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Old 08-11-2013, 12:06 PM
 
1 posts, read 3,983 times
Reputation: 10

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Hi there,

Found a home we liked (and consider this our forever home if approved).
Our bank (Wells) seems to be screwing us during underwriting.

Facts:

-Pre-approved in May for home price of close to 650. Went into contract on the home for around 600. 20 percent down puts us needing a loan of 480. Went into contract 2-months ago, and locked in a rate of 3.875. Non-conforming (jumbo) loan. 5 percent of down payment is in sellers attorneys account.
- two years of verified income with tax returns, and a year to date (bank asked for January - April)
- at least 20 percent down (15 percent coming in the form of a gift)
- post closing liquidity (at least 12 months mortgage payments). Have this in the form of a mutual fund (since the 90's)
- excellent credit score (+/- 800). I am under one of my parents credit card for 10 years, have my own debit card for 5 years, and, in December, it'll be 2 years under my own credit card
- no debt. no student loans. Cars paid off (underwriting is not counting my car payment as debt because I have under 10 payments remaining). Office building, practice, equipment, real estate being passed to me at no cost. No mortgages, or leases, on any of these.
- Credit card is paid in full every month (under 50 dollars). All of my transactions are debit card.
- I'm only on the loan. Wife has under 740 credit score and 25k in student loans. We did not include her.

Work as a dentist. Worked for 2 years with an immediate family member who was phasing into retirement. In sept 2012, I took over the business. The two transitional years (2011 and 2012)...
2011 - 68k (adjusted gross)
2012 - 110k (adjusted gross)
2013 - 170k (projected adjusted gross by using January-April numbers). Since April, numbers have steadily risen (underwriting has all of my bank statements).

Underwriting only used 2011 and 2012 as my income. I get that. Very understandable. They didn't use 2013 because its not official, but they still wanted it.

We also discussed that my debt to income ratio is not to exceed 45 percent, as determined by Wells Fargo. Averaged together 201, this becomes 89,000, or ~7,400 per month. 45 percent of 7,400 translates into me not to exceed debt of ~3,333 per month. Subtract 11,529 for taxes (official number for 2013 as per appraisal report), and that leaves me with 2,372.25 for mortgage and home owners insurance. If I subtract 100 a month for homeowners insurance that leaves me with 2,272.25. For a 30 year loan, with our locked in 3.875 interest rate, this leaves me with a 483,100 mortgage.

File went to underwriting 3 weeks ago. Heard nothing at all, and they know we are in somewhat of a rush because our apartment lease is ending.. All along I heard from broker I should have no problems. Called broker/processor for 3 consecutive days, and then underwriting magically got back to us saying we're not getting 480. They came back with 417. The limit for a jumbo.

Why did I not qualify for a jumbo? I've met all the criteria. My broker says underwriter considers me a "risk" because all of the patients may leave my practice and I could fall flat on my face. Really? Coming from a practice that's been in the same location and same ownership for 40 years, with consistent income?

Officer said if I applied next year with my 2012 and 13 incomes, I would be a shoe-in to get the loan according to underwriters.

So in other words, that 2013 year of income would be enough to show that I'm not a risk? That's 1 year since I've taken over. By standard underwriting criteria, wouldn't it make more sense to take the income of 2 years since I've taken over? I would like a better clarification of their idea of risk, because if their ideas of risk are patients leaving the practice, I would need to show income for 2013 and 2014.

What makes me a risk to lenders at this point in the game? I've worked at the same place for 3 years. I understand I'm taking over the business, but doesn't my year to date show a considerable increase in income, helping to show that in my case the risk is minimal?

Officer also said, if I had an MD after my name i'd be approved no problem, because they have a special program for MD's. Really? So being an MD is not a risk? Even with a fly-by-night start-up?? There is probably a program for MD's because they're in residency for at least 3 years, and their income is good, and more physicians graduate per year than dentists (or other healthcare professionals), so that the program would be more popular. Are they not aware that some dental residencies are up to 6 years? Or that schooling for dentists is considerably higher than medical school? Or are they not aware that the job outlook for dentists is better than that of physicians, and that per hourly week, dentists earn on average more? Not by ANY means knocking physicians, just directing my frustration towards the bank by their not offering a program for us.

I understand if my commitment to get a jumbo was ruled out because the down payment gift is too much or credit history doesn't date back a very long time (how much more do they need??). Fail to see the risk when MD's are not considered a risk by their view.

Now I am 63k short. If i'm a risk, why didn't they decide that from the very beginning, instead of twiddling their thumbs for 3 weeks??? Isn't it cut and dry? Volume is volume, I get that...probably swamped with a lot of applications. I'm just very frustrated. If underwriting is data and fact driven, I've satisfied their requirement. Was their decision arbitrarily made?

I told the bank I'm undecided what to do.

Can I switch banks this late and the game and try to close super quickly? In other words, could my file be transferred easily from one bank to another? I assume I lose the 3.875 rate? Or maybe a bank will work with me? Not sure how this works. I also would prefer not to lose the house, if the sellers find out i'm leaving the bank.

I've already written a letter to the bank for a rebuttal. Will underwriters counter offer?

Any suggestions? Sorry for sounding very frustrated. My search results here show that MANY are going through the same run-around and frustrations. Any thoughts would be appreciated!
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Old 08-11-2013, 01:30 PM
 
118 posts, read 378,851 times
Reputation: 95
How you tried a credit union?

My dad never has good experiences with banks, but amazing ones with credit unions.

When tried to get his home refinanced with a bank they asked him if he MILITARY PENSION(he's retired with 20yrs) was for only 1 or 2 years!!!!! Military pension is for life. He's been retired since the early 90s too.

Well, he went with his current credit union and got a very low interest rate with 0% upfront costs.

I would try a credit union and at the same time try to see if you can resolve the Wells bank.
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Old 08-11-2013, 01:39 PM
 
320 posts, read 384,936 times
Reputation: 471
Quote:
Originally Posted by hellothere11 View Post

Why did I not qualify for a jumbo?
...
Officer said if I applied next year with my 2012 and 13 incomes, I would be a shoe-in to get the loan according to underwriters.
I am sorry for your frustration, but it sounds as if you got your answer. You didn't earn enough in 2011 to qualify; wait a year and re-apply with your much larger 2013 income. Too bad someone didn't warn you about this during the pre-approval process.

Perhaps if you included your wife's income on the application you might meet the necessary threshold. You mentioned that her credit rating is 740? That is not a bad score. I agree that her 25K student debt isn't all that helpful, but surely she could still pay off her loans and contribute to the mortgage? As you pointed out, you're "only" 64K short.

At any rate, this is a setback but not a disaster. You sound young, with plenty of time to establish the requisite income. Alternatively, you could purchase a cheaper home. I know that it is heartbreaking to have a real estate deal fall through, but in the long run this is only a temporary setback.
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Old 08-11-2013, 02:03 PM
 
Location: Bloomington IN
5,861 posts, read 7,082,141 times
Reputation: 14068
I feel for you, but you should know that lenders consider those that are self-employed a higher risk. I'm sure they consider you self-employed and for under a year. As a business owner, the only dates that count are the dates you've owned the business. It doesn't matter if the business was in place for decades. You haven't owned it for the requisite 2-3 years. You've not "proven" your self-employed income for two years. My spouse has been self-employed for over 20 years. Even with that, we jump through hoop after hoop after hoop whenever we refinance or get a new mortgage. This includes a couple of mortgages with Wells Fargo. They want all of his business tax records and our personal tax records. He's had to show lenders contracts with clients, etc.

Unless you can find a small, local lender you have no choice except to wait another year to 18 months. Perhaps focus on improving your wife's credit score in the interim so that both incomes can be used.
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Old 08-12-2013, 09:18 PM
 
Location: MID ATLANTIC
7,598 posts, read 17,614,249 times
Reputation: 8078
What state are you in? Can you get the income/balance sheets for the practice? Do you have a supportive CPA?
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Old 08-12-2013, 09:23 PM
 
Location: Texas
42,203 posts, read 49,740,662 times
Reputation: 66975
Even at your highest income, I don't think you can comfortably afford that house.

Bank seems to agree.
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