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Hi, month ago applied with my bank to get pre-approved for the mortgage. I wanted to borrow around 400k. I already have mortgage for my apartment which will be paid off in 4 years, so basically I have 300k in home equity right now.
I also have the same amount in cash. No other debts except mortgage, credit cards paid off every month, 110k+ salary and also other income 60k plus yearly. Credit score 815+
However, just got the letter that I was rejected for the loan, reason: Excessive obligations in relation to income????
I am shocked and confused. I only have to pay off 60k for my apartment, and as I already said I have 300 k in equity at this moment.
My car lease will expire in two months and I won't be getting another car. Monthly payment is $240 right now.
What should I do now? What are next steps? I really wanted to buy a house in next few months but I don't know what to do now. Why didn't they offer any amount of loan to me?? I am confused why am I unacceptable candidate for mortgage?
I would like to hear from someone else, because I am not sure what should I do next?
What would the monthly payment be on the house you want to purchase with taxes and insurance? They are likely only counting our 110k salary as the other 60k isn't guaranteed income Why do you have a car payment if you have 300k sitting in the bank? Did you apply with the contingency of paying off your apartment or were you planning to keep that? If you are keeping the apartment the taxes and insurance on that, plus the car payment would make you ineligible for that high of a loan. Wait two months until your lease is up, and apply with the sale of your condo as a contingency and try again as that will lower you debt to income ratio. Or apply again with a lower amount. They only qualify or disqualify based on the amount you ask them to borrow.
It's all about your monthly debt-to-income ratio. It doesn't matter that you have equity in your apartment or only owe $60k. You have a monthly payment and that, along with your lease payment and your proposed new housing expense (to include taxes, insurance and HOA dues if applicable) are being counted as a monthly expense.
If you have $300k in liquid assets, you may want to consider paying off your apartment in order to qualify. You may even qualify once your lease is paid off if you don't incur a new debt for another vehicle. Talk to your loan officer. He/She should be able to run some numbers and give you options on how to make the deal work.
Are you planning to sell your current home before buying a new one?
If not; then that would probably explain it.
If you are planning to sell the current home before buying the next one; make sure the lender knows that. They'll tell you that you are pre-approved with contingency. Then you need to decide if you want to start looking for homes to purchase before selling your current one and probably placing a contingent offer (not very likely to get accepted if you are in a competitive sellers market)....or wait until your current home sells or is at least actively listed on the market.
Thank you all!I didn't want to sell apartment, wanted to rent it for another few years. I thought that having enough money for downpayment will do for pre-approval. Ok, I'll try again when the car lease ends. Maybe think about selling the apartment, I want to buy in a really competitive market, so no way they would wait until I sell my home, that is out of the question. Houses are sold after day or two and often way above listed price.
The other income is from my own company (we are young, started 3 years ago... This year we will probably end with 100k profit), and I think we can only get better. Maybe I should wait few more months, but I really need to buy a home as soon as possible. At least until summer 2019.
I learned a lot from you, my loan officer is not giving me enough information, will definitely change him.
Someone did not do their job correctly. You should have received a counter offer, outlining alternate scenarios in which they would lend. This sounds so like a big box bank move. Say no......and onto the next. You need to get to the bottom of this and get facts and details. Your car lease must be 100% finished on your credit report or the lender will assess a payment against you (as required by guidelines when it comes to car leases). If your lLO won't provide details, find another, even if that means another credit pull. With your score, it will not make a difference.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Carrying a high balance on your credit cards even though you pay them off each month will hurt you at tine of application. They will assume they are not paid off and will calculate monthly payments on them hurting your dti. Make sure they are really low when you apply and keep them there until you close.
You also failed to tell us what your mortgage payment is now as that will be held against you.
Btw I would go to a mortgage broker, not a bank. Most are more knowledgeable than an employee in a large bank.
Thank you all!I didn't want to sell apartment, wanted to rent it for another few years. I thought that having enough money for downpayment will do for pre-approval. Ok, I'll try again when the car lease ends. Maybe think about selling the apartment, I want to buy in a really competitive market, so no way they would wait until I sell my home, that is out of the question. Houses are sold after day or two and often way above listed price.
The other income is from my own company (we are young, started 3 years ago... This year we will probably end with 100k profit) This might be a source of confusion. The income calculation for your business involves using net income, after write-offs, not gross. Depending on how you file, it can be confusing. If you file personal returns only, look at Line 31 of the Schedule C. Average 2017 and 2016 total by 24 months. You might add other components, but detail cannot be provided in this format without reviewing your tax returns and income statements., and I think we can only get better. Maybe I should wait few more months, but I really need to buy a home as soon as possible. At least until summer 2019.
I learned a lot from you, my loan officer is not giving me enough information This is absolutely true, let another lender look at your income without pulling your credit., will definitely change him.
You need a loan officer who will sit down with you and run scenarios.
From what you've said, your debts are excessive in relation to your income. Say a $400k mortgage payment will be $2500/mo (this is a pretty variable number, depending on taxes, insurance, and possible HOA fees). You currently have a $900/mo mortgage payment, a $240 car payment, and $1000 in credit card payments. That gives you $4,640/mo in liabilities. Your monthly gross income is $9,167 for your primary job. I can't speak to what they can use from your self-employment income without knowing what deductions you're taking. A lot of self-employed borrowers make the mistake of writing off every cent they can and then looking like they make no money. So without using any self-employment income, $4,640/$9,167 gives you a debt-to-income ratio of over 50%, which will disqualify you for almost any loan.
That's why you need a loan officer to go over your self-employment income to see what is usable, as well as examining your debt to see what could be paid off using the $300k you have in the bank to make you look like a more acceptable risk to lenders. Pick someone new that you can meet with in person.
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