Underwriting Requirements

[lifeizfunhuh]

I recently concluded an extremely frustrating loan approval process. Without going into too much personal info, I consider myself to be a highly qualified buyer. I’m an attorney with high income, low debt/income, and great credit score. But it took me more than a month of loan applications, discussions, disclosures, letters, and the dreaded “documentation” just to scrape by. I’m talking JUST scrape by.

The “problem” from the banks’ (plural) perspective is that I, like many high income people, have an accountant. And my accountant and I have developed certain strategies to maximize my income. This results in a complex structure of legal entities, accounts, and other financial wizardry. This caused the banks (plural) all kinds of problems. It was “yeah that works” to “well, if you just show us these”, to “i don’t know about that, let’s see this other thing”, etc. ad nauseum.

It is an absolute miracle that I was able to buy my house. Anyone else experiencing this? And, although this is just anecdotal to me, it has to have a negative effect on the market. Discuss…

[jpinpb]

Someone I know had their loan delayed b/c they had to explain why some addresses came up associated w/the person’s name while they were running checks.

One was a rental unit the mother was occupying 10 years ago.
2 were incorrect addresses and 2 other ones were properties purchased 20 years earlier w/no encumberances except low property taxes.

They went from giving loans to dead people to inquiring about questionable assets/debts from 20 years ago.

[jpinpb]

Someone I know had their loan delayed b/c they had to explain why some addresses came up associated w/the person’s name while they were running checks.

One was a rental unit the mother was occupying 10 years ago.
2 were incorrect addresses and 2 other ones were properties purchased 20 years earlier w/no encumberances except low property taxes.

They went from giving loans to dead people to inquiring about questionable assets/debts from 20 years ago.

[jpinpb]

Someone I know had their loan delayed b/c they had to explain why some addresses came up associated w/the person’s name while they were running checks.

One was a rental unit the mother was occupying 10 years ago.
2 were incorrect addresses and 2 other ones were properties purchased 20 years earlier w/no encumberances except low property taxes.

They went from giving loans to dead people to inquiring about questionable assets/debts from 20 years ago.

[jpinpb]

Someone I know had their loan delayed b/c they had to explain why some addresses came up associated w/the person’s name while they were running checks.

One was a rental unit the mother was occupying 10 years ago.
2 were incorrect addresses and 2 other ones were properties purchased 20 years earlier w/no encumberances except low property taxes.

They went from giving loans to dead people to inquiring about questionable assets/debts from 20 years ago.

[jpinpb]

Someone I know had their loan delayed b/c they had to explain why some addresses came up associated w/the person’s name while they were running checks.

One was a rental unit the mother was occupying 10 years ago.
2 were incorrect addresses and 2 other ones were properties purchased 20 years earlier w/no encumberances except low property taxes.

They went from giving loans to dead people to inquiring about questionable assets/debts from 20 years ago.

[davelj]

(I assume you mean that these “certain strategies” are designed to maximize your AFTER-tax cash flow as opposed to your PRE-tax stated income. Just making sure.)

Yup, I’ve had the same “problems.” But, frankly, I view this as a good thing. It means the lenders are paying much closer attention. So, it didn’t really bother me. Underwriting standards are going “Back to the 90s.” As they should be.

I have some extensive diagrams and spreadsheets that explain pretty clearly how everything fits together and after I did it the first time it just required updating. You might want to consider doing something similar in order to save yourself the grief next time around.

[davelj]

(I assume you mean that these “certain strategies” are designed to maximize your AFTER-tax cash flow as opposed to your PRE-tax stated income. Just making sure.)

Yup, I’ve had the same “problems.” But, frankly, I view this as a good thing. It means the lenders are paying much closer attention. So, it didn’t really bother me. Underwriting standards are going “Back to the 90s.” As they should be.

I have some extensive diagrams and spreadsheets that explain pretty clearly how everything fits together and after I did it the first time it just required updating. You might want to consider doing something similar in order to save yourself the grief next time around.

[davelj]

(I assume you mean that these “certain strategies” are designed to maximize your AFTER-tax cash flow as opposed to your PRE-tax stated income. Just making sure.)

Yup, I’ve had the same “problems.” But, frankly, I view this as a good thing. It means the lenders are paying much closer attention. So, it didn’t really bother me. Underwriting standards are going “Back to the 90s.” As they should be.

I have some extensive diagrams and spreadsheets that explain pretty clearly how everything fits together and after I did it the first time it just required updating. You might want to consider doing something similar in order to save yourself the grief next time around.

[davelj]

(I assume you mean that these “certain strategies” are designed to maximize your AFTER-tax cash flow as opposed to your PRE-tax stated income. Just making sure.)

Yup, I’ve had the same “problems.” But, frankly, I view this as a good thing. It means the lenders are paying much closer attention. So, it didn’t really bother me. Underwriting standards are going “Back to the 90s.” As they should be.

I have some extensive diagrams and spreadsheets that explain pretty clearly how everything fits together and after I did it the first time it just required updating. You might want to consider doing something similar in order to save yourself the grief next time around.

[davelj]

(I assume you mean that these “certain strategies” are designed to maximize your AFTER-tax cash flow as opposed to your PRE-tax stated income. Just making sure.)

Yup, I’ve had the same “problems.” But, frankly, I view this as a good thing. It means the lenders are paying much closer attention. So, it didn’t really bother me. Underwriting standards are going “Back to the 90s.” As they should be.

I have some extensive diagrams and spreadsheets that explain pretty clearly how everything fits together and after I did it the first time it just required updating. You might want to consider doing something similar in order to save yourself the grief next time around.

[EconProf]

A few years ago when I bought investment properties I took out 15-year loans in order to retire the debt faster, and to get about a 1/2% break in the interest rate. Of course cash flow suffers on these investments since so much of the monthly payments goes to principle.
Now, however, banks rake me over the coals when I try to get a loan, because “You don’t have enough cash flow”. My great balance sheet doesn’t matter to them, or my better interest rate on existing loans. (Nor, BTW, does proof of living below one’s income). They just want wage slaves, or last year’s favorable Form 1040, or commissioned salesmen coming off of a good year. Very frustrating.

[EconProf]

A few years ago when I bought investment properties I took out 15-year loans in order to retire the debt faster, and to get about a 1/2% break in the interest rate. Of course cash flow suffers on these investments since so much of the monthly payments goes to principle.
Now, however, banks rake me over the coals when I try to get a loan, because “You don’t have enough cash flow”. My great balance sheet doesn’t matter to them, or my better interest rate on existing loans. (Nor, BTW, does proof of living below one’s income). They just want wage slaves, or last year’s favorable Form 1040, or commissioned salesmen coming off of a good year. Very frustrating.

[EconProf]

A few years ago when I bought investment properties I took out 15-year loans in order to retire the debt faster, and to get about a 1/2% break in the interest rate. Of course cash flow suffers on these investments since so much of the monthly payments goes to principle.
Now, however, banks rake me over the coals when I try to get a loan, because “You don’t have enough cash flow”. My great balance sheet doesn’t matter to them, or my better interest rate on existing loans. (Nor, BTW, does proof of living below one’s income). They just want wage slaves, or last year’s favorable Form 1040, or commissioned salesmen coming off of a good year. Very frustrating.

[EconProf]

A few years ago when I bought investment properties I took out 15-year loans in order to retire the debt faster, and to get about a 1/2% break in the interest rate. Of course cash flow suffers on these investments since so much of the monthly payments goes to principle.
Now, however, banks rake me over the coals when I try to get a loan, because “You don’t have enough cash flow”. My great balance sheet doesn’t matter to them, or my better interest rate on existing loans. (Nor, BTW, does proof of living below one’s income). They just want wage slaves, or last year’s favorable Form 1040, or commissioned salesmen coming off of a good year. Very frustrating.

[Author]

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