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Bank won't finalize mortgage

Working with a direct lender and using FHA financing.  Getting to the final stages of approval however the lender recently stated that no banks are willing to purchase the mortgage due to the LTV on our other house, which we are currently leasing out and have a 24 month lease signed (temporarily living with inlaws during purchase process).  Banks are afraid of a buy and bail due to being upside down on the other house.  Our credit scores are mid 700's, we have enough income to easily meet the debt to income requirements, and have full intention of continuing both mortgages and using the first one as an investment property for many years to come. 

Lender is reaching out to brokers rather than banks and stated they see no issues with getting things finalized with this approach, just a couple more days and a few more signatures as we move. 

Has anyone else ran into this situation?  Any guidance, input, or reassurance you can provide would be great. 
  • February 27 2013 - Woodbury
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Answers (4)

Profile picture for CallTheSisters
I am aware that lenders are looking very closely at these situations.  I have not personally had a turn down but other agents I know have had banks refuse because of the potential bail out
  • February 27 2013
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I'm sure starting the whole loan process over is the last thing you want to do, but if you're woking with a major bank, you might want to think about working with a local independent bank. The big banks, although they have begun lending, still seem to be a bit gun-shy. Independent banks generally were not involved in the bundling and selling of mortgages that got us into this financial mess, but tend to hold their own loans and thus have been less affected. Their smaller size also makes them more personal and less bureaucratic. Good luck!
  • February 27 2013
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Profile picture for user1096134
Thanks Russell.  Apparently the banks are afraid of they 'buy & bail' situation, which isn't the case with us.  Is it banks that typically takeover the finalized loans for you, or is it more brokers / brokerages.
  • February 27 2013
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You should not have any problems with this scenario if you do not need the lease income to qualify. Based on what you laid out, I am not sure why your current lender hit a road block. I have closed many loans with this scenario and as long as the credit and DTI work, it has not been an issue as to who will buy it.

  • February 27 2013
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