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.
a bit of a housing rant...but I feel better now that I wrote it.
December 9th, 2008 at 07:00 pm
December 9th, 2008 at 07:08 pm 1228849680
December 9th, 2008 at 07:28 pm 1228850900
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!
December 9th, 2008 at 07:47 pm 1228852046
December 9th, 2008 at 07:47 pm 1228852075
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.
December 9th, 2008 at 07:48 pm 1228852129
December 9th, 2008 at 07:51 pm 1228852315
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
December 9th, 2008 at 08:02 pm 1228852932
December 9th, 2008 at 08:10 pm 1228853455
December 9th, 2008 at 08:15 pm 1228853754
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.
December 9th, 2008 at 08:19 pm 1228853988
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.
December 9th, 2008 at 08:34 pm 1228854873
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!!
December 9th, 2008 at 08:36 pm 1228854978
December 9th, 2008 at 08:50 pm 1228855848
December 9th, 2008 at 09:02 pm 1228856528
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?'.
December 9th, 2008 at 09:22 pm 1228857747
December 9th, 2008 at 09:46 pm 1228859201
December 9th, 2008 at 09:56 pm 1228859790
I do strongly suggest a mortgage broker. They should be able to steer you to a manual underwriter.
December 9th, 2008 at 11:26 pm 1228865172