15 Surprising Reasons Your Mortgage Loan Could Be RejectedAvoid these 15 mistakes to get a home loan.

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  • Franklin

    The person that wrote this is clearly not educated in the mortgage industry. Credit utilization has close to nothing to do with the decision making of lenders and everything to do with credit scoring models used by Experian, Equifax and TransUnion. Secondly, borrowers cannot be denied a loan because it is too small. This is a clear violation of ECOA, which is now closely scrutinized by the CFPB. Accounts in collections are not deal breakers for lenders, while accounts that are judgments are.

    This site is very well designed and has a lot of information, but nearly everything written in this article is either incorrect or severely lacking necessary content and explanation. There is enough misinformation for borrowers, please do not add to the problem.

    • GBR Casey

      Hey Franklin, do you work in the mortgage industry yourself? You’re obviously very passionate about the topic …but I do stand by all of the information I included in the post.

      Glad you at least like the design of the site.

      • franklinanthony

        Casey, I do work in the industry and have over the last 10 years. You can stand by the information, but it does not make it correct. I will use #10 for example. The existence of a secondary market actually increases the likelihood of loan approval because there are more options available to the consumer. If banks could only underwrite based on their risk standards, then options would be far more limited and narrower in scope. Due to the opportunity to sell loans on the secondary market and the existence of mortgage backed securities, lenders can provide expanded options.

        To use a loose analogy. Say you live in a small rural town that has one car dealership. There is no competition and no other options. You go to that dealership and essentially buy the car they sell and have a tough time negotiating a better deal because there’s no other dealers in town. Twenty miles down the road, the town has 7 car dealerships. That town is similar to the secondary market. There’s more dealers, which means there’s more competition and different brands of cars avaiable. Competition will typically lead to better prices and options for the consumer. It’s no different in the mortgage industry.

        Part of the reason we saw economic collapse, which started in the housing and lending sector is because the secondary market became too lax with underwriting standards. MBS became so profitable, that the market just wanted the product quicker, therefore cutting requirements for the loans. The market is much tighter because there are less players in the secondary market, but to state that the secondary market is a reason your application could be rejected is misunderstanding the secondary market and its function.

        • GBR Casey

          Let me provide you with a couple of resources that reinforce why #10 is included in this list:

          From a lender with Sonoma County Mortgages:

          “the mortgage companies that create and bundle the loans to be sold in the secondary market do not want to put themselves in selling a risky asset to Wall Street. If that mortgage loan goes bad, it falls back on the mortgage company and their ratings with the secondary market fall. This is the type of activity that can make or break a successful mortgage company.”

          http://www.sonomacountymortgages.com/2012/02/loan-denied-mortgage-company/#ixzz2W1YxL4Nw

          From MSN:

          “Mortgage lenders naturally want to avoid repeating mistakes, so it’s not surprising that they would look more closely at applicants’ financial situations. But changes in the secondary mortgage market have made them extra cautious.

          Greg Cook, a licensed California real-estate broker and mortgage banker, says that it used to be easy for lenders to get their loans insured by the Federal Housing Administration or guaranteed by Fannie Mae or Freddie Mac. Only in the case of fraud would these organizations require lenders to repurchase a mortgage.

          ‘Now, if FHA feels the lender didn’t follow guidelines, (it) can refuse to insure and the lender has to pony up the cash to replace the funds on (its) warehouse line,” Cook says. “Multiple buybacks can bankrupt a small lender.’

          With lenders facing greater responsibility for the loans they originate, they have no choice but to be extremely cautious in approving borrowers.”

          http://realestate.msn.com/article.aspx?cp-documentid=25828886

          • franklinanthony

            Are secondary markets tighter than in the past? Absolutely, but that does not mean the secondary market makes it more difficult to get a loan. The secondary market does not prevent someone from getting a loan. The statement below is false:

            “This is pretty tough to avoid, as most mortgage loans are often sold on the secondary market multiple times. This makes it harder for you to get a loan in the first place.”

            The key sentence that is false is the final sentence and again I refer to my previous post. The existence of the secondary market does not make loans harder to get, it actually expands the options because lenders are not only offer products for loans they will keep.

            If you go to a local bank that does not utilize the secondary market and a lender that does utilize the secondary market, you will quickly see which lender has more options available, increasing the chances for loan approval.

            Buybacks and stricter standards in the secondary market make it more difficult to gain approval in comparison to the past standards, but that does not mean the secondary market makes it more difficult for approval in comparison to the absence of the secondary market.

            If this were a test and a true/false question was posed: True or false, the secondary market prevents borrowers from getting approved for mortgage loans, the answer would be false.

          • Jim

            Actually, I’m running into this exact problem right now. I live in a condo and am trying to refinance a portfolio (i.e., non-FNMA or Freddie) loan. I’m having a very difficult time because my condo is not FNMA or Freddie-compliant, so hardly any lender will underwrite it, because almost all lenders sell their mortgages. But I have found a bank that may keep the mortgage “on their books,” but that bank has much more stringent underwriting requirements (increased LTV, smaller DTI ratio, etc.). It’s very frustrating.

          • GBR Casey

            Jim, sorry you’re having such a tough time, but I appreciate you sharing your personal experience. I’m sure plenty of readers can relate.

      • the lastros

        after I get pre approved what are the odds of me getting a final approval ?

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