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How can I get pre-Approved but declined by underwriter?

Everything has passed and is good to go, but now the under writer is saying no due to residual income. What can I do and is there any legal remedy against the lender if this does not go through? I have spent over $2,000 and the sellers have spent even more! by zappydog577 from Collettsville, North Carolina. May 23rd 2017 Reply


Really sorry to hear about this. A loan officer should calculate residual income as part of the qualification process. Let me know if you want me to take a second look at this for you.

May 23rd 2017
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Phil Dumouchel (PhilDu)
#32 ranked lender in South Carolina - 2,224 contributions

Sounds like this is a VA loan, sometimes there are additional details not known at the time you are preapproved that change the residual income calculation. There are options to address that issue. Depending on the gap: you can pay off debt, or the seller is also allowed to pay debt on your behalf; find less expensive insurance (costs can vary 50% or MORE from one provider to another - don't assume they will all be similar); make sure the lender has accurate property tax info they are using to qualify you. I'd be pleased to help you work it out but your closing would be delayed going to a different lender.

May 23rd 2017
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William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,788 contributions

The realty is that you were never pre approved.. you were pre qualified.. The lender looks at your loan profile, including income, debt, and for VA loans, residual income, and makes a determination that he feels confident he can get you approved. this is what a pre qualification is.. Pre approval, is when the loan officer takes all your documents and forward them to the underwriter, and the underwriter looks at you, your credit, your job, your income and your residual income, and makes a decision that you can be approved subject to an acceptable property.. this is a "pre approval".. Unfortunately, loan officers are not underwriters.. Although a really good loan officer will look to see if you have sufficient residual income to meet eligibility requirements, the reality is that most loan officers are not that sharp.. Any documents that you received from the lender had a clause somewhere (they all do), that says your pre qualification is subject to final underwriter approval. Unless you can prove the lender did something illegal, then there probably is no "legal remedy" available to you.. Also, a good loan officer can analyze your complete profile and maybe come up with other options (such as what Phil suggested).. My suggestion is to go back to your loan officer and ask him if there is a way to improve your scenario.. if he has nothing.. then go to a different lender.. Again, some loan officers only take applications.. once they have that, the file get's passed along to someone else who does all the hard stuff.. and when a loan officer does the hard stuff, they get really good at their job... I'm a preferred Lender with Arizona and California being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893

May 23rd 2017
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Michelle L. Shortsleeve-Garcia (mlshortsleevegarcia)
#4 ranked lender in North Carolina - 4 contributions

William was very correct. Your loan officer probably ran your credit and put your income in by what you said. Then sent you out house shopping and simultaneously collected your documents with your contract. Once the documents were processed - then there was an issue with residual but you were too far into your contract - up front underwriting is always the way to go. But in your case - it is reviewing to see about paying off expenses, lowering insurance, lender credit - see how far off you are on residual income . What about going fha with down payment assistance? There are other avenues to explore. Good loan officers exhaust all measures!

May 23rd 2017
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John Burke (jburke)
#1 ranked lender in Texas - 183 contributions

Hi Zappydog577,The most important thing you can do right now is get a 2nd opinion from another lender! I specialize in VA & would be happy to help. | Please feel free to contact me for more information or help. | John Burke | Senior Mortgage Banker | Great Plains National Bank http://www.valoansdoneright.com | (877)228-9069 | Lending in ALL 50 states

May 24th 2017
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