Why would a lender require me to sell my mortgage free home to qualify for a new, replacement home mortgage?

Asked by spudwiggley, Glendale, AZ Thu Apr 11, 2013

I have been pre-qualified by my lender to purchase a "replacement" home and have received a Pre-qual certificate from them. My current home is mortgage free. It has been paid in full. My family situation has changed since purchasing this home and we need to upgrade to a larger residence. (From 3 bedroom to 4). We are activily searching for a new home in N. Phoenix/Scottsdale. Our current home is in N. Glendale. When requesting that the lender send or fill out the Arizona Association of Realtors Pre-Qualification form they suddenly decided to deny my pre-qualification because we will not be moving more than 50 miles from our existing one. The new home will be our primary residence. The "old" home will be rennovated and eventually sold when the market improves enough to come close to breaking even. Why would the lender say that we can no-longer be pre-qualified or that any new loan would be contingent on our selling our current, mortgage free home?

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Thu Apr 11, 2013
Hi spudwiggley,

Sounds like you are working with a lender who has too many "Guideline Overlays" & a is bit too rigid on their Underwriting.

I have done many purchases for my clients who own homes within a 50 mile radius. Please feel free to contact me directly if you have any further questions, I'd be glad to help.

All the best,

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct

Scottsdale, AZ 85260
NMLS ID 263779

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite, fund, AND SERVICE our loans, in-house, with FHA (starting at a 580 score AND still only 3.5% down), FHA Streamline refinance loans (NO minimum credit score, NO appraisal required), HARP 2.0 - No Appraisal Required for Refinance for Underwater Home Values, HomePath, Investor Friendly (10 financed properties), VA, VA Refinance loans (NO appraisal required on IRRRL loans), USDA loans, Jumbo loans, Conventional loans, plus, we allow Escrow Hold-Backs!
Web Reference:  http://www.ezAZloan.com
1 vote
Don Tepper, Agent, Burke, VA
Sat Jul 20, 2013
Rafael got it right. The clue is that you were denied because you won't be moving more than 50 miles away. The lender believes that the new purchase will be used as a rental.

I ran into the same situation years ago. My Realtor and I were able to demonstrate to the lender (to the underwriter) that the new purchase was indeed going to be my primary residences. I don't know if you'll be able to do the same.

But that's what the problem is.

Hope that helps.
0 votes
Dave & Kathy…, Agent, Glendale, AZ
Sat Jul 20, 2013
That is a question for your lender. Are you sure the lender had all the information they needed to qualify you? Maybe you should "shop" for another lender!
0 votes
Cody Anderson, Agent, Minneapolis, MN
Sun Jul 14, 2013
Guidelines are in place for a reason. Ask your lender what is needed to move forward. VERY SIMPLE :)
0 votes
Sherry Pigeon, Home Buyer, Glendale, AZ
Sun Jul 14, 2013
Sounds like they are not honest.
0 votes
spudwiggley, Home Buyer, Glendale, AZ
Thu Apr 11, 2013
Thank you all for the information. Its nice to see a concensus on what the issue may be. My plan is to contact the lender again to get more clarification. I have a feeling that the mortgage rep I was dealing with was confused and not "translating" the information to the underwriter correctly. Thanks again.
0 votes
Derek Ostrov…, Agent, Sun City, AZ
Thu Apr 11, 2013
More than likely everyone that already answered your question is right... you are probably working with a lender that has too many guidelines to follow :) It is also possible that the current expenses on your existing home push the numbers just outside of their comfort zone. It is hard to say but, I would speak to a mortgage broker... one that deals with several lenders. I work with few brokers and will be happy to connect you with one or all of them, shopping them is a good thing. Call or email me:

Derek Ostrovski
Coldwell Banker Residential Brokerage
Sun City
0 votes
Cindy Martin, Agent, Glendale, AZ
Thu Apr 11, 2013
I am sorry your lender did not give you an explanation as to why they suddenly changed your qualifications. I would recommend you speak with a different lender. Explain to them what happened, and maybe they will be more helpful and get you pre-qualified again.

If you would like the names of several great lenders in the north Glendale area, please feel free to contact me. Cind@CindyMartinAZ.com
0 votes
Jeremy James…, Agent, Scottsdale, AZ
Thu Apr 11, 2013

I think that you need to consult with another lender...as noted by Roswell below (guidelines may be too strict) I have represented clients with more than one home with no problems. If you are moving into a bigger home, no mortgage etc.. and it is not counted against your DTI you should be good to go, if you would like information on a lender that will guide you effortlessly through this process feel free to reach out to me...

0 votes
Rafael Almaz…, Agent, Glendale, AZ
Thu Apr 11, 2013
Hi sounds like they do not believe that are looking for an owner Occupied home, that it in fact may be an investment home. If that is the case then the down payment required maybe higher.

But if in fact you are looking for a home that you will live in than an explanation maybe all that is required. The explanation could be that it; will be a larger home, that it will have more bedrooms, your family size has grown and you require larger home, Or that it will be closer to your work and or school.

The lender will factor in the current taxes and insurance cost of you existing home to determine how much you would qualify for on the new purchase.

I would get a second opinion from a different lender/broker, Give me a call I can provide you with a few names of good loan officer's. I can be reached at 602-531-3787.

Good luck
0 votes
Jessica Vese…, Agent, Granbury, TX
Thu Apr 11, 2013
Hmmm that does sound interesting. Without personally talking to your lender I would not be able to answer that. I have dealt with this before with the preferred lender that I have been using for years and he has never requested this of a client that was in the same situation. I would recommend either letting me talk to your lender to help you get to the bottom of this and/or get a second opinion from a preferred lender that comes highly recommended and is trustworthy. I can supply you with the preferred that I use, just let me know. By the way, it doesn't hurt you to get a second opinion. Let me know how you would like for me to help.
0 votes
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