Our Loan Fell Through! Now What?

When you're buying a house, there's an anxiety-filled time delay between making the deal and closing day. The details usually come together, but what happens if your loan falls through?

Don't panic. If your lender refuses to finance you, it doesn't have to be the end of your home ownership dream. Here's what you can do to move forward.

1. Find Out Why?
   Don't wait for a letter from your lender. The moment you learn that they won't finance your home, call and ask why? If it's fixable, you need to work it out quickly before the seller moves on to the next prospect. The lender's explanation should dictate your next move.
   
   
2. The Home Costs Too Much
   If it's a home value versus price issue, the appraised value isn't high enough to justify the loan you requested. You have several alternatives:
   
   Appeal the appraisal: It's a complicated process. The appraiser works for the lender, so you have to go through them for an appeal. The homeowner can present supporting proof for an appraisal reconsideration. If the lender allows it, you can pay a fee for a second appraisal. In the end, the value might stay the same.
   
   Renegotiate the selling price: Talk to the seller's agent about your value versus price problem. The seller might reduce the selling price, aligning with the appraised value.
   
   Increase your down payment: Upping your down payment reduces your mortgage amount. Look for down payment assistance programs by checking state and local home-buying resources and independent services. Withdrawing money from your retirement account or borrowing cash from a family member might be an option.
   
   
3. Your Job or Income Changed
   When you're buying a house, a career shift changes your financial circumstances at a time when lenders are looking for consistency. They may still approve your mortgage if you can show consistency in your career track, occupation, and income.
   
   If you change your field after qualifying as self-employed or a business owner, lenders want to see that you're in a similar field earning a like amount of money. That might be impossible if you went from full-time employment to owning a business. Lenders prefer to see three years of consistent business income.
   
   
4. Your Credit Changed
   Ask your lender to explain any specific credit issues preventing you from buying a house. Find out if they'll reconsider your financing if you clear up the problems and raise your score. If it's your debt-to-income ratio, paying down your debt might help. If you have unresolved credit disputes, talk to the creditor to see if you can get them off your record.
   
   
5. You Don't Meet the Requirements
   If your mortgage denial involves issues you can't resolve independently, check into alternative financing programs. FHA-insured loans, VA-backed loans, Fannie Mae HomePath financing, Freddie Mac Home Possible® Mortgages, and USDA's Rural Development Loan Program have lower down payments, flexible income requirements, and reduced interest rates.

If You Can't Work it Out

It's frustrating when you get so close to buying a house and lose it. If you must walk away from your dream home, you'll move forward having learned some tough lessons. Before you get back out there, take a few preparatory steps.

Get Pre-approved

While it won't guarantee home financing, pre-approval gives you a potential yes. Access your three major credit reports at annualcreditreport.com and work out any problems ahead of time. Maintain career and income consistency. Both are critical to the home loan evaluation process.

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