I received a pre-approval letter on a mortgage loan for a house I was interested in buying…?

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I had already paid their commitment fee and appraisal fee, paid for the house to be inspected, and put up earnest money…One week before the scheduled closing, the lender came back and informed me that they were not going to approve the loan. Does that happen often? Is there something that I can do to try and reclaim some of the money that I have already invested?

I’m in the process of buying a home. First time buyer. The loan company said that they need a letter from my parent’s stating that i been living under there ruff… Is there any examples or websites of where i can find letters like these…just need a little help how to start it (for my parents)…thanks.

10 Comments
  1. Reply
    Professional Peon
    February 9, 2011 at 9:26 am

    Yes it can happen if they find something when they underwrite it. A preapproval is nothing concrete it is a letter from the loan officer, basically it says that you should be ok for approval if everything you told them was correct. You should have had a commitment letter issued to you. If that was issued, then it should have listed the required documentation. Did you get that letter and return what they asked?

    It can happen alot, especially if people overstate their income or savings.

    Did they say why they won’t approve the loan?

  2. Reply
    heartoworship
    February 9, 2011 at 9:33 am

    Yes as a Realtor we see this happening now quite often, It is very important to have a good broker or banker, with out one you can spend countless hours looking for houses on the false assumption that you are approved. With the new changes issued by HUD “Dept of Housing & Urban Development” it will be even more important to have a broker/banker and Realtor/Agent than ever before. Your Realtor should have checked the loan situation before allowing you to spend that kind of money. In NC where I live, depending on your contract dates, you could potentially lose your earnest money in a situation like you are in. I would check on that ASAP! Sometimes sellers will buy back the inspection report,(usually at a discount) to have it, make some repairs, and show that to future buyers. Hope this helps! Brandon

  3. Reply
    godged
    February 9, 2011 at 9:48 am

    You probably signed something that said you realize that you are paying these fees up front and have no recourse.

    The commitment fee is total nonsense, no reputable lender charges such a thing.

    Hopefully, you have some language in your contract that says your offer is contigent upon you obtaining financing, so at least you will get your earnest money back.

    Unfortunately, this is happening more and more as lenders/underwriters become ridiculously scrutinizing of every loan package that comes across the desk. The goal is to find reasons not to write the loan. Thanks bankers! (Read sarcasm there)

  4. Reply
    Landlord
    February 9, 2011 at 10:24 am

    Yes, you should recover your earnest money as you were unable to obtain funding.

  5. Reply
    Beverly S
    February 9, 2011 at 10:32 am

    You should get back your earnest money if your loan is declined. As for the rest sorry no. A pre-approval letter is assuming that everything is exactly as you originally told them. There are many things that can change it during processing- something must have changed. It can be something like a rate increase that caused your DTI to be too high, a credit issue that they weren’t aware of, an issue with the title to the home etc. I would guess about 15% of the time something happens- they should tell you why though. Sorry!!

  6. Reply
    Carol
    February 9, 2011 at 10:45 am

    Happens more frequently than buyers would like. The blame could be placed on many different shoulders. You did not say “why” your loan was turned down, so I can’t be specific.

    When you get pre-qualified or pre-approved, that approval is based on a given set of circumstances given to the loan officer. Based on that info, you get approved.

    If during the course of you actually buying the house, something in these circumstances changes, then the buyer can lose the approval.

    The reasons could be numerous:

    1. Low appraisal
    2. Unverified income
    3. Insufficient down payment
    4. Insufficient cash to close
    5. Buyer took on additional debt after the initial approval
    6. Credit scores decreased
    7. Problematic condo purchase
    8. Liens uncovered through title search
    9. Unacceptable employment
    10. Underwriting guidelines changed

    ….. and many, many more

    If not explained properly to the borrower, many do not understand that the approval still hinges on the details of the final transaction. “Changes” to the transaction can kill the approval.

    It is unusual to pay a commitment fee upfront. The other costs are customary.

    Hopefully your purchase contract was worded properly so that the deposit is returned to you in the event you do not get mortgage approval.

    The way you phrased your question sounds like you think you are doomed. Is it your opinion that the reason you were denied will occur even if you went to another lender?

    Good luck.

  7. Reply
    daeve930
    February 9, 2011 at 11:11 am

    Did they say why they weren’t going to approve the loan? It’s probably a problem with the house or the chain of title, rather than with your credit, unless something has changed since you were approved.

    When we approve a loan, we’ve examined 3 things, you (your income, credit score, debt ratio, assets, employment, etc), the physical building (the appraisal and flood certificate) and the chain of title (who has what rights in the house). Since you were pre-approved, the you part should be fine, unless you bought something big, lost your job, declared bankruptcy…anything major happen? It could be the value of the house won’t work into the approved loan to value ratio, or that there’s a cloud on the title…lots of things come up.

    We are not working to decline loans. I can absolutely tell you that at my bank (a very big one) we approved, process and close gazillions of loans every month.

  8. Reply
    Cheryl G
    February 9, 2011 at 11:53 am

    Very simple:
    To Whom it may Concern:

    This is to certify that (your name here) is our daughter and that she has been living under our roof at (parents’ address here) since (date here).

    Very truly yours,

    (Parents’ sign here)

  9. Reply
    MoneyMatters101.com
    February 9, 2011 at 12:07 pm

    All the lender is requiring is a simple letter stating that you are living with your parents. The letter can begin like this:

    To whom it may concern,
    My son, or daughter, is currently living with us and has been living with us for the past _____ years. If you have further questions regarding this issue, please contact us at_____________________.

    Thank you very much,
    Mr___________________
    Mrs.__________________

  10. Reply
    Emilee
    February 9, 2011 at 12:31 pm

    Mortgage loan is a term used for the loans secured by a property. Mortgage loans refer to a loan secured by residential property, often for the purpose of securing real estate. Mortgage loans are priced lower than other loan structures because the value of the property risk for the lender.

    http://www.worldbestloans.com/Mortgage%20Loan.htm

    A fixed rate mortgage loan has its own benefit. If the borrower is budget conscious, he will remain at peace because the monthly mortgage amount will not change.Fixed rate mortgage loan is a loan where the interest rate remains the same through the term of the loan. Fixed rate mortgage loans are the most traditional form of loan.

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