40 Most Common Reasons Loans Get Denied

If you’re considering buying a home, whether that be a replacement property, investment property, or your first home, it’s important you enter the home buying market guns blazing. What we mean by this is that, while the market is showing signs it’s a good time to buy (rates are low, inventory is up, appreciation has slowed), this doesn’t mean that once you make an offer on a home it’s a done deal. Aside from continuing buyer competition, there is also the chance that the deal falls through because of your financing. That’s right! If you’re need a loan in order to purchase a home, that loan could be the cause of you losing the home if you don’t properly prepare and choose the right lender. A good agent will point you in the direction of the right people. Above that, the best agents will know how to prep or “stage” you as a buyer so something like this doesn’t happen to you. 

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 as the contingency deadlines loom!

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 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 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 ( Christams / New Years) – National Holidays -FLU season

Want to know how to void all 40 of these, stage yourself as the best possible buyer, and save money while you’re at it? Call our 24/7 recorded hotline at 877-957-6677 and listen to our recordings for Saving Buyers Thousands. 

The Kurt Real Estate Group | Distinct Strategies. Record-Setting Results.