underwriting problems/help
Contractor · Elkton, MD · Member since 2014 · 11 posts · 0 votes
underwriting problems/help
5 Replies
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes12y
Is it the same lender as before on the other house??
Many lenders are worried about "buy and bail". It's when a home owner is upside down on one property in value. They buy another one and close on it and then short sale the first house after words to dump it.
Sounds like you are under "manual review" for underwriting and have been flagged versus and automated vanilla underwriting. Do they sell the loan off or keep it in house?? Places that keep the paper can be more loose when evaluating things. Banks or lenders selling off the paper are concerned with default and buy back provisions on Wall Street. With manual underwriting be prepared to go through "hell" to get it approved if at all.
- Contractor · Elkton, MD · Member since 2014 · 11 posts · 0 votes12y
Thanks for the response Joel. The first house has about 40% equity so that shouldn't be a flag but I can see where that would be a worry if it was under water.
I believe they sell the loan (applying now with new lender).
I tried getting a loan about two months ago to no luck (same lender as first house). The house I am trying to buy was under contract until the guy backed out yesterday due to some septic issues. The realtor isn't going to put back on market till I know if I can get loan (or not get loan)...While this guy is giving me the ringer, would you suggest applying with a big bank that will not sell off my loan. I am trying to get the pre approval to put contract on home. I understand that there will be another inquiry on credit but its all isolated.
Between two months ago and now-came into 20%down for new home and also got rid of a lot of debt (sold pickup truck) that I had.
Thanks for feedback
- 12yDaniel DietzPro MemberRental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
Sounds like Joel is giving you some good things to think about above. I too am going through a similar situation of owning one that is for sale, and has no mortgage. It is at the top of our price range for our market (300K+). I am also JUST starting the process of getting permanent financing for the one I am living in which started as a flip. The one I am in is ALL 'others peoples money' (family) part cash and part a 'commercial loan' from our local community bank.
The loan for the flip was no problem with underwriting I think mostly because they keep it 'in house' and being commercial it is only fixed for 3 years in this case. This bank has always been great for commercial loans for my 'day job' business (small contractor).
I am talking to both a Broker and this same Community Bank in regards to the permanent financing for the house I am now in. The Broker mostly because I was hoping to qualify for one of the special <5% down loans (all my cash is tied up in the house that is for sale) which does not look promising :(.
I too work for and own part of our family business, but <10%, and get a K-2 instead of W-2, and take a consistent monthly draw - so my income shows TWO years of 'steadiness'. Neither lender thought that should be an issue even with NOT in-house loans. The Community Bank pretty much guaranteed me I could get their in house permanent loan, but it is only 15 years and 1% higher than the traditional 30 year fixed, so I would prefer the 30 year (free up more future funds for more deals).
I do have an excellent credit score of about 780+ and have 150K of equity in the house that is for sale too (ex-wife gets the other 150K :( ) and the new house for me is a total cost of about 150K. My issue right now is coming up with the 30K or so down for 20% to get the traditional 30 year loan. They did both say I could do a HELOC on the house for sale for that 30K, but I am hoping to just sell it and avoid the loan fees for a HELOC which might only be needed for a few months. (we JUST listed it this week).
I will try to remember to update this as I hear back from them after underwriting.
Dan Dietz
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes12y
Explain why you're moving down. It indicates you may expect less income.
Don't know how they know it's a W-2 from a family corp unless the verifications came back with same name or you told them. Now, that's an indication of expected business performance they can't go into, dad could have said we're gona have rough times next year, brace yourself! You have inside information to operations that other W-2 employees don't have. Almost like self employed. Then, they see you're stepping down.
Might offer some corporate info to support the expected salary/earnings to continue.
Tell them you don't want to live with room mates to pay housing expenses and that your standard of living is improving, that you don't need the excess room.
Moving down, by someone who is expected at their age and position who should be advancing economically, indicates that a borrower has expectations of changing jobs, taking time off, maybe going to school, or expects some other incident/situation and they are moving into a survival mode.
Moving down is common for those ready to retire, empty nesters, divorced or having family changes. :)
- Investor · Hoffman Estates, IL · Member since 2014 · 434 posts · 185 votes11y
Working for a family owned business is a higher risk. Typically a lender will require tax returns to verify the income. What they are looking for is 1) ownership in the company; 2) fraud.
The thought process is that if you knew you were going to try and get a loan you could get a "raise" from your family member just to make sure you qualify. They want to be sure that your income is legit. A lot of people will have their family members on payroll but not actually working, mostly for tax breaks. That's bad news bears to a lender.
Just provide the lender with a signed letter of explanation on why you're downgrading, and be as detailed as possible. It needs to "make sense". That's the biggest thing.
Hope that helps.
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