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Most Common Reasons Loans Get Denied

As a homebuyer, the last thing that you want to experience is any of the following deal killers. The good news though, is that in most scenarios these deals can be saved when using the right lender and real estate advisor.

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

  2. Little or No Income reported on Tax returns

  3. Poor credit management 

  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 COE (2-3 months for conventional – (FYI: Zero for FHA /  VA) – 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 who is evasive

  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 through 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 recently 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. Seasonal Issues ie. long weekends / vacation times ( Christmas / New Years) - National Holidays -FLU season
Disclaimer: This article is provided for informational purposes and should not be relied upon as legal advice. If you would like to work with a Skyworks Group advisor to ask questions or receive advice, please contact us directly.