First house got denied

[frenchy69]

Hi everyone!

 

I’m writing to share a story with my daughter and her husband. . Last week, they finally found their dream house! Her husband applied for pre-approval, and it was approved. Just two days before closing, they discovered that he had a lien for $200,000 under his name. The loan fell through, and they’re feeling a bit overwhelmed.

 

Her husband is a high-earning individual, but he had set up a payment plan. Also, the owner kept the earnest money. Can you help them figure out what to do next?

 

I’m curious, if the borrower is current on their debt, can they still deny the loan?

[liverichly]

Someone with a tax lien can still qualify for a mortgage as long as they've set up a payment plan and payments have been made on time.  The easiest types of mortgages to get approved for in that situation are FHA, VA and USDA financing, however Fannie Mae loan programs will also allow someone with a federal tax lien to remain unpaid at closing as long as the lien wasn't filed in the same county as the home that's being financed.

Do you know what type of financing they were trying to qualify for?

[frenchy69]

 

They went for the traditional loan." Conventional loan ".

 

They just filed a lawsuit in their county.

 

What’s their next move?

 

 

 

[liverichly]

If the tax lien has been filed in the same county they are buying in, then they'll need to switch their financing type to FHA.  FHA has loan limits, however, so if they are financing more than the FHA loan limit in their county then it made sense why they applied for conventional financing instead.

FHA loan limits can be looked up at https://entp.hud.gov/idapp/html/hicostlook.cfm - select the state, type in the county name (or don't, it's not a requirement), and then hit "send" and it'll bring up something that looks like the below (the below is for counties in California, where I'm at).  If they are purchasing a house, then it'd be the "one family" limit.  Two, three and four family limits refer to if they were purchasing a duplex/2-unit, triplex/3-unit or quadplex/4-unit property and living in one of the units.

 

The FHA county loan limit varies depending on the HUD median sales price in that county (or MSA, in the situation of a major city like San Francisco, Los Angeles, Chicago, Atlanta, Charlotte, etc.), but all counties will go up to at least $498,357.  Keep in mind that is the loan limit, not the sales price.  Sales prices have no limit.

 

MSA Name	MSA Code	Division	County Name	County Code	State	One-Family	Two-Family	Three-Family	Four-Family	Median Sale Price	Last Revised	Limit Year
SAN FRANCISCO-OAKLAND-BERKELEY, CA	41860	36084	ALAMEDA	001	CA	$1,149,825	$1,472,250	$1,779,525	$2,211,600	$1,595,000	01/01/2024	CY2024
NON-METRO	99999		ALPINE	003	CA	$503,700	$644,800	$779,450	$968,650	$438,000	01/01/2024	CY2024
NON-METRO	99999		AMADOR	005	CA	$498,257	$637,950	$771,125	$958,350	$388,000	01/01/2024	CY2024
CHICO, CA	17020		BUTTE	007	CA	$498,257	$637,950	$771,125	$958,350	$284,000	01/01/2024	CY2024
NON-METRO	99999		CALAVERAS	009	CA	$498,257	$637,950	$771,125	$958,350	$375,000	01/01/2024	CY2024
NON-METRO	99999		COLUSA	011	CA	$498,257	$637,950	$771,125	$958,350	$367,000	01/01/2024	CY2024
SAN FRANCISCO-OAKLAND-BERKELEY, CA	41860	36084	CONTRA COSTA	013	CA	$1,149,825	$1,472,250	$1,779,525	$2,211,600	$1,595,000	01/01/2024	CY2024
CRESCENT CITY, CA	18860		DEL NORTE	015	CA	$498,257	$637,950	$771,125	$958,350	$280,000	01/01/2024	CY2024
SACRAMENTO-ROSEVILLE-FOLSOM, CA	40900		EL DORADO	017	CA	$763,600	$977,550	$1,181,650	$1,468,500	$635,000	01/01/2023	CY2024

[frenchy69]

Is an FHA loan a prerequisite for qualification?

He earns a substantial income, and I doubt they will qualify for it.

I was considering offering to co-sign the loan for her, as she is very fond of the house.

Personally, I own two properties in my name and recently purchased a brand-new 2024 Corvette Z06.

However, I am concerned that my debt-to-income ratio may not allow for the loan.

My credit score is 867.

[frenchy69]

II would like to express my sincere gratitude for your willingness to provide comprehensive answers to all of my inquiries.

[liverichly]

You're welcome.   Nice choice in automobile.  

 

FHA loans don't have an income limit, so someone making a lot of money wouldn't disqualify them.

 

If they didn't want to use FHA financing and had their heart set on using conventional instead, then you could be a non-occupying co-borrower on the loan with your daughter.  Your income + debts and her income + debts would be used to determine what she could qualify for.  When owning other real estate the calculation isn't so straightforward, you'll need to supply tax returns and housing payment related documents for the homes you own, along with standard documentation of your own income (whatever the source is - W-2, self-employment, retirement, etc).  

[frenchy69]

Hello,

 

I have decided to co-sign for my daughter’s mortgage, so she has been working with this broker.

 

My credit score is exceptional, and I contacted him. He informed me that my interest rate will be 6.7%.It seem very high rate .

 

Since I am not occupying the property, the closing costs are approximately $7,000.

 

Should I shop around for the best rate? What banks would be willing to accept my situation?

[frenchy69]

A broker recently contacted my daughter from Empurium lending 

I have never heard of them before. 

 

[frenchy69]

byt the way , my daughter discovered a locate guy. We applied for an FHA loan, but the interest rate is approximately 6.7%.

Is an FHA loan a suitable option?

They are requesting a down payment of $24,000. 

[liverichly]

FHA requires a 3.5% down payment, so whatever the sales price is it'll be 3.5% of that.  $24,000 is 3.5% of $685k (roughly).  Is that the amount you are trying to get pre-approved for?

 

A 6.7% rate is on the higher side for FHA, but it's normal for conventional these days.

 

What are your and your daughter's credit scores?

Edited November 14, 2024 by liverichly

[frenchy69]

Her score is 770, but she also has a lower score of 730.  The selling price is  410k!

 

Oh, and he also mentioned that the total out-of-pocket cost will be 24000. Does that make sense to you? 

Edited November 14, 2024 by frenchy69

[liverichly]

That rate on FHA is high for those scores - should be closer to 6.250%.

 

At a $410k sales price the 3.5% down payment would be $14,350.  If the total out of pocket will be $24k then that means there are $9,650 in closing costs.  Depending on where in the U.S. the property is that might be in line or not, it's tough to say.  You'd have to share the Loan Estimate to get more precise analysis.