Mortgage loan notes can approve your loan

Can your Mortgage broker’s “loan notes” cause your good loan to be denied?
Loan notes are written by every good mortgage officer when a loan application and all supporting documents are submitted to underwriting. Loan notes tell the borrowers story, why the loan makes sense, and explains any situations that may not make sense on the paperwork submitted.
An attorney gave me a call and asked me to look at a loan file to see if I could help him and his client understand why their refinance loan was denied. His client was very upset. They had given the other loan officer a non refundable application fee and appraisal fee for a denied loan. I looked at the income documents, more than enough income on tax returns for these self employed borrowers to qualify. I looked at the FICO scores, almost 800! I looked at the appraisal, value over 600,000 for a 300,000 loan. The property is residential according to the report, on 2+ acres with a pool and has a horse stable, with horses. What happened? When I looked at the other lenders appraisal I was confidant I knew why the loan was denied, the use of the property and the income from the use of the property. One of the borrowers gives ridding lessons to children – using the horses she owns. The other Loan Officer did not write notes to the underwriter and tell the story about the horses on the property and show that the income from the ridding lessons was not needed for the borrowers to qualify for the loan. It was as simple as that. Best bet, when this file went into underwriting with the first lender, the property was determined to be a commercial horse farm and not residential in her opinion – thus, the loan was denied. I just closed and funded this loan. The rate reduction saved this borrower more than $400.00 per month. How? When I submitted the file the loan notes documented the horses were owned by the borrowers, and showed with a current P&L statement the income from ridding lessons was not needed for the borrower to qualify for the new mortgage. Make sure your Mortgage officer submits complete and correct loan notes with your loan file!