Financing in 92075>Question Details

California M…, Real Estate Pro in 92075

What should a Realtor do when a mortgage company turns down a borrower for an inability to repay the loan?

Asked by California Mortgage Broker, 92075 Fri May 11, 2007

I'd be interested in hearing some of the solutions from Realtors about how to deal with a borrower that can not be pre-approved because they can not demonstrate an ability to service the debt

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Brian: We don't encounter this very often, but I would try to find out why the client was declined for a loan and see what needs to be done to correct the situation. Pay off credit cards? Accumulate more down payment? Bring in another borrower? Clean up FICO score? Every problem has a solution...or it's not a problem.
2 votes Thank Flag Link Sat May 12, 2007
Roberta Murp…, Real Estate Pro in San Diego, CA
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The borrower should first persist on having the mortgage company or bank work something out with him or her. The last thing the bank wants it to deal with taking the home and having to sell it. In the meantime, the Realtor can have the borrower talk to as many mortgage companies or loan officers that the Realtor has a relationship with to gather as much information to help them work something out with the bank.
3 votes Thank Flag Link Fri May 11, 2007
"Inability to repay" can mean the debt ratio is too high for the purchase price applied or the type/source of income is not considered stable.

There are several potential reasons for the denial....

1. Income too low to buy at the price on the application... possible solution, lower purchase price
2. Too much debt to qualify at the price on the application... possible solution, pay down debt, wait until later to buy... or use down payment money to pay down debt and borrow more on the new house (this can work wonders for the debt ratio in some cases)
3. If the borrower is self employed or earns commissions/bonuses, they must have a 2 year history on the job. Withouth two years, the only option to buy now would be a co-signor.

There are other reasons as well. The loan officer should have taken the time to give the buyer some direction on what it would take to get the loan approved.

I've seen a lot of buyers getting pre-approved through call center lenders... there is not a lot of creative thinking when dealing with a call center rep. If the computer tells them the loan is denied, that is the answer they give.
0 votes Thank Flag Link Mon Feb 28, 2011
It is beyond me that the mortgage company would not give the borrower advice on how exactly to proceed. I would speak with a mortgage broker.....believe me he willl steer you in the right direction. This very thing happened to me a few weeks ago when a potential buyer (My Client) could not be pre approved for a loan. The mortgage broker told my client what exactly he needed to do in order to qualify for the loan. Long story short, my client will be able to qualify for a loan in Jan 2010 after filing his next tax return. My client is happy that I steered him in the right direction and will use me to purchase his home next year. Hope this helps.
0 votes Thank Flag Link Fri Sep 4, 2009
There's not much you can do except maintain contact with the buyer until he's cleaned up his credit and puts himself in a position of being ready and able to purchase a home. Hopefully the mortgage lender is willing to help your buyer do just that by offering some "counseling" to help your buyer imporve his overall credit.
0 votes Thank Flag Link Tue Dec 2, 2008
My first response would be not to deal with them because if they have a history of not paying what will give a lender the assurance that the borrower will pay them?
0 votes Thank Flag Link Fri May 11, 2007
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