Lenders; Denied on Pre-Approval, no consistency! Why is this?

Question

I genuinely need answers from professionals. My husband & I have spoken to 6 different lenders. Each one we have spoken to gave us a different answer to why we can't get approved, please help me understand why.

Our situation is this: We both have 2 full time jobs each, have employment history for the past forever, we make $100k annually each.

Paid off all our debt, have a little over $10,000 in stocks.

His credit score; 730-760 / My credit score; 610-630

We have been in the same field of work for 3+ years, left previous positions because of higher salary with no gap in positions. By January, we will have $30k saved for a downpayment, we are shooting for a house in the 400k-500k range.

Reasons being told no by these lenders:

1. We can only use 1 of your jobs each, nobody can use both of your combined income, that's not how lending works.

2. Income is enough, but haven't had same job for 2+ years, so that's unreliable income, can't use it ( worse explanation ever)

(even though we left previous position cordially due to a higher salary, doesn't matter)

3. Yes, WE DO have a program for you being Black, but you make way to much money to qualify for the program. (In order to qualify for the program for being black, you have to earn waaaaaaaay under the median annual income; P.S I don't)

4. Well, if we go based on your employment, on a 500k house, you'll need $120k as a downpayment.

5. Even with $30k as a downpayment, we are going to need 6 months worth of cash reserves; then we can TRY, no promises.

Why are we getting all these different answers, that all equal NO, not right now.

We obviously are going to have to push back our purchasing date, and we will continue to save a ridiculous amount of money. My question is why is it so difficult, why so many different explanations, and what's our best approach?

Please & Thank you!

Kevin Luttrell · Answer

1. If only one of you will be on the mortgage, only that individual's income can be used. Probably came up because the option was suggested to only have your husband on the mortgage in order to use his credit score.

2. If you have any sort of variable income (variable hours, overtime, bonus, commissions) then you may need to have a 2 year history of receipt in order to use for qualifying.

3. Yes there are government programs out there for low income households that you may not qualify for.

4. A larger down payment means a lower monthly payment, which may have been suggested as an option to qualify for a higher purchase price than you would otherwise qualify for.

5. Lender may have a program that allows for higher DTI ratios, lower credit scores, etc, but the program requires 6 months reserves.

Galen Ikonomov · Answer

Breonna, going through multiple newbies and people are lacking basic communication skills in the mortgage industry is EXTREMELY disappointing and frustrating.

What LOs told you:

1) That does not make any sense - Of course they can use both incomes when there is a a consistency 2+ years, same line of business. The only reason they would not use it is if your new job is commission and bonuses based with a little base salary. However, if you guys are W2s with 100k salaries, no issue to use the income.

2) That depends on the loan product. FHA will require consistent 2 years on the job. ( But like you said, you left the previous job for a higher salary with the current one, so LOE would take care of that gap ).3) For me these programs are not the greatest option, because they have contingencies such as stay in the home for 5 years, without being able to refinance, because you will have some kind of early prepayment penalty. This is one of problems I have with these programs. On top of all, nothing is "free".

4) B***sh*t. The myth of 20% down for a primary residence is long gone.

5) That again depends on the product, but looks like they are going with a Conventional loan and because your credit score is so low, they are trying to add cushion with reserves to get Approval from the UW system.

My questions and suggestions: 1) To clear the "gap" situation that are they are telling you, IF the reason of you switching jobs is higher salary and because of that change there is a little gap, to clear that CONDITION is to simply provide LOE - Letter of Explanation, but most of the LOs have no idea how to and when to use these.

2) Breonna, YOU MUST WORK on your credit score. When there are 2 borrowers on the same application, the lenders are using the lesser of the 2 credit scores. Looks like you are putting 5% down payment and that is conventional loan. With that loan 630 credit score will give you terrible terms with conventional loan and even not approve you sometimes. Why is your credit score 630 after you have paid all your debts?

3) You need to work with a broker. Brokers do not have multiple leads coming every single day like the big institutional lenders and every one they get, they try to provide the most value possible in order to retain you as a client. There are a lot of brokers here that are licensed in CO and I highly suggest you start talking to one of them.

Sergey A. Petrov · Answer

@Breonna Mahana - lots of variables here depending on what type of a mortgage you are applying for. I suspect it is a mix of needing to use both incomes (but then only the lowest credit score counts for qualification purposes) vs using only one with the higher score (but then there is not enough income).

Breonna Mahana · Answer

Beforehand, we only worked 1 job, then realized it'd take forever to save up enough money for RE, so we both decided we'd work two jobs for the next 2 years and see how much money we could save.

After all of the feedback I have received, in general I think it's best for us to wait at least another 6 months, for all the reasons all of you have explained.

That gives us time to build our savings, save, save, save, and learn.  This entire thread was extremely insightful and helpful.

Thank you all, I really appreciate all of your responses.

Erik Estrada · Answer

@Breonna Mahana Work with a mortgage broker in your area. They are more flexible when it comes to financing options.

Bradley Showalter · Answer

Good Morning @Breonna Mahana, I apologize for all of the different responses. That is the main issue that I hear when speaking to clients that have been denied. Everything that you have stated seems to be fine to go down a few paths, I would be more than happy to hop on a call with you to see what we can do and if there is an issue, then I will give you an in-depth explanation as to what we can or cannot do. Just let me know!

Melanie Marie Trinh · Answer

Hi Breonna,

Broker here in Denver. It sounds like you may have encountered overlay guidelines with the varying lenders you've talked to. Have you tried talking to a broker? We are experienced in creative solutions since we know all the overlaying guidelines from the multiple lenders we work with and we have access to hundreds of loan programs. I agree with everything Kevin said but I'd be happy to sit down and answer your questions and come up with a plan of attack.

Miranda Holland · Answer

Different lenders have different guidelines for loan programs. And with traditional banks, the requirements to qualify are even more strict. If you want to get a loan through a traditional bank and you sit outside of what's considered to be a perfect applicant, I recommend you speak with licensed mortgage brokers in your area.

With that being said, due to your stated credit score and "less than perfect work history", it may be difficult for a licensed mortgage broker to match you with a conventional lender.

If that's the case, I recommend you speak with private lending companies through a private money mortgage broker. Private lenders don't care a whole lot about your work history. Approvals are primarily based off the profitability of the deal and not solely based on the borrower

Bill B. · Answer

If you make over $200k and “only” have $10k in stocks and $30k in downpayment savings I assume you’ve had some recent financial difficulties? I would spend 1 year tying to “get by” only only $100k per year. That would give you another $100k for reserves/downpayment.

As mentioned above. You have to fix your credit scor, at least 50 points. It might be something terrible that will age off in the next year? With 3 years of $200k+ year of income there’s no reason for a credit score below 760. Maybe the “no debt” is some recent payoffs of bad debt?

Go to a mortgage broker and have them pull your credit or look at least look at credit karma and it should be obvious what the problem is. You might be better of waiting 6-12 months anyway if there’s any kind of market pullback or we finally get lower rates in 12-24 months.

Good luck.

Caroline Gerardo · Answer

1. FICO lowest middle score is used and that determines a part of the rate

2. Can't tell from your description BUT if you worked six jobs as w-2 in past 36 months we use every single one. If you have 1099 or are self employed and w-2 then it's the net bottom line after expenses. Having many jobs is not a problem. You need to have same job type for the whole time period. Can't mix together various job types and call it continuing income- this problem may just be in the eyes of the person who typed up the job titles unless they appear to be wildly different. If you were in college or got a certificate and only have a year that's acceptable. You have to show every piece of paper. To do this job the mortgage broker needs to show the story, back up the information and cross all the t's.  Going to six lenders sounds like a nightmare.

3. Lenders use 60% of the dollar amount in a stock or brokerage account to qualify or you have to prove you liquidate it at closing via wire to the title company

4. For a 400000 Single family house if it can go FHA you need $14000 for the down payment. Plus maybe $6000 for closing and then cushion of savings for reserves. So for FHA you need something like $23000.  Saying you will have $30000 in the future can't be used.

5. You maybe qualify for down payment assistance -depends on census track, your income compared to the low to moderate income for that location where you buy. There are many programs and we need your IRS returns and the zip code to see if there is a match to cover the money in #4 above.

6. Why is your FICO low do you have liens or collections? That might relate to #4

I have not looked at your paperwork and my guess is you need someone who cares and can help you look perfect on paper. You did not find the right person.

Lenders; Denied on Pre-Approval, no consistency! Why is this?

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