Today’s
discussion?
Financing
Denied!
What
should
you
do
about
this,
whether
it’s
your
buyer 
or
the
buyer
on
your
listing?
If
it
hasn’t
happened
to
you
yet,
put
this
in
your
brain
as
‘what
I 
need
to
know
BEFORE
I
need
to
know
it!’ 

Rest
assured:
We
have
closed
thousands
of
transactions
over
our

real
estate
career
and
have 
coached
thousands
of
coaching
clients
to
meet
or
exceed
their
goals.   

The
following
are
tried
and
true
solutions
to
deals
dying
due
to
financing
issues!
We
have
done 
100%
of
these
solutions
and
have
coached
clients
to
do
the
same
successfully. 

Secret:
Manage
your
mindset.
Get
off
the
panic
button
and
into
action.
You
still
have
a 
deal
if
the
buyer
still
wants
to
buy
and
the
seller
wants
to
sell.  Get
to
work
to
solve
the
problem.
Most
deals
DO
have
a
solution! 

If
you
have
a
backup
offer,
know
the
facts
before
switching
to
that
deal.
If
you
don’t
have
a 
backup
offer,
get
a
2-week
extension,
so
you
have
time
to
resolve
the
issues
and
still
get
to
the 
closing
table,
then
get
to
work. 

Realtors
Guide
to
Saving
the
Deal
:
When
Financing
Is
Denied.   

(4
Common
problems
and
how
to
fix
them). 

Note:
Legally,
a
lender
must
explain
why
a
borrower
is
denied
their
loan.
Find
out
the
specifics.
If
the
lender
won’t
tell


you,
they
MUST
tell
the


buyer. 

1.

Down
Payment
issue,
and
/
or
closing
cost
issue? 

-If
it’s
not
enough,
then

how
much
does
the
lender
require? 

-Would
changing
the
loan
program
change
the
requirement? 

-Is
it
possible
to
use
gift
funds
to
make
up
the
difference? 

-Can
the
borrower
cash
out
an
investment
account,
401k,
or
other
form
of
payment
to
build
up 
the
payment? 

-Can
the
borrower
get
a
co-signer
and
solve
the
problem? 

-Is
it
because
they’re
guaranteeing
an
appraisal
gap?
Might
the
seller
renegotiate?

-Seller
to
provide
a
second

mortgage
to
create
funds?
The
seller
can
make
interest
on
this
loan, 
file
it
as
a
lien
using
the
title
company,
and
require
it
to
be
paid
off
within
a
specific
time
frame. 

-Can
you
raise
the
price
by
the
deficit,
and
still
have
the
home
appraise?
Have
the
seller 
contribute
the
overage
to
the
buyer’s
closing
costs,
thus
giving
them
more
for
their
down 
payment.
The
seller
nets
the
same
because
the
purchase
price
was
raised. 

-Seller
to
provide
seller’s
financing
or
use
a
hard
money
lender,
then
the
buyer
refinances
into
a 
more
conventional
loan. 

2.

Ratio
issue?
What
does
this
even
mean?

Lenders
require
specific
debt-to-income
ratios
to 
qualify
a
borrower
for
a
mortgage
loan.
They
calculate
the
buyer’s
total
expenses
divided
by 
gross
income,
which
equals
a
ratio.
Housing-related
expenses
divided
by
gross
income
indicate 
how
much
of
someone’s
income
they’re
spending
on
their
house
payment.
Typically,
the
total 
debt-to-income
ratio
should
be
36%
or
less,
and
the
total
housing
expense
should
be
28%
or 
less.   

If
ratios
are
too
high,
this
means
the
borrower
has
too
much
debt,
creating
too
much
cash
flow 
going
out
the
door
and
not
enough
toward
their
mortgage
payment.   

This
has
become
more
problematic
because
a)
prices
have
increased,
b)
ratio
requirements 
haven’t
changed,
and
c)
higher
rates
make
for
even
higher
payments. 

How
do
we
fix
high
ratios?
ASK
THE
LENDER
which
of
these
would
work: 

-Buyer
pays
off
a
credit
card
/
student
loan
/
car
loan
/
etc.
(Could
they
borrow
from
a
401k
to 
do
this,
or
borrow
from
the
bank
of
Mom
and
Dad
to
do
this?)
Does
the
loan
have
to
be
paid 
OFF
or
just
paid
DOWN? 

-Would
a
different
loan
product
have
different
ratio
requirements? 

-Would
raising
the
downpayment
fix
the
ratio
issue?
How
much
more
down
payment?
-What
if
they
got
a
co-signer? 

3.


CREDIT
SCORE
Issue?
Again,
find
out
precisely
what
the
issue
actually
IS.
Deal-killing 
credit
issues
come
in
two
forms:
Low
score,
and/or
a
specifically
damaging
item
such
as
a
tax 
lien
or
default
that’s
too
recent.
Find
out
what
it
is.   

-If
the
score
is
too
low
by
about
15
points
or
less,
it
is
probably
fixable
with
a
few
easy 
remedies.
Use
Experian.com
to
update
credit
and
correct
errors,
and
Experian
Boost
to
improve 
your
score
with
a
few
simple
steps.
If
you
can
make
a
698
score
into
a
715,
you
might
be
back 
in
luck
with
the
loan. 

-If
the
score
is
too
low
for
the
loan
product,
the
borrower
might
need
to
switch
to
FHA
or 
another,
more
lenient
type
of
mortgage.  

-If
something
needs
to
be
paid
off,
use
the
same
strategies
as
we
discussed
in
our
previous
point.
Find
out
what
needs
to
be
paid
off
and
how
the
buyer
can
pay
it
off.
Obviously,
the
smaller 
amounts
are
easier,
but
there
still
may
be
a
solution,
so
don’t
give
up. 

-If
the
item
that
needs
to
be
paid
off
is
a
lien,
like
a
homeowners
association,
a
mechanic’s
lien, 
or
a
private
loan,
it
may
be
possible
to
negotiate
a
lower
payoff
with
whoever
is
owed
the
debt. 

4.
The
buyer’s
Home
Sale

tanked,
and
now
they
can’t
close
on
their
new
house.
Take
your 
backup
offer
if
you
have
one
and
they
qualify.
(Re-check
with
the
lender
since
rates
increased 
and
their
credit
may
have
changed). 

-See
if
the
seller
will
convert
the
contract
to
‘contingent
on
home
sale
with
an
escape
clause.’
In 
other
words,
they
can
try
to
sell
it
to
a
new
buyer
who
is
NOT
contingent
on
a
home
sale.
This
is 
like
a
‘first
right
of
refusal’,
which
keeps
the
original
buyer
but
gives
the
seller
the
right
to
get 
someone
who
can
close
faster. 

-Communicate
with
the
listing
agent
(if
it’s
not
you)
to
strategize
and
see
if
THEY
have
a
backup 
offer.
If
it’s
in
your
market,
maybe
YOU
have
a
buyer
for
the
home. 

Tim
and
Julie
Harris
are
nationally
recognized
real
estate
coaches
and
authors.

This
column
does
not
necessarily
reflect
the
opinion
of
HousingWire’s
editorial
department
and
its
owners.To
contact
the
editor
responsible
for
this
piece:



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