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Mortgage denied after pre-approval

My wife and I have searched for months to find a lender that will work with us. Not because of poor credit or lack of funds. My wife is a 1099 contracted medical worker making $300k+. She hold an LLC and files as an s corp, has doesn't have two years of tax returns but has a long term contract agreement. I'm a W2 employee who has had a consistent employer making six figures for a few years. Our DTI is around 6% right now.

Our letter of commitment was due yesterday, my lender called me to tell me underwriting denied our loan because they didn't understand she had an LLC/Scorp. This was all disclosed in June of 2022. The lender has escalated our issue for an exception, I provided the current balance sheet and P&L to prove the business has virtually no expenses other than Internet and a few hundred dollars in office supplies.

Any advice on other things I can do? Am I going to lose my earnest money deposit over this?

Oh yeah. We will also be without a home of this falls through.

submitted by /u/Unk361
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source https://www.reddit.com/r/RealEstate/comments/y8uvbo/mortgage_denied_after_preapproval/
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