Maji's Market Minute August 18, 2022

SBA Loans and Mortgage Qualification

So earlier today, I had an interesting conversation with a seller client and they mentioned that before they had decided to list and sell their property they had applied for a HELOC, (for those that don’t know that is a Home Equity Line of Credit.) A lot of people are doing that right now which makes perfect sense, but unfortunately, they were denied. I thought well, that’s odd, why would they be denied? It’s not that hard to get a HELOC, after all, they are using your home as collateral.

My seller explained the reason that they weren’t approved was because of an SBA loan that they had gotten during COVID, like many business owners. So why would this be an issue?

Well, one obvious reason is that the debt to income ratios would be off because it is a loan. But what was interesting and something I didn’t realize was that SBA loans during COVID are actually in first position. So apparently, if that person or anybody were to file bankruptcy, for example, the first creditor that would be paid would be the SBA loan. So that was obviously going to be an issue for a bank or lender. However when they spoke with another banker, that banker said, well, that’s true, but you can always change the order of the creditors.

If you are trying to get a loan, and you have an SBA loan, just make sure that if you do get denied ask is it because of the SBA loan? Is it because of the order of creditors if I were to file bankruptcy? Why exactly was I denied?

If you have any questions on this topic, feel free to reach out. I have many trusted professional resources. I was born and raised in Miami, and have been a Miami realtor for a bazillion years. So if you need any help, if you need a referral, and obviously if you need help with any real estate related purchases or if you are considering selling a property, please feel free to reach out.

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Maji Pace Ramos,
Maji Ramos Real Estate Advisor, P.A

• Miami Realtor since 1993
• 2nd Generation Realtor
• Negotiation Specialist
• Market Trends Specialist
• Miami native