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Home > a bit of a housing rant...but I feel better now that I wrote it.

a bit of a housing rant...but I feel better now that I wrote it.

December 9th, 2008 at 11:00 am

Just got rejected by bank #2 about applying for a mortgage. Bank #3 application is still in "underwriting" where it has been for several weeks. So that option is not dead yet but may need some resuscitation.

After telling BB about bank #2 rejection- we tried to figure out what areas we needed to improve to get an approval. Bank #1 said that our mortgage payment would be 80% of our monthly income and they would only approve 45% of a monthly income. So we would need to put down $130,000 for a $200,000 house. The woman from bank #1 called me with the rejection info while I was in an airport and didn't have much ability to absorb her numbers. I knew they were crazy off...but we already had bank #2&3 working on our applications so I just let it go.

Bank #2 gave us no formula to work with. I just got an email stating, "After further review of your documents, the debt ratio is still too high and we are unable to approve you at this time."

So BB and I tried to find our weak links. We have gotten conflicting information about my rental income counting as income. I have heard the full amount applies towards my income, 70% applies as my income, or the full amount minus HOA fees counts as income. I have heard that BB's lesson income will or will not count because he is working in a state other than he will live.

But no matter how we tally up the numbers, if we put 30% down, our mortgage payment will be 20-30% of our monthly income at the current 5.5% interest rate without accounting for the additional rental income from the duplex we want to buy.

So I wrote bank #2 with my calculations. I asked where we needed to strengthen our numbers because right now we are offering:
credit in the 800's
$0 debt
30% down
assets that could be liquidated to pay for the house in full
mortgage payment will be less than 30% of our income.

Bank #2 wrote back that he will re-review our paperwork with his manager.

Inspired- I called bank #1 to argue our case. Have not gotten a call back yet.

And bank #3 is not dead yet either.

BB and I have hotel rooms booked to take BB's father to look at the duplex we want to buy this weekend. We thought we might make an offer this weekend. Now everything is on hold until we get a positive confirmation from a bank.

I just feel like a loser. I feel like no one wants to 'work' for us- they want to wait for the easy applications to come in rather than get their hands dirty with us. And I feel like all this being responsible with credit scores, no debt, no student loans, no car loan, full down payment is MEANINGLESS. I am frustrated looking at the homeowners from "easy application days" where anyone was approved. And everyone did get approved! And now we cant with all we are offering? Why are we being punished for other peoples irresponsibility?

And you know what annoys me? Once we buy this rental duplex...we will have 5 sources of income. 5! Now if Joe Schmoe gets a mortgage because he makes $80,000 a year and then loses his job 2 months after moving into his house- he's screwed. His income went down to whatever severance his job provides. But if we have 1 renter who loses their job and cant pay...we still have 4 other sources of income to cover that loss.

And my renter who has paid on time for the last 6 yrs is more reliable than some job obtained a year or two ago. And even if she was a new unreliable renter, If she loses her job, In this economy, I bet it's easier finding a new renter than a new job.

This duplex we are buying near a college has hundreds of potential renters. This place will always be rent able and has a rental history of 4 years with the same renter. I bet the country is losing jobs faster than schools are losing students.

And anyway, why is depending on a renter for payment considered more of a risky income than being dependent on a company for income when our country is in the middle of massive layoffs?

I still have my own human capital capabilities to seize in the event that my renter runs into problems. With a rental income there are 2 potential bodies able to create an income rather than 1! (does that make sense to you?)

I feel like the banks are telling me that my money is not as good as other peoples money because of where it comes from.

I just argued my own point so well I no longer feel like a loser. I feel like the banks are losers for missing out on my business.

18 Responses to “a bit of a housing rant...but I feel better now that I wrote it. ”

  1. Ima saver Says:

    I agree, they are losers for missing your business.

  2. mom-sense Says:

    Maybe the timing is just bad, given the "economic crisis" and looming foreclosures. Your rental income probably won't be given as much weight as a salary because your tenant could move at any time. In all probability, your income isn't enough to support their qualifications. Remember, you are just numbers on paper, nothing more, nothing less. That said, I do hope that you hear back with something positive from Bank #3! Good luck!

  3. homebody Says:

    I too am completely baffled. My OD has qualified for a 30 year fixed rate at like 5.75% and owns a rental now. Her mortgage is going to be about $200,000. I'm not sure what her income is, but it can't be more than $75,000. Will be interesting to see if it actually goes through. Her house started getting built this summer before the crisis really hit. Supposed to close January 8th.

  4. merch Says:

    I think mom-sense hit the nail on the head. At this point, a bank might not want to make the loan if they can't sell it on the market. In other words, you may be looking at a non-conforming loan. This would mean the bank would have to keep the loan in its portfolio rather then sell the loan.

    The $80k job that the guy has been working for 4 years equates to somewhere around $1,076 a week after taxes. His cash flow is probably less erratic then yours. The banks might me looking at your lowest monthly income and saying this is what is equivalent to the $80k job.

    If the $80k guy gets fired, he will collect unemployment.

    I guess what I am saying is that you are a round peg being shoved in a square hole. Have you tried a mortgage broker? The realtor should be able to give you a few names and they may be able to shop you around more effectively.

  5. lizajane Says:

    You definitely have some valid points here - with excellent credit scores, no debt, and a sizeable down payment, what exactly ARE they looking for?! But mom-sense is right, I think they are scrutinizing anything and everything to be careful these days. And I don't know if they really care that multiple sources of income gives you more likelihood of withstanding job cuts, I think they just look at the numbers overall. Good luck though, maybe they will come back with better responses.

  6. simpleyme Says:

    that is frustrating

    being turned down for a loan makes you feel like a loser I got turned down for a loan on my last place it made me so mad the loan office was fill out the wrong paper work we needed a commercial loan and the idiot was filling out residential paperwork ,I told her that it would be rejected and pleas help us apply for the proper loan

    well she told me she was a professional and knew what she was doing and guess what ? we were turned down the reason? because it was commercial property , oooh it made me mad ,I pulled my business account out of that bank

    keep trying , we had the best luck with local banks who really have manual underwriting and people smart enough to look at you incomes and assets and your personal record

  7. gamecock43 Says:

    yeah- even though we all know ideals for getting a mortgage...we still don't know the exact needed formula. The bottom line is; no mortgage. We are trying...but if no one wants our business then no one wants our business. Looks like we will have to start making alternate plans for our future. I would love to keep saving and just buy a house outright. Nearly impossible I know, but its revenge against the banks that I am focusing my rage on right now.

  8. Analise Says:

    The credit situation is very tight right now. I remember in a previous post you mentioned you had inherited a million dollars from your mother but you want to make it on your own, which is a very admirable goal. Have you thought about maybe "lending" some funds for a larger down payment to you and BB from your sole and separate property (your inheritance)? This would help you qualify for a loan. Just a thought.

  9. monkeymama Says:

    I am also completely baffled, considering your unique situation. So if you have 6 or 7 figures in assets, you can't get a mortgage if your income doesn't qualify you? Huh?

    I learned something interesting yesterday, which could shed light on the situation. At least in the state I live in, banks can not go after anything but your house, if you walk away from an original mortgage. BEcause original purchase mortgages are non-recourse loans (in the state of Cali). If you refi though, they are usually recourse loans. They can go after your other assets if you default, in this case.

    I wonder if that is perhaps the issue. Maybe why they don't care as much about the big picture, particularly given the current state of things. Your other assets don't matter so much since maybe they have little recourse if you were to default.

    Just some insight, but I would still keep at it. At least get some better answers. Yeesh.

  10. gamecock43 Says:

    I have thought about that...I will allow myself to use $10,000 of the inheritance...I was planning for the the $10,000 to be our emergency fund to transition us to the new house. Now I will throw it in with our down payment to create 30% to put down...I just have not withdrawn it yet. The problem is...I showed the lenders the balance statements saying there is $198,000 in stocks just sitting there in assets that can be liquidized ...and they don't seem to care! The fact that I have enough $$ to buy the $200,000 house outright is not even swaying them!! Can you imagine!? These banks are crazy!
    And monkeymama...I didnt know that about what banks can or not seize. I never thought about it but now that I do think about it that does explain how banks are not going after 401k and other properties from foreclosures...I guess that does make me much riskier to lend to since they cannot get my other assets. hmm...I feel less bad now.

  11. CouponAddict Says:

    lenders can be funny. I used to work (temp work) because the pay and benefits rocked. The bank refused to allow my income because it was temp even though my boss stated on the finacial paperwork the likely hood of my job continueing was excellent. They told me to write a letter as to why I should be allowed to to use my income. I stated I have a bacholar degree and worst case I could go work retail at 8 dollars an hour, then work part time at my temp job to come out about the same income. They told me to get a non-temp job!

    PS my non-temp job is now my full-time job, with income and benefits for this area that rock! It was worth the wait to get the house. We ended up with a better builder and a much better house because we had more time to build up the down payment.

    This will all work out for you!! I know it!!

  12. gamecock43 Says:

    I know it will. I'm not so mad now that I wrote the post and stated my case. When you go through brokers and lenders you rely on them to state your case. At least here, on this blog I got to state my case.

  13. ceejay74 Says:

    How lame is that...AS and I were able to borrow $190K pretty much on the strength of a written job offer she'd gotten...when it turned out she hated the job and it was killing her with stress and she quit after 6 months, we struggled for years to make our mortgage payments. 'Course I guess stupid lenders like ours, and naive borrowers like me and AS, are what caused the meltdown and made it harder for together people like you to get loans. Sorry. Frown

  14. whitestripe Says:

    it is unfortunate that this is happening to you and BB but the only thing I can offer is that you have to try and look on the positive side: atleast the banks are trying to be responsible now!

    I remember being frustrated failing my first drivers license test, and then having a hairdresser tell me she got her license by giving the police sheriff a free haircut 25 years ago. i remember thinking: 'why is it always HARDER to do EVERYTHING now?'.

  15. gruntina Says:

    I would think retirement and stock account might not be dependable for the banks to figure in income/debt ratio since a huge loss has been incurred with the economy crisis?

  16. gamecock43 Says:

    I'm ok with it. I have made peace with it. I talked to bank #1 and they are only counting 70% my rental income AFTER paying HOA fees, counting 70% of BB's income cuz its out of state and not counting another BB income at all because it's going to end when we move...and they will not count my assets because it's not being held in their bank. She said they are being very tight till Obama comes in...and will keep us on file to call us if Obama makes changes and we suddenly qualify....and Ceejay...your confession is hilarious.

  17. merch Says:

    Agian, I think the issue is that the loan would be a non-conforming loan and the banks would not be able to sell the loan. They would have to carry the loan on their books.

    I do strongly suggest a mortgage broker. They should be able to steer you to a manual underwriter.

  18. gamecock43 Says:

    We got approved!! by Bank #2!! Read my next post about it!

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