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40 Most Common Reasons Loans Get Denied
If you're considering buying a home, whether that be a replacement property, investment property, or your first home, it's important you enter the home buying market guns blazing. What we mean by this is that, while the market is showing signs it's a good time to buy (rates are low, inventory is up, appreciation has slowed), this doesn't mean that once you make an offer on a home it's a done deal. Aside from continuing buyer competition, there is also the chance that the deal falls through because of your financing. That's right! If you're need a loan in order to purchase a home, that loan could be the cause of you losing the home if you don't properly prepare and choose the right lender. A good agent will point you in the direction of the right people. Above that, the best agents will know how to prep or "stage" you as a buyer so something like this doesn't happen to you.
The following is an in-depth list of deal killers which are all too common, many of which can be resolved IF a loan officer has time to adapt and restructure the loan package as the contingency deadlines loom!
FHA or Fannie loan limits are too low for the county the property is located in
Poor credit management
Buyer shows large losses on rental properties
Mortgage rates rise dramatically
Buyer changed careers recently
Inability to verify key info i.e. bonuses, overtime, liquid assets
Not enough liquid reserves after COE (2-3 months for conventional – (FYI: Zero for FHA / VA) – 6-12 months for “Jumbo loans”
“Layered risk” – too many “questionable or conflicting issues” about the buyer who is evasive
Limited credit history Credit scores too low
“Down payment/ Gift” money isn’t seasoned or traceable (i.e. “mattress money”)
Inheritance sale – squabbling among siblings or probate sale moves too slowly thru the court system
Undisclosed liabilities – the investor always discovers them
New or recently closed credit accounts
Buyer’s or Seller’s unpaid tax liens/ unpaid child support / student loans
Inexperienced loan officer
Divorce issues for buyer or seller
Simple clerical errors
Undisclosed relationships with seller – non-arms-length transaction
Buyers attempts to buy multiple properties at the same time (occupancy fraud)
Defects on property / non permitted work
Poor communication between Escrow - RE Agent - Loan Officer
HOA Issues (litigation / under insured)
Low owner occupancy (Less than 50% for FHA)
Lender “overlays” additional underwriting criteria over & above what Fannie -VA- FHA requires
Seasonal Issues ie. long weekends / vacation times ( Christams / New Years) - National Holidays -FLU season
Want to know how to void all 40 of these, stage yourself as the best possible buyer, and save money while you're at it? Call our 24/7 recorded hotline at 877-957-6677 and listen to our recordings for Saving Buyers Thousands.
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