Most Common Reasons Loan Applicants Get DeniedNeither lenders, or real-estate agents needs any “practice” working on transactions which don’t close escrow!

Unfortunately it too often happens because some buyers obscure try hide “their issues” until it’s too late.

The key for agents using a lender who will discover any deal killing issues before offers are written, before you waste gas, money, and time.

The simple solution: Encourage your buyers to submit a full loan application for “DU” loan approval before you invest effort into them.

As a result: any credit, income or down payment issues will be exposed long before you begin writing offers.

Buyers also benefit also as they will close escrow faster, get a lower interest rate and avoid any last-minute stress brought on by poor preparation.

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.

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  1. FHA /  Fannie loan limits too low for the county the property is located in

  2. Little or No Income reported on Tax returns

  3. Poor credit management Fico Myths

  4. Buyer shows large losses on rental properties

  5. High DTI (Debt to Income) Ratios

  6. Mortgage rates rise dramatically

  7. Buyer changed careers recently

  8. Job history limited / Inconsistent

  9. Inability to verify key info i.e. bonuses, overtime, liquid assets

  10. Not enough liquid reserves after close of escrow (2-3 months for conventional – (FYI: Zero for FHA) – 6-12 months for “Jumbo loans”

  11. Buyer is a co-signer for other loans

  12. “Layered risk” – too many “questionable or conflicting issues” about the buyer

  13. Collection Accounts other past credit delinquencies

  14. Self-employment issues

  15. Limited credit history Credit scores too low

  16. “Down payment/ Gift” money isn’t seasoned or traceable (i.e. “mattress money”)

  17. Inheritance sale – squabbling among siblings or probate sale moves too slowly thru the court system

  18. Termite Issues

  19. Past foreclosure, short sale, BK

  20. Property not really owner-occupied

  21. Undisclosed liabilities – the investor always discovers them

  22. New or closed credit accounts

  23. Buyer’s or Seller’s unpaid tax liens/ unpaid child support / student loans

  24. Credit bureau errors

  25. Inexperienced loan officer

  26. Divorce issues for buyer or seller

  27. Solar lease on subject property

  28. Simple clerical errors

  29. Fraud

  30.  Undisclosed relationships with seller – non-arms-length transaction

  31. Buyers attempts to buy multiple properties at the same time (occupancy fraud)

  32. Property doesn’t appraise at value

  33. Defects on property / non permitted work

  34. Giver of Gift $$ can’t or won’t provide proof of funds

  35. Poor communication between Escrow-RE Agent-Loan Officer

  36. HOA Issues (litigation / under insured)

  37. Low owner occupancy (Less than 50% for FHA)

  38. One condo owner owns too many units in complex (10% +)

  39. Lender “overlays” additional underwriting criteria over & above what Fannie -VA- FHA requires

  40. Buyer has too many properties with mortgages (10 is max for hard $$- 4 for Fannie and Freddie)

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    I hope this post helps you earn commissions!

    Daniel Dobbs (.org)

    MLO – Broker
    Mutual Home Mortgage
    265 S. Randolph #120
    Brea, Ca. 92821
    Cell: 949 250-3981

    Dandobbs6@gmail.com
    BRE # 00986886 …..NMLS# 307631

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