Mortgage broker situation advice

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Mortgage broker situation advice

Jamie CianfaraniPro Member
Member since 2023 · 4 posts · 4 votes

Good morning, looking for advice on how to hand the following situation:

We're currently residing in a single family house that we'd like to rent. I was pre-approved for a conventional mortgage and found a 2-unit house that we liked. My mortgage broker told me I qualified very well for conventional, so my real estate agent and I moved forward with the offer at 5% down conventional. A week after making the offer, the broker e-mailed stating that he just found out that I'd be required to put 15-20% down for a conventional mortgage, not 5%. Because of this I'd be required to use FHA if I wanted to keep 5%. We re-wrote the offer and it was accepted.

We're supposed to close at end of May. Late last week, the broker told me that it is also a requirement to have a signed tenant lease agreement in place for the current house I'm residing in, as well as a down payment and security deposit paid. It's getting to the point that if I had known these things I would've reconsidered making the offer in the first place, worried about losing the earnest money deposit if we can't close. The broker went from 99% confidence (their words), to this is going to be difficult (also their words) within a few weeks. I have great credit and good DTI ratio to be approved for both houses at the same time, so that doesn't seem to be the issue. Looking for advice on next steps. Thank you

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
3y
sounds like your mortgage broker is not experienced with investor loans .. either stick with it.. or switch lenders.
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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    3y
    sounds like your mortgage broker is not experienced with investor loans .. either stick with it.. or switch lenders.
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  • Andrew FreedBusiness Member
    Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
    3y

    @Jamie Cianfarani - Agreed, you could always switch lender. The other option is having a lease set up prior to your departure. It is not that challenging, I have done it numerous times for a househack. Just so you know, the lease prior to leaving one property to another is a pretty common request. This lender does sound inexperienced, however what they are asking for is normal stuff. 

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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    3y

    Having a lease and deposit check before you close is a requirement the lender should have told you day one. That's a normal condition that you cannot escape. You have to prove you are buying this owner occupied.

    Second issue about the down payment, maybe lender overlooked you were offering on duplex. Only single family you could have gotten away with less down.

    My guess is your lender is new or not paying attention. I hope there is no third mistake at closing. Get the manager or owner involved. Find a second lender as a backup and apply.

    2Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y
    Quote from @Jamie Cianfarani:

    Good morning, looking for advice on how to hand the following situation:

    We're currently residing in a single family house that we'd like to rent. I was pre-approved for a conventional mortgage and found a 2-unit house that we liked. My mortgage broker told me I qualified very well for conventional, so my real estate agent and I moved forward with the offer at 5% down conventional. A week after making the offer, the broker e-mailed stating that he just found out that I'd be required to put 15-20% down for a conventional mortgage, not 5%. Because of this I'd be required to use FHA if I wanted to keep 5%. We re-wrote the offer and it was accepted.

    We're supposed to close at end of May. Late last week, the broker told me that it is also a requirement to have a signed tenant lease agreement in place for the current house I'm residing in, as well as a down payment and security deposit paid. It's getting to the point that if I had known these things I would've reconsidered making the offer in the first place, worried about losing the earnest money deposit if we can't close. The broker went from 99% confidence (their words), to this is going to be difficult (also their words) within a few weeks. I have great credit and good DTI ratio to be approved for both houses at the same time, so that doesn't seem to be the issue. Looking for advice on next steps. Thank you


     There are plenty of mortgage brokers and direct lenders out there, tbh this sounds like a situation where you should move on from the broker that you chose.  Too many options to stick with someone giving bad guidance (thats their job!)

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  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Jamie Cianfarani:

    Good morning, looking for advice on how to hand the following situation:

    We're currently residing in a single family house that we'd like to rent. I was pre-approved for a conventional mortgage and found a 2-unit house that we liked. My mortgage broker told me I qualified very well for conventional, so my real estate agent and I moved forward with the offer at 5% down conventional. A week after making the offer, the broker e-mailed stating that he just found out that I'd be required to put 15-20% down for a conventional mortgage, not 5%. Because of this I'd be required to use FHA if I wanted to keep 5%. We re-wrote the offer and it was accepted.

    We're supposed to close at end of May. Late last week, the broker told me that it is also a requirement to have a signed tenant lease agreement in place for the current house I'm residing in, as well as a down payment and security deposit paid. It's getting to the point that if I had known these things I would've reconsidered making the offer in the first place, worried about losing the earnest money deposit if we can't close. The broker went from 99% confidence (their words), to this is going to be difficult (also their words) within a few weeks. I have great credit and good DTI ratio to be approved for both houses at the same time, so that doesn't seem to be the issue. Looking for advice on next steps. Thank you


    When I try to make a loan, I visit their office and run my DTI # with them in real-time. When you said you're going to rent out your primary, the lease is used to reduce your DTI. Your credit score doesn't matter, your DTI what matters here.

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  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    3y

    Didn't you have a financing addendum stipulating your offer (and earnest money) are conditional on being approved for a mortgage with 5% down? Those addendums are to save your earnest money in the case you don't get approved.

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  • Account Closed
    Lender · Member since 2023 · 20 posts · 7 votes
    3y

    Look for a second lender here or ask if that originator has someone more senior that can help you. Definitely a few moving pieces and he/she is probably newer.

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  • Jamie CianfaraniPro Member
    OP
    Member since 2023 · 4 posts · 4 votes
    3y
    Quote from @Eric James:

    Didn't you have a financing addendum stipulating your offer (and earnest money) are conditional on being approved for a mortgage with 5% down? Those addendums are to save your earnest money in the case you don't get approved.

    Thanks Eric, you’re right, I didn’t realize this was the case.  The offer states “Purchaser agrees that in connections with said application to lender he/she shall promptly comply with lender’s request for necessary information required to process the loan application. If a commitment for such mortgage cannot be obtained within __2_1___ days from date of acceptance, at the Seller’s option, this Offer can be declared null and void and Ernest Money Deposit shall be returned. Should Seller wish to exercise this option, Seller must do so in writing. It is further agreed that said written notice may be hand delivered, electronic delivery and/or mailed to Purchaser's real estate agent.”
    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    3y

    Sounds like your loan officer is a doofus, as nothing here should shock someone with experience.

    FHA down payment multifamily 3.5%

    Conventional down payment

    1 Unit - 3%

    2 Unit 15%

    3-4 Unit 25%.

    Signed lease and security deposit, deposited, needed to offset debt from your current primary residence. 

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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3y
    Quote from @Jamie Cianfarani:

    Good morning, looking for advice on how to hand the following situation:

    We're currently residing in a single family house that we'd like to rent. I was pre-approved for a conventional mortgage and found a 2-unit house that we liked. My mortgage broker told me I qualified very well for conventional, so my real estate agent and I moved forward with the offer at 5% down conventional. A week after making the offer, the broker e-mailed stating that he just found out that I'd be required to put 15-20% down for a conventional mortgage, not 5%. Because of this I'd be required to use FHA if I wanted to keep 5%. We re-wrote the offer and it was accepted.

    We're supposed to close at end of May. Late last week, the broker told me that it is also a requirement to have a signed tenant lease agreement in place for the current house I'm residing in, as well as a down payment and security deposit paid. It's getting to the point that if I had known these things I would've reconsidered making the offer in the first place, worried about losing the earnest money deposit if we can't close. The broker went from 99% confidence (their words), to this is going to be difficult (also their words) within a few weeks. I have great credit and good DTI ratio to be approved for both houses at the same time, so that doesn't seem to be the issue. Looking for advice on next steps. Thank you

     Sounds like he overpromised and underdelivered. 

     You can't do 5% down on 2 units with a conventional loan. Can you get an extension on your escrow? Also was the appraisal already ordered and completed? 

    You can also do 3.5% down on FHA with 2-4 Units as long as you meet the self sufficiency requirement. 75% of the rental income from the units must cover the full mortgage payment.

    I wonder how this even slipped. Sounds like the realtor and broker weren't that experienced in investor loans. Most should know, even by reading the pre-approval letter that you cannot buy a 2 unit with 5% down on a conventional loan 

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