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Yes it does, because although you have just 2 years of self-employed income, you cannot go off your gross. You have to use your schedule C income (or whatever schedule you report it on) after all business deductions. What you have taken in up to this point is just what you have called it, your gross income. However, that is not the income that any underwriter would use.
1 vote Thank Flag Link Tue Aug 3, 2010
$30K is the net, prior to taxes. That includes all my expenses. Thank you guys for the feedback.
0 votes Thank Flag Link Tue Aug 3, 2010
Segjr, this is not a flaw in the banking system. Someone who has a short history of self-employment, and may have his business go up and down, is what got us where we are to begin with. If you are in your own business, you must have expenses that you need to pay from your $30,000 per month that you are grossing. What was your net from your business in 2009? That is the number you should probably work off of.
What you might want to do is find a small savings bank or credit union who will look at your income differently, so you don't have to worry about Fannie/Freddie guidelines. Seeing as you are looking in FL, this is obviously not the only house out there.
0 votes Thank Flag Link Tue Aug 3, 2010
Most lenders do not actually hold a loan over 24 hours after they close. They immediately sell it off for a profit to Fannie Mae or Freddie Mac. If your loan doesn't fit every criteria they cannot sell it to Fannie or Freddie and have to sell it for less to another investor.
0 votes Thank Flag Link Tue Aug 3, 2010
Cash is king, no way, no how would I put my savings into a house. Additionally, the house I am looking at needs work, so I would like to put about $35K into the property. I just think its ridiculous that someone who is bringing in $30K/month, with an 800 credit score and $150K in the bank can't get preapproved for a $400K loan. That shows an obvious flaw in the banking system.
0 votes Thank Flag Link Tue Aug 3, 2010
Why not live frugally and buy something for $140k? Then once you've saved up another $250k you can sell the $140k property and pay "all cash" for your dream home in a few years if you continue at your current income pace.

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0 votes Thank Flag Link Tue Aug 3, 2010
Gross is my gross income for 2008, 2009 and current year ($99K - $72K - $150K YTD). In 2008 I was an employee at a large corporation until August, when I started my own business. Hope this helps.
0 votes Thank Flag Link Tue Aug 3, 2010
What is it that you do that you are talking about gross? Is it a salaried position? Are you on commission? Do you take employee business expenses or do you get paid on a 1099? There are certain guidelines that underwriters all follow. Not looking at your documents, I can't make many comments, but the questions that I have asked would help to figure out whether someone else could possibly give you a 30 month average to give you the income that you need.
0 votes Thank Flag Link Tue Aug 3, 2010
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