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1st Time Home Buyer - Turned Down Due to Not Enough Debt History

by Teresa
(Fargo, ND)



My daughter lives in Fargo, ND and was pre-qualified for a loan and was scheduled to close this Friday. She is a college graduate, has a great credit score and stable job. She gave her notice to her landlord and today - 2 days before her closing she was told there was an error and they were denying her loan due to not enough debt history. Now she is without an apartment in 2 days and apparently a home - what is her recourse?

=====ANSWER=====

Hello Teresa,

Thank you so much for visiting my website and asking such a good question.

As I think over your question, something is just not right here. What kind of a loan was it that she was approved for? Was it a conventional loan? If so, then the lender got nervous, perhaps you're dealing with a local bank or credit union.

She is entitled to a written letter according to RESPA law which should state the exact reason for her denial. Also she should be able to get a FREE credit report.

OK, with that said, I would strongly suggest she notify her landlord of course and see if she can stay longer. Then I would look real hard at the FHA loan. I have a page hear called Best FHA Home Loans you may want to check out. That page even has a link to Lendingtree if she wants to give them a try for a mortgage.

The FHA loan has very little requirements. Basically a credit score of 620 or better, 2 years on employment and a DTI of 29/42. For additional details on your debt to income (DTI) take a look at my First Time Home Buyer Checklist page.

To sum it up, your daughter should not be denied a loan if she can meet the FHA guidelines. This is the simplest way to get a home mortgage today for first time home buyers.

I hope things work out. If you find this helpful, please share this by using your FaceBook and Twitter account to pay it forward and help someone else by using the links below.

Best Regards,

Jeff Ragan
The Mortgage Doctor


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