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What is a mortgage exception?

  • November 10 2010 - US
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Answers (7)

If it was approved I wouldn't worry too much about it.    Some programs will require proof of improvement to justify increase in value in a "flip" situation when the seller has only owned the property for a short time period.  

You should make sure you are paying a fair price justified by comparable sales in the area, that is something your real estate agent can help you with.   
  • June 16
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My husband and I are in the middle of buying a house. It has been in the underwriters hands for a while. The house was a re-hab and the underwiters asked the seller for a receipt of the repairs on the home to justify the selling difference. I just received an email from my mortgage lender that the exceptions were approved. What does this mean and should I be finding out what that exceptions were.
  • June 16
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In short, you meet all the program guidelines except for one item.  The lender will need to get an underwriting exception to not consider that one item given the other compensating factors of the loan file.  The exception is typically not free.  It could cost you as little as .125% or more in the fee.
  • November 19 2010
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Nice point Chris...

If you have a purchase loan approved "pending exception" there may be a great possibility your loan officer put together a tight file and demonstrated strong compensating factors and the ability to repay. But "pending exception" is still what I call a "make believe" loan until that exception is cleared..... don't mistake this for an approved loan....All parties should understand that fact upfront.

Loan packages with strong compensating exceptions are getting approved today but it is my belief that borrowers and agents should be informed upfront that the loan package is not approved however you believe there is a strong chance to get a guideline exception.

As Chris stated, if you give us a bit more info on any exception you may be seeking I am certain someone here on Zillow can offer up quality advice.
  • November 19 2010
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If you are in the process of qualifying for a mortgage loan, and have been told an exception will need to be approved in order for your loan to close, it is likely a guideline that the investor who will ultimately purchase the loan from your lender has established. Without more information it is impossible to answer your question in more detail. I see exceptions approved on a regular basis, as long as it does not affect the ability to sell the loan. The bottom line is lenders that want to be around for the long term better make sound underwriting decisions. If you exception makes sense, it will likely get approved.
  • November 18 2010
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Mortgage Exception -  in the 1990's and early 2000's, loan officers would take loans with compensating factors to management and underwriting and request an "exception" to guidelines. After the crash of 2007, the exception has become an extinct creature. Not saying that exceptions are no longer granted but you better believe the sun, moon and stars must line up for that to happen. Mortgage lending in 2010 - if it a'int in the guidelines, forget about it.........

Is there a specific exception you are talking about???
  • November 16 2010
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That means with compensatory factors you are allowed to get a mortgage not adhering to guidelines.
  • November 16 2010
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