Why Approved Loans Get Declined
When something goes wrong with your loan approval, who’s responsible?
Have you been told that you qualify, then all of a sudden you’re being told that you don’t qualify?
Did your loan officer tell you that the loan program was discontinued, or changed?
Did you loan officer tell you that there was a change in underwriting guidelines, and now you don’t qualify?
I have heard of all of these scenarios being told to homeowners and homebuyers that believed that they were in the process of getting a home loan.
In any of these cases, your home loan is abruptly declined and you are left in shock, wondering what went wrong, why it went wrong, and who’s to blame?!
Understanding Underwriting Guidelines
The key to understanding how something like this can happen is to understand how underwriting guidelines work.
When you are applying for a Conventional, FHA, VA, or USDA loan, you are following the qualifying guidelines as laid out by each of these programs.
While there are definitely nuances to each, there are also many similarities. All loan programs require that you show the ability to repay the mortgage by proving income, employment stability, credit history, and in many cases, savings, just in case of an emergency.
Once your loan application complete, your credit report and all of your supporting documentation is submitted to an underwriter for review.
The underwriter will consult the underwriting guidelines for the loan program you are applying for to make sure that you meet all of the qualifying requirements.
While some underwriting guidelines are very specific, many guidelines are exactly that, just guidelines that provide direction, or a general “spirit of the guideline” that acts more like the process of our court system, and the laws that govern society.
Your loan officer is similar to your attorney, deciphering the spirit of the law (guideline), and making a case to the underwriter and management as to why your loan falls within the risk threshold described in the underwriting guidelines.
It’s not the common ground or the similarities that would cause you to be approved, then denied. It’s the details, the question that were not asked, or the questions that were asked wrong that will cause your loan to go off the tracks.
When you lose in underwriting court, it’s because you are being represented by a lawyer that does not know the laws.
The Importance of Experience
The experience, and competence of your loan officer is where the overwhelming majority of your ability to qualify lies.
In some cases, the loan officer will make a mistake that can be overcome by providing additional documentation, or explanation.
In other cases, the underwriter can make a mistake, or interpret a guideline in a way that is not necessarily consistent with what the guideline is intended to address.
In either of these cases, your success, or failure to qualify depends heavily on your loan officer.
The Quickest Way to be Disappointed
The problem with many of today’s most popular mortgage companies is that there is little importance being given to hiring experienced loan officers.
These companies spend millions of dollars on television commercials trying to convince you getting a home mortgage is as easy as downloading an app, or pushing a button.
Other companies try to convince you that if you complete a loan application on their website, that loan officers will compete for your business.
Yet other companies like to guarantee you the lowest interest rates without having any information about who you are, what your financial situation is, or what you qualify for.
In all of these cases, the money that is being spent so that you know their name is money that they are not spending to hire experienced professionals that are capable of solving complicated situations that most average people are faced with.
If you’ve called one these call centers filled with “customer service” telemarketers, or had the misfortune of having your information sold to 27 lenders that will not stop calling you, or if you’ve discovered the hard way that everything you read on the internet is not true……you’re not alone.
Unfortunately, the role of the career loan officer has been buried beneath promises of automation, simplicity and one-size-fits-all promises that rarely deliver the expected result.
Finding a Loan Officer You Can Trust
It really isn’t as hard as you would think to find an experienced loan officer that actually cares as much about you meeting your financing goals as you do.
Since starting this website almost ten years ago, I’ve since connected with several dozen loan officers across the Country that actually care, and know how to fight for their clients.
As much as it pains me to admit it, myself, and many of my loan officer friends make our living by fixing the screw ups that are common with these mass marketing mega lenders.
My advice to you would be this, take hiring a loan officer as serious as you would if you needed a lawyer, or doctor, or other professional service that puts your livelihood, your finances, and your health at risk.
There is nothing more stressful than spending money on appraisals, inspections and movers, only to find out days, or weeks before you’re supposed to close, that your loan officer made a mistake, and you actually do not qualify.
Because your loan officer, like your attorney, is responsible for presenting your case to the underwriter (the judge), a poorly prepared case is going to find you on the wrong end of a decision about whether or not to lend you the money to buy, or refinance your home.
I see this every single day on this website. Thousands of wasted dollars, hours of stress and worrying, dozens of questions, comments and inquiries as innocent consumers scramble to get answers that make sense about how they could have gotten so far into the process only to be turned down at the last minute.
Don’t Take No For an Answer
Don’t worry, there is a happy ending to this story. More often than not, the mistakes that are being made are not the final answer. There is hope.
The single most common challenges I hear are simply misinterpretations of underwriting guidelines, or a misplacement of your loan into a loan program that you never qualified for in the first place.
Far more often than not, there is a solution that can be achieved by using a loan officer that has experience with the particular scenario that caused the other lender to stumble and fall.
When the loan officer makes a mistake, that doesn’t necessarily mean that you didn’t qualify. It often means that you are just working with a loan officer that’s taking you down a dead-end path.
A simple shift in direction can often overcome challenges that stop inexperienced loan officers in their tracks.
The most common challenges that I see that are easily overcome include families buying after a bankruptcy, foreclosure, short sale or deed in lieu of foreclosure. The next most common challenges that inexperienced loan officers make are when you have student loans with income based repayments.
Self employed, second jobs, low down payment, less than perfect credit, divorce, manually underwritten FHA and VA loans are among other common challenges that can often be overcome.
Need Help Finding a Loan Officer?
The most difficult part of trying to qualify for a home loan is finding a loan officer that knows the underwriting guidelines, has experience with your particular situation, and is willing to fight for you.
If you would like an introduction to a loan officer that has experience with underwriting guidelines and can help, you can catch us most days taking questions through live chat on the lower right corner of this article, or answering questions in the comment section below.
Please feel free to ask any questions below, on chat, or by email.
This is also a great opportunity for you to anonymously ask an experienced professional that has no financial interest in how how your question is answered.