Mortgage process stalled due to underwriting flags, options?

Thanks for your response. We have had several offers on this short sale for 11 months with no acceptance from the seller’s banks until June 1st. While we had an offer on this property (in April), we refinanced our existing home from 15-yr to 30-yr (no cash out) to better manage cash flow in the event that this short sale finalized before our current home sells. Bank says the only way to proceed is to refi our existing home again to an income property.

@Chris MacKay I appreciate the additional information. The issue you are running into stems from Fannie Mae Automated Underwritting system which is flagging your new loan because you have financed a your current property within the last 6 months as a primary residents. Due to this, the system is tell the lender that you maybe committmenting fraud due to multiple primary residents applications within the last 6 months, which you signed documentation in the refinance that you expected to reside in the home for at least 6 to 12 months. I don’t think you are trying to pull a fast one on the lender but that is why it is being flagged by lenders using AUS.

The options for you are to look for a lender that provides a profolio product and will not use an automated underwriting system, or you can wait six months from the date of the refinance loan was sold to Fannie Mae, Freddie or FHA, and start looking for additional properties. Some leaders may allow you to write a letter of explanation but with the possible of the lender having to buy back the mortgage is higher than traditional, which make it unlikely you will be able to secure financing under any loan back for fannie, freddie or FHA unless you finance the new home as an investment property.

@Mario Ingraffia – Thank you for that explanation. Will lenders disclose (when asked) if they use an AUS. That’s good to know in the future, though it’s not likely this situation will ever come up again. Thanks again for your help.

@Chris MacKay if you ask if a lender they should be able to let you know if the loan is underwritten to meet fannie or freddie standards meaning they will be using an automated underwriting system to underwrite the loan. You need to find a lender that provides profolio lending options, but they should disclose is they are using an AUS when asked. Let me know if you have any additional questions.