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Why Are Mortgages Denied And How To Avoid Loan Denial

ByAlex Carlcucci

This Article Is About Why Are Mortgages Denied And How To Avoid Loan Denial

There is no reason why are mortgage denied. The number one and biggest reason why are mortgages denied is due to the loan officer not qualifying the borrower’s correction and issuing a pre-approval letter. Home Buyers and sellers put a lot of weight on the validity of a pre-approval.

Buyers and sellers count on loan officers to be professional and if a pre-approval is issued, they assume they can start packing and planning on moving at the anticipated closing date. Unfortunately, this is not always the case. First and foremost, a pre-approval letter should never be issued by a loan officer without fully qualifying the borrower. All of our TBD Property Underwriting pre-approvals at Gustan Cho Associates are fully underwritten and signed off by our mortgage underwriters. This is why Gustan Cho Associates closes 100% of all of our pre-approvals.

Loan officers are allowed to issue pre-approvals if they have carefully qualified borrowers and reviewed all of the documents. Homebuyers should never enter into a written real estate purchase contract without a solid pre-approval letter. Over 75% of our borrowers at Gustan Cho Associates are folks who are stressing over their mortgage process or could not qualify at other lenders due to their lender overlays.

Gustan Cho Associates Mortgage Group has zero overlays on government and conventional loans. We just go off Automated Underwriting System Approval (AUS) Findings.

Not All Lenders Are Created Equal

As mentioned in the earlier paragraph, there is absolutely no reason Why Are Mortgages Denied. The only reason Why Are Mortgages are Denied is that the loan officer did not properly qualify borrowers. Another main reason Why Are Mortgages Denied is because pre-approvals were issued prior to the loan officer not carefully reviewing documents. Loan Officers should get second and third opinions on cases they are not sure about from underwriters or other mortgage professionals. There should be no stress during the mortgage process.

Getting a last-minute mortgage denial can be an ordeal and extremely stressful.

Why Are Mortgages Denied: Agency Mortgage Guidelines Versus Lender Overlays

Not all lenders have the same lending requirements:

  • Borrowers who get denied with one lender does not mean they cannot qualify with a different lender
  • HUD, the parent of FHA, only requires a 580 credit score
  • However, most lenders may have higher credit requirements like 620 to 640 as part of their lender overlays
  • Gustan Cho Associates Mortgage Group has no overlays on government and conventional loans
  • We will explain on reasons why are mortgage denied and ways of choosing a lender where borrowers do not have to worry about closing their home loan on time

The mortgage process does not have to be stressful. There is absolutely no reason why a home loan should not just close but close on time.

Why Are Mortgages Denied: Transferring To Another Lender During Mortgage Process

Most of our borrowers at Gustan Cho Associates are folks who are stressing during the mortgage process or get a last-minute mortgage denial. As mentioned earlier, not all lenders have the same lending requirements on FHA, VA, USDA, Conventional Loans. Borrowers who are stressing out during the mortgage process such as underwriters asking for more conditions after initial conditions have been turned in or gotten a loan denial do the following:

  • Find out why there is stress
  • If denied, find out the reason for mortgage denial
  • Were minimum agency guidelines met?
  • Was it due to lender overlays?
  • Who issued pre-approval?
  • Was it the loan officer or the mortgage underwriter?
  • Not all lenders have the same credit score requirements
  • Was it due to high debt to income ratios?
  • Was it due to outstanding collections and/or charged-off accounts?
  • Late payments in the past 12 months?
  • Was it due to credit disputes?
  • Was it due to high balance student loans?

Choosing The Right Lender With No Overlays

Not all lenders have the same lending guidelines on government and conventional loans. Many home buyers are under the belief all lenders have the same lending guidelines on FHA, VA, USDA, and Conforming Loans. This is absolutely not correct.

All lenders must meet agency guidelines. However, every lender can have higher standards above and beyond of FHA, VA, USDA, Conventional Guidelines, often called agency guidelines. Any borrowers with over 740 credit scores, 20% down payment, 40% debt to income ratios, and no derogatory credit tradelines can qualify with any lenders. However, the main reason why are mortgages denied is due to overlays by lenders. Many loan officers will qualify borrowers since they get an approve/eligible per Automated Underwriting System Approval. There is stress and a potential chance of getting a last-minute denial that come into play when the lender has lender overlays.

Qualifying For A Mortgage With A Lender With No Overlays

Key in avoiding mortgage denials and/or stress during the mortgage process is choosing a lender with no overlays on government and conventional loans. Gustan Cho Associates has zero overlays on government and FHA Loans. Over 75% of our borrowers are folks who either gotten a last-minute mortgage denial and/or are stressing over their mortgage process due to overlays. Please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays to take your mortgage inquiries.