New construction financing presents a problem that many buyers don't think about when they sign their original contract: a mortgage approval at the beginning of the building process doesn't guarantee that the same lender will be able to close the loan months later.

I've recently received multiple calls from buyers already under contract with builders who discovered late in the construction process that their original lender could no longer complete their financing.

This can be particularly stressful when you've spent six, nine or even twelve months waiting for your home to be built, made deposits, selected finishes, planned your move and are finally approaching closing. Finding out at that point that your builder's preferred lender or original mortgage company can't close your loan can make it feel like you're about to lose the house.

That doesn't necessarily mean the transaction is dead.

A significant part of my mortgage business involves reviewing loans that another lender couldn't complete and determining whether one of the more than 75 wholesale and specialty lenders I work with has a program that fits the borrower.

Why Would a Builder's Preferred Lender Deny a Loan Before Closing?

A lot can change between the day you sign a new construction contract and the day your house is finally ready.

The borrower may have qualified nine months ago, but the financial picture at closing may be different.

Common problems can include:

• A job change or change in employment structure
• Income that changed during construction
• Bonus, commission or overtime income that can no longer be used the same way
• Becoming self-employed or changing from W-2 to 1099 income
• A credit score that dropped during the construction period
• New credit-card, automobile or other monthly debt
• A higher debt-to-income ratio
• The buyer's existing home didn't sell as expected
• The buyer now has to qualify while carrying both properties
• Less cash or fewer reserves than originally anticipated
• An appraisal issue
• A change in interest rates that increased the qualifying payment
• A lender-specific underwriting overlay
• A jumbo loan that no longer meets that lender's requirements
• A condominium or property-eligibility issue
• A documentation problem discovered late in underwriting

Sometimes nothing meaningful changed with the borrower at all. The original lender simply may not have a program that accommodates the situation.

That's where having access to multiple lenders can become particularly valuable.

New Construction Loan Rescue in Lakewood Ranch and the Bradenton Area

I work with buyers purchasing from many of the major builders throughout Lakewood Ranch, Bradenton, Sarasota, Parrish and the surrounding communities.

That includes buyers purchasing homes from builders such as Toll Brothers, D.R. Horton, Homes by WestBay, Medallion Home, David Weekley Homes, Lennar, Taylor Morrison, Neal Communities, Pulte Homes, Del Webb, M/I Homes, Dream Finders Homes, Kolter Homes, Homes by Towne and Perry Homes.

Lakewood Ranch's current builder roster spans everything from production homes to multimillion-dollar custom properties, so the financing challenges can be very different from one transaction to another.

If your builder's lender has told you they can't close your loan, contact me before assuming you have to cancel the contract.

How a Mortgage Broker May Be Able to Rescue the Loan

A bank, direct lender or builder-affiliated lender generally has a defined set of loan programs and underwriting guidelines.

If your situation falls outside those guidelines, that lender may simply have nowhere else to take the loan.

As a mortgage broker, I have access to more than 75 wholesale and specialty lenders. That doesn't mean every declined mortgage can be approved, but it gives me considerably more places to look for a solution.

Depending on the situation, the answer might be another conventional, FHA, VA or jumbo lender. In other cases, we may need to consider a bank-statement loan, asset-depletion program, DSCR loan, non-QM mortgage or another specialty program.

The first thing I want to know is why the original lender can't close the loan. Once I understand the problem, I can determine whether another lender's guidelines solve it.

And when a closing date is approaching, speed matters. I want the existing loan documentation, appraisal information when transferable or otherwise usable, income and asset documentation, purchase contract and the original lender's explanation of the problem as quickly as possible so we can determine whether there is a viable path forward.

What About the Builder's Mortgage Incentives?

One reason buyers hesitate to leave a builder's preferred lender is that the original financing may include an attractive advertised interest rate, closing-cost credit or other incentive.

That's understandable.

But losing a lender credit is very different from losing the house.

More importantly, builder-affiliated financing isn't the only place where lender credits and competitive rates may be available.

Because I can shop among multiple wholesale lenders, I can compare available interest rates, lender credits, discount points and loan structures. In some situations, there may be an outside financing option that remains competitive even after considering the builder's financing incentive.

I don't assume my financing will beat the builder's offer, and I don't assume the builder's offer is automatically better.

I compare the actual numbers.

If the builder's preferred lender can close the loan and offers the best overall financing, that's useful information for the buyer. If they can't close the loan, or another option produces a better overall result, the buyer should know that too.

Already Under Contract on a Resale Home? The Same Idea Applies

This isn't limited to new construction.

I also receive calls from buyers already under contract on resale homes whose original lender discovers a problem during underwriting.

The buyer may be days or weeks from closing when the lender says the loan can't be approved.

Again, one lender's denial doesn't necessarily mean the transaction can't be financed.

If another lender has declined your mortgage, delayed the closing or told you they can't complete the loan, I can review the file and determine whether another program is available.

Don't Give Up on the House Until You've Had a Second Opinion

If you've been waiting months for a new home to be completed and suddenly learn that your lender can't close, time is important.

Send me the scenario as soon as you know there is a problem.

I'll review what changed, why the current lender can't approve the loan, the property, your income and assets, and the programs available through my wholesale lender network.

Sometimes I can find another way to structure the financing. Sometimes the original lender's problem can't be overcome. Either way, you'll have a second opinion from a local mortgage professional with access to more than 75 lenders before deciding what to do with the home.

Courtland Hunt
Mortgage Loan Originator and Branch Manager
Pioneer Mortgage Funding, Inc.
NMLS #188709
Bradenton Branch NMLS #2681794
Bradenton, Florida