I Wrote A Pre-Approval Letter But Did Not Close The Loan

I wrote a preapproval letter but did not close the loan. IMO, this is the "kiss of death" for loan officers.

Most times online we share our successes and not our failures.

So here goes...back in July I received a call from a first time buyer in Virginia looking to utilize the no money down program called FHA Plus with VHDA.

Basically the program allows eligible buyers with a certain income to finance the three and half percent minimum downpayment required  for FHA loans. VHDA just recently increased those income limits, too.

Money in the bankAnyway with the borrower's credit checked, income verified, and education course completed I confidently placed my name on the $150,000 check (this is what I call my pre-approval letters, because typically it's LIKE money in the sellers bank)

After a quick weekend homesearch, the buyer had ratified contract with a forty-five day close back on my desk by Monday morning.....woohoo!

We ordered the home inspection, appraisal, and disclosures, everything was going as planned until Mr. Buyer called and said he just accepted a new job that he could not pass up. So by the next week he would be starting his new job making more money. Then came the questions (rather after the fact)....

  "So how will this affect my loan approval? It should make it better right?"

Actually the opposite was true, the new position making more money turned out to be a contracted postition for only a six month period. Although the employer believed the contract would be renewed they were not willing to guarantee in writing that the employee would be retained if the contract did not continue. 

As a result VHDA denied the loan for unstable employment. In my opinion, no employment is stable today and we live in an area where many workers are contractors of the government and/or companies supporting the government.

Nonetheless there are certain things you just cannot afford to do when seeking a mortgage loan and changing jobs in the middle process is one of them.

I felt terribly bad for the sellers, agents, and the buyers involved...I wrote a pre-approval that did not close.

Download my free report 7 Things Not to Do When Applying for a Home Loan and make sure this does not happen to you!

 loan denial

Contact Markita Aldridge-Woods at (703) 929-2274 or via email for custom tailored mortgage solutions.

 

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Comment balloon 12 commentsMarkita Woods NMLS#196099 • September 15 2011 07:24AM

Comments

Thanks for the post. I guess we should give buyers a list of things they should not do if they want to buy a house.

Posted by Gita Bantwal, REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel (RE/MAX Centre Realtors) over 6 years ago

You are right about writing about successes. We all have deals that go down the toilet.  We hate it for all involved but then we move on.  Sometimes it happens to be an opportunity to learn! Thanks!

Posted by Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC, ... a small office, delivering big service! (Waters Realty of Brevard, LLC) over 6 years ago

Markita, we tell our buyers all the time....do not make significant changes to your status or credit before your close on your loan.  Do not buy a new car, do not finance new furniture, do not apply for a new credit care and for goodness sakes...never...never...never...quit your job even for a better one before the loan closes!

This was a really good post to share.

Posted by Mona Gersky, GRI,IMSD-Taking the mystery out of real estate. (MoonDancer Realty, Dillsboro,NC) over 6 years ago

This is on my list, but I have discovered buyers cannot read, so now I have to read them the list and make them sign it before we start the process. 

Posted by Gwen Fowler-CRS- 864-638-3599 SC Mountains & Lakes--, Gwen Fowler Real Estate, Inc. (Gwen Fowler Real Estate, Inc) over 6 years ago

Markita, thank you for sharing this information. Wow..that's a tough one. Kind of reminds me of the time at settlement years ago, a Closing Attorney hands over the copy of the loan application to the buyer to sign and verifying nothing major had changed since loan approval.  The gal says" the only thing that has changed is I got fired the other day because I'm loosing to much work because I'm pregnant." The seller and myself just put our heads on the table in shock!

 It happens....so sorry!

Posted by Peggy James, Woodbridge Virginia Area Real Estate Specialist (EXIT Realty Associates) over 6 years ago

My buyers call me before making any sort of move like this. Had a VA loan borrower call me about a new job offer before he accepted it - and I said to hold off until after closing. A change, at best, would be a requirement for 30 days of paycheck stubs from the new employer. Lessons learned and passed on to all new clients is the key for future success!

Posted by Melanie Thompson, Registered Mortgage Advisor (Mortgage Equity Team) over 6 years ago

Markita-I know that's tough.  One of my recent buyers wanted to change jobs and I said WAIT if you can.  Otherwise you will be waiting a bit longer to buy a house.  Same holds true if a buyer gets excited about furnishing their new home so they run out and charge a new house full of furniture to be delivered on closing day.  OUCH.

Posted by Cindy Jones, Pentagon, Fort Belvoir & Quantico Real Estate News (Integrity Real Estate Group) over 6 years ago

Quote of the day there are certain things you just cannot afford to do when seeking a mortgage loan and changing jobs in the middle process is one of them.  Should have bought the home, then considered different employment.

Posted by Daniel H. Fisher, MCRP - Charlotte Real Estate, NC or SC (www.FisherHermanRealty.com (704) 617-3544) over 6 years ago

Thanks for everyone's comments. At the end of the day I like Gwens suggestion of reading them the list and making buyers sign it. Have a great weekend.

Posted by Markita Woods NMLS#196099, Queen of Mortgages - FHA, VA, Conventional, USDA (Hancock Mortgage Partners, LLC) over 6 years ago

Sis I think I need to include that in my Home Buyer's Presentation. Good thing is he got a better paying job. Bad thing is he lost out on a house. So sorry to hear this.

Posted by Lanre-"THE REAL ESTATE FARMER" Folayan, I don't make promises.I deliver results.SOLD HOMES (Keller Williams Select Realtors-Buy a home in Washington DC. Sell a home in Washington DC) over 6 years ago

Well, with nowdays full doc approval buyers fall out of escrow at the last day. It is really frustrating.

Posted by Inna Ivchenko, Realtor® • Green • GRI • HAFA • PSC Los Angeles CA (Barcode Properties) almost 3 years ago

Yes it is very frustrating especially if it is something that could have been prevented.

Posted by Markita Woods NMLS#196099, Queen of Mortgages - FHA, VA, Conventional, USDA (Hancock Mortgage Partners, LLC) almost 3 years ago

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