Overzealous Underwriters in Georgetown Texas

I’m in the middle of buying my next home here in my neighborhood, Georgetown Village in Georgetown, Texas and my loan is almost out of underwriting. Then I get the call from my lender that goes something like this:

Hi Edward, there’s just one more thing they need.

Sure, what is it?

Well, the underwriters are having a hard time accepting this home as a primary residence

Ok, that’s easy…”Yes…it is.” Can you just tell them that? Isn’t this what I indicated when I applied?

Yes, but they want you to write them an explanation and “convince” them because you bought other investment homes in the past in this neighborhood and this one is only a few houses down from you.

At this point, I was a little annoyed. They were questioning my integrity! I applied and said it was NOT an investment home but would be owner-occupied, so what’s the big deal? Ok, so I own other homes in this neighborhood and I bought 3 of them last year. I’m not sure how that relates. But, if I really WAS lying, why would I suddenly stop now? So, I tell my lender

Oh, I’ll “convince” them…you can expect the email shortly.

And I send them this…

This email is to affirm my intent to occupy the home on 125 Village Park Drive as my primary residence. Although, I have purchased many investment homes in the past, in this same neighborhood, they were all purchased with the INITIAL INTENT to invest in them and rent them out. They are also all priced BELOW my current primary residence. It would seem to make sense that if my stated intent is to purchase this home on 125 Village Park Drive, as a residence and NOT an investment, that I would follow-through with this commitment, otherwise that would be considered fraudulent, dishonest and maybe even illegal. All of which I would never want any part of.

In addition to the fact that I’m qualifying for this home as a residence and not an investment, there are several other facts that must be mentioned that support the legitimacy of my intent:

1. This home is priced ABOVE my current primary residence which would classify this as a typical MOVE-UP purchase. All of my other rental homes were priced below with significant (20-25% down) cash down so that it would cash flow. This home would be a poor investment choice and could never cash flow given the mortgage and current rental prices

2. This is 4 bedrooms and my current home has 3 bedrooms; it also has 2400 SF and my current home has 2000 SF. Lastly, this home has 400 SF of space above the garage which will be converted to my home office which is one of the main reasons I am moving. I have 3 children under the age of 4 and have worked from a small study for the past 5 years in this home. If anyone has had children before, they can understand the reason for this move!

3. I purchased my current home when I was single, 6 years ago. I am purchasing this home, 3 kids, a wife and a minivan later. Yes, that sounds like a move-up to me.

I hope this helps clarify my intent to purchase this home for a primary residence. If you or the underwriters would like to call me for further clarification please don’t hesitate to call me.

As far as me moving down the street, what person would NOT want to move their belongings a short distance and find the perfect home this close by? This means less time packing and unpacking a moving truck and more time enjoying my glass of ice cold lemonade on the front porch of my new home overlooking the neighborhood park.

So, what do you think? Were the underwriters being a little overzealous or just doing their job? Do you think what they did would really prevent a liar from stop lying at that point? I mean, if a guy is going to say he’s going to occupy it and then really rent it out, why would writing a letter change that? Is this just more “busy work” or is it really effective? I’d love to hear a situation from a lender or underwriter that was similar to this, but had different results (i.e. the purchaser wrote the letter and admitted he was secretly buying the home as an investment but was qualifying it as owner-occupied)

Message to Underwriters/Banks: It’s hard enough to qualify somebody these days, give us “legitimate” buyers a break! Sheesh!

(Bet that picture makes you thirsty huh?)

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  1. Aida Pinto says:

    Well being a Realtor/real estate agent is probably a red flag to them! I know that if I was an underwriter–I would have my doubts too! And this is your 4th investment! 2nd red flag!

    Well good luck anyway!

  2. Lynn 911 Team says:

    I agree buyers believe we are picking on them when in fact I state life has changed vs. one year, going back toooo the old days for lending. I am sure if they were toooo lend money they do the same.

  3. Christine Donovan says:

    This situation is occurring more often as lending restrictions become tighter. We are concerned with a potential buyer right now because she has several investment properties bought over the last several years, none of which she lives in, and now she wants to purchase one as her primary residence which is smaller than some of the invesments. We’ll see what the underwriters think.

  4. Steve Shatsky says:

    I think they may be a bit overzelous these days, but I think that perhaps given the condition of the lending industry the have good reason to err on that side of the spectrum. Like Aida mentionsed, after 4 investment home purchases I don’t know that they didn’t have a good reason to at least question whether there had been some unintentional error made on the application.

    In any case, Enjoy your new home… it sounds like you were fortunate and found somewhere that you will be very happy living!.

  5. Edward Lui says:

    Yeah, unintentional error I could see, just make me check the block again that says I’m getting it as a primary residence…but to ask for an explanation seems counter-productive. They used to be too “loosey-goosey” and giving everybody who could fog a mirror a loan…and not they’re going a bit over the top. I think the lending industry just needs to find their middle ground.

    Qualify based on scores, income, assets, but if you’re going to second-guess the applicant that’s like me telling my real estate client, “Are you sure you only want to spend $200,000? You’re driving a Mercedes and so I think you really want to spend $300,000. Why don’t you write me a letter and explain that too me.”

    He would probably just get in his Mercedes and drive away from me forever.

  6. Tiffany Burke says:

    Overzealous or not I have to agree with Edward on the fact that they may need to get something better in practice to verify if the potential buyers are lying or not. I wouldn’t think the method they are currently using will effectively weed out the real liars.

  7. Linda Taylor says:

    They are being overzealous!! I had a closing yesterday and the buyers told me that their lender made the wife write a letter to the underwriter that her husband had access to the money even though the loan is only in the husband’s name. Why would they do that? Well, the wife was doing all the faxing!! The husband works full-time and his wife stays home with their 3 children so she had the time. What does faxing have to do with access to the money? Good question but at least they let my buyers close.

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