we were preapproved for a mortgage but at underwriting they keep dening loan because of unique property. why?

Question

we had the appraisal done, we have tried different lendors but because there are not enough comps the property is considered unique. what can we do?

Answer 1

Have your broker or lender use the wholesale lender Magna Mortgage - they specialize in unique properties and still have comparable rates.

Answer 2

Any pre-approval will always be subject to a satisfactory review of the appraisal of the collateral.

You didn't clarify what made your property "unique", but typically you're dealing with dome homes, log homes, earth homes, or something that is completely overbuilt for the area.

A standard appraisal will included 3 comparable sales, ideally all of which have closed within the past 6 months and within a 1 mile radius.

Anything outside of those guidelines (and yes, they are relaxed for rural properties, though maximum loan-to-values may be curtailed as well) requires additional information from the appraiser. Often this means finding anywhere from 1-3 additional comparable sales (comps), and making notes in the appraisal addressing the marketability of the property.

Problem is, any home that is considered "unique" is less likely to appeal to a broad spectrum of home buyers. If your property is very unique, you may have only a fraction of the potential buyers that you would for an average single family home in your area.

For this reason, if you were to default on your loan, the bank is likely to lose more money than they would on an average home, because fewer potential buyers means less competition to buy the property.

Lenders constantly look at the performance of the loans they issue, and it's not hard to identify where they lose money. Condos, manufactured homes (double-wide trailers), and your so-called "unique"-type properties, when they do default, cost the banks far more money than the average home would. So their risks are higher, which leaves only a couple options: Lend less money against these types of homes as a percentage of the value, or increase the interest rate to compensate for the additional risk, or both.

Additionally, they will look much closer at the strength of the buyer. How good is your credit? 720+ scores? How high of a debt to income ratio do you have? Under 40%? How much cash reserves do you have? Over 6 months of your future PITI payment? How much, if anything, were you planning on putting down? 5%, 10%?

Sometimes finding a local bank that understands the area to do a second mortgage, and reducing the first mortgage to 75-80% of the value can do the trick. The first mortgage lender has passed off most of the risk to your local bank, so they may be more inclined to lend to you.

In my experience, Wells Fargo's underwriters seem to be the most "common-sense" in these situations, though many of the big banks do as well.

I don't know what type of loan you are attempting to get, but try to go directly to Wells, perhaps Countrywide. CW has their own appraisers, and if the value is there from their own appraisers, you typically will sail through the rest of it.

If you haven't already paid for your appraisal, don't pay for it unless the lender who originally ordered it will release all rights and interests in the appraisal to you, in writing, so you can actually use the appraisal with another bank.

Answer 3

Unique properties and birm homes scare the crap out of lenders. Reason being is that they see a mortgage as an investment, and having a unique property is a big variable. Considering they're investing probably six figures, they try to take the most conservative route. My suggestion would be to ask your broker to look for a lender that specializes in unique properties. They usually have different rates or LTV issues, but they are out there. And if your broker is worth anything, he's already looked. And if you don't have a broker, get one, and tell him the situation. It'll make things run a whole lot quicker the more information you give him.

Answer 4

I've noticed that this sometimes comes up with modern eco friendly homes. One of my friends plans to have a concrete dome home, and she knows they're harder to finance, so there's a few extra planning steps.
1 Research resale value on these types of homes (which an assessor might not have the expertise/interest/time to do).
2 Research factors that make this type of home more appealing to banks, and be ready to present them- fireproof, earthquake proof, incredibly low maintainence costs
3 Maintain as high a credit rating and pool of savings as possible.

Alternatives:
If it's a pre-existing home, find out if you can assume the mortgage on it currently.
As a last resort, find out if the current owner would like to act as your lender. They may be having trouble selling it, and that's the only option. They may also like the idea of earning money on a secured investment, instead of having some bank earn that interest instead. Real estate investments are getting more popular. If an owner financed mortgage looks like the only good option, I'd stop by the library for half an hour, look through this section in a real estate investing book, then pick up a real estate lawyer.

Answer 5

In addition to weigh the credit risk of the borrower, the lender also must evaluate the collateral. This includes the ease with which they can liquidate the property in the event of default...also, appraised value of residential R/E is usually derived from assessing comparable properties. If the property is such that there are no readily available comp. properties, then the value becomes more difficult to determine.........

Answer 6

You were pre approved the property wasn't this is very common especially if it doesn't meet housing standards. They have the right to do this because they don't want to risk their dollars on a property that they might not be able to recoup the loss if you were to default. We have had this happen before on a 'flip' that was way to far gone. You either have to pay more than 50% of the property price in cash, find a company that deals with unusual properties or find a new property.

Answer 7

Being pre-approved for a mortgage just means that your credit isn't terrible.....basically just that under optimum conditions you would be able to get bought on a loan. This obviously is not the case. Either keep searching for a broker that specializes in unique properties, or find another property to buy. Try this place..... Common Fund Mortage, phone # is 315-422-2523, ask for Keri, and tell her Lew referd you. She is extremely knowledgable, even if she can't help you, she will get you to someone who can.

Answer 8

You have given us very little info to go on here. It sounds to me like you are looking for a traditional long-term fixed rate mortgage on a non-traditional house or other type of real estate. I am also guessing you are going through a high-volume one-size-fits-all mortgage broker. Your collateral does not fit the cookie cutter, so the lender does not want to deal with you.

I can assure you that somebody or another makes loans on all types of real estate, including homes, office buildings, apartment buildings, shopping malls, factories, funeral homes, pet cemeteries (I'm not kidding), college campuses, coal mines, strip joints, golf courses, hourly motels etc.

A few recommendations:
Consider a small local bank. Most small banks want to serve their local community.
You might be pushed into a commercial or farm mortgage, as opposed to a traditional home mortgage. For example, if the real estate in question is 500 acres (worth $4,000 per acre) with a 1,000 square foot home (worth $100 per square foot) you will probably need a farm mortgage.

Hope this helps.

PS - I forgot to add that you have also found out that mortgage pre-approvals are not worth the paper they are written on. The lender writes the approval but leaves itself sufficient loopholes to change its minds.

Answer 9

what state is the property in? we will be happy to evaluate your appraisal and let you know terms for which we will be willing to lend on it.
you can email it to [e-mail], or fax it to 866-876-2944, attn: Underwriting/BJ

Answer 10

Try hiring a professional appraiser yourself. Using comps is just one way to value a property.