What happens when a borrower gets a commitment and then the same borrowers gets denied because of new information?
Well this happened to Lisa. Lisa went into contract on a home in Haverstraw NY, in August, got a commitment in September and was subsequently denied on Dec 31, 2010. She had provided paperwork again and again,sometimes duplicates, she had paid down her debt and she had complied with everything that the bank that she has applied with required. To compound matters, she actually moved into her new house in October, renting the home from the seller until the closing, which both parties thought would happen in days. But the months dragged on, paperwork was submitted and then ultimately the denial letter received on December 31, due to her credit score dropping below an acceptable level.
Three questions come to mind
1. This was a major bank, well known and prestigious with multiple branches across the region, state and country, why did they lose her paperwork requiring her to submit duplicates?
2. Why didn’t she close once she got her original commitment within a short time frame?
3. Why didn’t they try to help her rectify her credit?
I don’t know the answers to all the questions. What I do know is that the “Big Banks” have to go through the same hoops and jumps as the smaller more boutique style mortgage bankers. We all follow the same basic guidelines and underwriting requirements. Large banks though do other things besides mortgage lending. They also do car loans, truck loans, education loans, business loans, saving and checking accounts etc. Mortgages are just a small piece of the business that the larger depository lenders do. Because of that, they may add stricter overlays on the basic guidelines like requiring a higher credit score or a more conservative debt to income ratio. Their mortgage personal may not necessarily be better trained or experienced and/or they may be overwhelmed with clients so if something doesn’t work out, they are already on to the next client.
When Lisa came into my office on January 5, she was devastated and her confidence was shaken. She told me that she had been so excited about buying a house and now she just wants it over with and she was very worried as to whether she would get her $25,000 down payment back if she could not get a loan. I looked at her credit and I saw that there was a current late to Best Buy for $26. She told me that the balance had already been paid in full and that when she moved to the new house, the bill didn’t get forwarded and Best Buy had sent her a letter stating that they would remove the late payment. I got that letter from her, did a “rapid Re-score” of her credit and last week, on Tuesday I got her new score and it was 35 points higher than before. Her file was submitted, we got a commitment and we hope to close on January 31.
Lisa’s story is not unique. The mortgage professional that you go to is key in you getting a timely approval and facilitating your moving into a new home as painlessly as possible.
