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Module 4
Steps for Buying a Home
Getting the Loan
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If Your Loan is Not Approved

Make Sure You Can Withdraw Your OfferNot everyone gets his or her loan application approved the first time. This is why it is important to have the financing contingency in your purchase offer so that you can withdraw your offer and receive your earnest money deposit back. Unfortunately, you will lose any monies spent on other upfront costs. Before giving up in despair and walking away, sit down with your home loan consultant and discuss possible options.

Ask the Expert: If You Are Not Approved edge

Dear H.O.M.E. Expert,

I have just been told that my loan was not approved. My family and I were really excited about moving into our new home. Is there anything we can do?

Signed,
Despairing in Dallas

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Dear Despairing,

Don’t give up hope. The most important thing to find out is why your loan was not approved. Depending on the reason, here are some suggestions that may help:

Reason for Denial Suggestions
Poor credit history This will take some time, but start now to improve your credit. Pay all bills on time, limit the amount of credit you use, avoid high credit limits, limit yourself to two or three credit lines and check your credit report regularly. Get advice from a credit or homebuyer education counselor.
Lack of cash for down payment and closing costs Look for additional sources such as an $11,000 gift from family member, expected insurance settlement or inheritance or money from the sale of a car or other asset. Or take up to a $10,000 withdrawal from IRA or 401(k) accounts. Consult a tax advisor, as there may be some penalties for early withdrawal from an IRA or 401(k). Don’t borrow money to obtain more cash as this will count against your debt ratio.
Insufficient income to support monthly payments Provide documentation for an anticipated raise or part-time employment not previously counted. Possibly consider getting a co-signer, but know that co-signer debts will also be taken into consideration.
Too much debt Talk to a non-profit counselor about systematic ways to reduce debt. Consider selling assets like a car, motorcycle, etc. and using the sale proceeds to pay off other debt. Try to renegotiate student loans.

It may be that you just simply cannot afford to buy the particular home you chose, and you should start looking for something smaller or less expensive. Next time, be sure to get pre-approved before making an offer to purchase. This will save you and your family from such a big disappointment.

Signed,
Your H.O.M.E. Expert

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