buying a home after short sale from 2 years ago
How to Avoid a Bad Mortgage Lender in Sacramento
If you’re working with a bad mortgage lender, you probably won’t realize it until your file is submitted to underwriting and rejected. Because bad mortgage lenders, bless their little inexperienced souls, don’t generally mean to screw up your loan; you know, that’s not their intent. They should know the terms for which your loan will get rejected, but often they don’t. And to be even more objective, sometimes institutional lender guidelines allow for exceptions that mortgage brokers might not.
Let’s take Wells Fargo for example, just because that has been my most recent experience. As a top producer listing agent in Sacramento, I don’t work with Wells Fargo loan reps very often because most homebuyers in Sacramento choose to obtain their loan through a mortgage broker, and not a big box lender. They don’t like the impersonal service and mistakes they often obtain from big box lenders. Lenders all charge about the same rate. While you’ll always get those buyers who would throw their grandmother from the train to save 1/8% in rate while forgetting what happens when they bend over to grab the bar of soap, all the available lending money is pretty much the same big ol’ bag of money.
Still, I called this bad mortgage lender in San Jose when the first 3 weeks went by and my Sacramento seller’s escrow showed zero signs of closing. Let’s call that loan rep Dick, short for you know what. Dick explained the buyer could not qualify for a conventional loan because he had a short sale on his credit report from 3 years prior. The underwriter threw out the file. When I deal with these situations with our own buyers, we walk the file through underwriting for underwriting approval prior to even looking at homes, because conventional lenders are not required to make loans to people who had a short sale, and . . . the waiting period is 4 to 5 years, not three years.
In my opinion, this loan should never have been submitted for conventional financing due to the short elapsed period of that previous short sale.
But Wells Fargo did not disclose the short sale dilemma to us and, in fact, could not close this loan. I asked Dick why he tried to close a loan that did not fit guidelines in the first place. Because they make exceptions, he said. How many times have you gotten an exception? I pushed. A bunch of times. How many times, Dick? Would you say 10 times? Have you received exceptions 10 times? Well, yes. I don’t believe it. I’d say not only is he a bad mortgage lender, but he’s a liar, too.
The second time around, Dick at Wells Fargo suggested an FHA loan. FHA short sale guidelines are 3 years. However, unknown to us, the buyer was not intending upon occupying this property, even though the purchase contract stated he was an owner occupant. And let’s not even get into the fact his agent vanished for a while and I had to step in to help out the buyer. Of course, this FHA loan was not approved by Wells Fargo. The buyer lives and works in San Jose, not Sacramento, another fact undisclosed. You have to live in the home to get an FHA loan.
The only way I know that Wells Fargo rejected the loan is because the buyer received a rejection in the mail and contacted me when he couldn’t reach his agent. Dick over at Wells Fargo in San Jose could not be bothered to pick up the phone, call or send a text message. I contacted him using all 3 methods for four days straight. Usually, leaving voice mail messages and continuing to badger a bad mortgage lender will eventually get a response, but this time, nothing. No response. No phone call. Nada. The last time Dick failed to respond to me, the listing agent, or the buyer, he eventually would after I kept up the inquiries. This time, no. Communication should not be this difficult with these guys.
The buyer’s agent asked to extend while the buyer pursued a loan for investors. Nope, not doing it now. The seller will undoubtedly demand that you can cancel and submit a new purchase contract for the seller to consider, and the buyer will need to get approved through my recommended Sacramento mortgage lender. Unfortunately or fortunately — depending on how you look at it — my recommended mortgage lender could not approve the buyer because each desktop underwriting file, regardless of loan type, reflected a red flag. The buyer could not do an investor loan because then he would not have enough money to bridge the gap between appraisal and sales price.
I don’t know why bad mortgage lenders don’t see the same red flags. Maybe they look green to them, or maybe the mortgage guys aren’t wearing their glasses? Maybe they have canine eyes, and aliens swooped down at night to switch out their eyeballs? Dogs can’t distinguish colors between red and green. That’s the best explanation I have.
However, I did learn something new. There’s always a silver lining when you learn something new. Freddie Mac can now underwrite a file with a short sale after two years, providing the credit file is strong. If you’ve had a short sale on your record and want to buy a home in Sacramento, call Elizabeth Weintraub at 916.233.6759, Lyon Real Estate. We close our escrows for our own buyers who’ve had a short sale because we don’t refer you to bad mortgage lenders.