Mortgage Denied? Don’t Cry. Make Better Choices.

September 6th, 2011

A large, well known bank, who the client described as “well established with comparable rates, so we are going with them”, has rejected a home buyer’s loan after almost 90 days in process. The seller has already given extension after extension. Now the sellers are furious, the buyer’s are literally in tears, and are asking me to take over the loan and get them to settlement in 7 days. That is impossible, no one can get a new loan done that fast. The husband told me, in tears, that he had to have this house to move into, and that he was desperate for more space for he and his growing family. Mortgage consumers need to make better choices, and not shop by price alone.

I had a Realtor who called me, who is leaving the business because it is so tough, and he wants to move on to something easier. He has one deal left in process, and says he desperately needs the money. The loan has been rejected by a large bank, for reasons that are baffling, and he wants me to step in and save the deal if I can. I checked over the numbers, and the deal seems workable to me. The Realtor, while not in tears, is very upset.

A client whose refinance loan was in process with me left for a slightly lower rate (1/8%), about one week prior to settlement. I told him he had a very difficult loan, and that I checked with 15 lenders, and only found one that would do it. He said he had to, “do what is best for his family”. I tried to explain why he could not simply call just anyone, and shop by rate alone, but he did not listen. Two months later his loan was rejected, and he came back crying (literally) because he said his family needs the cash out he was aiming to get from his cash out refinance, to buy a new property. His loan was for an investment property, condo, cash out refi; all of which includes some of the most shied away from loan categories in the business. The mortgage industry does not like investor loans in general right now, is not highly fond of condos and has lots of special restrictions on them, and is hesitant to give cash out on any deal. All of this, and the borrower had very high debt ratios to boot. How the client thought beggars could be choosers I have no idea.

And last, I had a condo purchase deal where the lender did not even tell the buyer he can’t use the $20,000 seller credit he had negotiated with the seller, to pay for two years of condo fees. You can only use a seller credit towards closing costs. But he heard what he wanted to hear, because the other lender supposedly had a better rate. I am not quite sure how a better rate matters when you are not going to get your mortgage approved. And I am not sure how a better rate matters when the lender clearly does not know the underwriting rules! He went with them anyway for the lower rate, even when I pointed out their important oversight. Do you think there are future problems coming? Think he’ll be upset or  in tears someday soon?

I write about mortgage blow-ups at other lenders about once every few months, but I get enough material to write about them daily. It simply fascinates me that 98% of us SHOP BY PRICE ALONE, and no one asks about experience, execution, fees, turn times, organizational structure, etc. And then when problems arise, consumers have the audacity to complain to friends, and write their Congressperson, complain on opinion websites, write letters to management, scream at people, etc.

Please, please, please, do not shop by price alone. And even if you check all the other issues, do not put price first, and then put other things last. Price should be in the middle of the pack of reasons you use a particular mortgage lender. We all have about the same rates, give or take 1/8%. It is not worth the tiny margin to go with an unknown for a small variance.

There are numerous things to check when shopping for a mortgage, and there are numerous reasons to ask about them. Check this link for more.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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