No soup for you!

[gauss]

I was told by many banks that I would have been able to get a mortgage on our primary residence based on our assets, but not the second home. Seems absurd, since you're making the same payment no matter which home it's on, but that's the credit industry today.

Perhaps more personal pain is imparted to the average Joe in loosing his/her main home then an extra home?

If I had to default, all things being equal, I know which one I would default on.

 

[jazz4cash]

FWIW the asset to income conversion formula is somewhat new e.g. 2013 and even worse a lot of lenders are not aware or choose not to use since it is a bit more work for them. My point is if anyone had a bad experience many yrs ago don't let that keep you from giving it a shot. I guess there are more folks living off of personal savings with little to no pension nowadays so Freddiemac put out new guidelines.


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[Texas Proud]

I have zero debt. My house is paid-off and I have excellent credit.
The one and only reason I could not qualify was my low income...
which I purposefully keep low for tax purposes.

.

Right now you have no debt, but if you get a mortgage then you will....

And it would seem that the monthly payment amounts on a new mortgage cannot be supported by your low income....

That is what I mean by debt payment to income ratio.....

 

[Hamlet]

I'd look at other banks. Wells Fargo has some weird criteria. I had a friend that worked there during the housing bubble, and they wouldn't loan him anything rational for a home loan. He had no trouble getting a loan from anyone else.

 

[daylatedollarshort]

I'd look at other banks. Wells Fargo has some weird criteria. I had a friend that worked there during the housing bubble, and they wouldn't loan him anything rational for a home loan. He had no trouble getting a loan from anyone else.

We when we're trying to refi when rates dropped I asked lending places up front if they considered investment assets, especially retirement account balances, in the underwriting. The places that said sure were our two credit unions, though I don't have a statistically large enough sample size to know if that was just coincidence or not. Some lending places only wanted to look at regular kinds of income like W2 forms, 1099 forms, pension or SS payments and wouldn't consider investment income if wasn't the kind of income that showed up on tax returns every year.

 

[Helena]

Right now you have no debt, but if you get a mortgage then you will....

And it would seem that the monthly payment amounts on a new mortgage cannot be supported by your low income....

That is what I mean by debt payment to income ratio.....

If possible, I would do what I did last time.... pay down my mortgage and re-amortize with the money from the sale of my current house. Then I would pay the whole thing off asap. Last time my new house was paid off in three years. This time around I could pay it off with existing assets.

.

 

[Koolau]

To show you how "stupid" the rules are, we were almost turned down for a mortgage because of "low income" until they reviewed our 1040's and saw "large" income (taxable) due to converting tIRAs to Roths! That's all they needed. OP might see if his/her 1040 shows such "phantom" income. YMMV

 

[meierlde]

I have zero debt. My house is paid-off and I have excellent credit.
The one and only reason I could not qualify was my low income...
which I purposefully keep low for tax purposes.

.

Since banks use 1040 income as income, managing for low taxes has downsides. If for example one were to get a bunch of dividends they would qualify as income, or do banks reject schedule B income? (you do pay taxes on that income just the same)

 

[Sunset]

To show you how "stupid" the rules are, we were almost turned down for a mortgage because of "low income" until they reviewed our 1040's and saw "large" income (taxable) due to converting tIRAs to Roths! That's all they needed. OP might see if his/her 1040 shows such "phantom" income. YMMV

Another excellent reason to do conversions to ROTH.

 

[Telly]

A while ago I looked at the "how much mortgage can I afford" calculator at BankRate.com. They used Wages + SS + Pension + Interest + Dividends in the calculation. In other words, 1040 income. I didn't think of Roth conversions, as Koolau mentioned, as that seems so transitory.

But I guess it isn't any more transitory than any of these following actions, AFTER getting the mortgage: Quitting the job; selling or redeeming the interest-bearing instruments; selling the dividend-producing equities.

So just the most-recent 1040 will do it?

 

[OverThinkMuch]

While reviewing mortgage lenders I recall banks and credit unions revealed how often they sold their mortgages. One credit union I checked out sold either 0% or 25% (forgot which), suggesting they kept most of their loans in house. They might have more flexibility, since they only need to adhere to their own criteria.

 

[Koolau]

A while ago I looked at the "how much mortgage can I afford" calculator at BankRate.com. They used Wages + SS + Pension + Interest + Dividends in the calculation. In other words, 1040 income. I didn't think of Roth conversions, as Koolau mentioned, as that seems so transitory.

But I guess it isn't any more transitory than any of these following actions, AFTER getting the mortgage: Quitting the job; selling or redeeming the interest-bearing instruments; selling the dividend-producing equities.

So just the most-recent 1040 will do it?

It's now been 6 years, but IIRC, they wanted to see 3 years of 1040s. As it turned out, those were the three years we hit the conversions (and actually taking some tIRA money to spend.)

What seems so silly about using 1040 income is that it says so little about what I would think of as income. In the case of converting from tIRA to Roth, one is simply paying the taxes (thus ending up with somewhat less total assets in the process.) Actually spending tIRA money - as we did one of those years - LOWERs your assets. One would think that was a "bad" thing to banks, but they have to slavishly follow their rules (rules primarily set by congress IIRC due to the housing bubble bust - but I could be wrong.) In any case, it didn't make sense to us then or now. We just had to play their silly little game.

YMMV

 

[pb4uski]

To show you how "stupid" the rules are, we were almost turned down for a mortgage because of "low income" until they reviewed our 1040's and saw "large" income (taxable) due to converting tIRAs to Roths! That's all they needed. OP might see if his/her 1040 shows such "phantom" income. YMMV

Agree, for allegedly smart people you would think that they would know that moving money from one pocket to another is not income. What I do is just say it is pension income and they totally buy it since it appears on the 1040 as pension income. If they ask further than I would elaborate but they don't ask further so I don't elaborate.

 

[panacea]

To show you how "stupid" the rules are, we were almost turned down for a mortgage because of "low income" until they reviewed our 1040's and saw "large" income (taxable) due to converting tIRAs to Roths! That's all they needed. OP might see if his/her 1040 shows such "phantom" income. YMMV

This is because the underwriters are not trained in tax; just know what rules to follow. They looked at the taxable IRA distribution and treated it like income, not unlike dividend and interest income. Their focus is on the main schedules, not Form 8606 that actually details the conversion.

 

[phil1ben]

Important to keep this in mind when deciding whether to payoff your sub 3.5% mortgage to feel better.

 

[Which Roger]

I bet a lender would explain it like this: People with sizable assets but low income are a tiny fraction of the general population. And since most of those people can afford to pay cash for a home, the ones who are interested in a mortgage are only a fraction of that tiny fraction. They are indeed the best credit risks, but because of the small numbers, the cost of accommodating them (the additional software, rules, and employee training required to handle these rare special cases) far exceeds the benefit.

 

[bclover]

I just wanted to point out the absurdity of a mortgage company preferring job income [which could suddenly stop] to real assets.

But things [even things that seem negative at the time] happen for a reason.

I no longer need a mortgage because I am no longer interested in a new home. I have decided to stay put. Ironically, the best decision I could have made was made for me.

.

it is absurd and I had this same argument with my bank. I told them I was retiring and they kept telling me to wait until I had the mortgage even though I had 800K in a taxable account that I was using to live off of.

Their argument was I could spend that money and my argument was I could quit my job at any time. Got the mortgage and then told them I had retired.

Go figure

 

[harley]

I bet a lender would explain it like this: People with sizable assets but low income are a tiny fraction of the general population. And since most of those people can afford to pay cash for a home, the ones who are interested in a mortgage are only a fraction of that tiny fraction. They are indeed the best credit risks, but because of the small numbers, the cost of accommodating them (the additional software, rules, and employee training required to handle these rare special cases) far exceeds the benefit.

I think this is it, exactly. It's hard enough to train the monkeys to do the main part of the job.

 

[gauss]

I have done several mortgages and HELs with PenFed given their very favorable rates at time (prior to leaving MegaCorp).

Has anyone tried to get a HELOC/HEL or Mortgage with PenFed AFTER FIRE'ing?

 

[dallas27]

In commercial real estate, banks will make the loan if you open an offsetting account, like sticking 50k in a CD with them that they keep as insurance. Might want to try that.


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[Helena]

... they wanted to see 3 years of 1040s.

The irony is... because I have intentionally kept my income low....
I didn't have to file an income tax return the past couple of years.

Lesson learned. I will keep more of my nest egg liquid.

.

 

[Helena]

It's hard enough to train the monkeys to do the main part of the job.

What aggravates me the most... is being told by someone who was not born when I bought and paid off my first house... who is only punching income numbers into a mortgage computer program...
who probably has debt, no savings and a lower credit score... that I am too much of a risk to qualify.

.

 

[jazz4cash]

These situations can also be helped by using a mortgage broker that has many lenders to choose from but the fees and rates could be higher. The big bank lenders seem to be stuck on cookie cutter loans.


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[kgtest]

I'd look at other banks. Wells Fargo has some weird criteria. I had a friend that worked there during the housing bubble, and they wouldn't loan him anything rational for a home loan. He had no trouble getting a loan from anyone else.

I had the same exact issue with WF. Went with a smaller name in town and they immediately within 1month transferred my loan to WF.

 

[kgtest]

These situations can also be helped by using a mortgage broker that has many lenders to choose from but the fees and rates could be higher. The big bank lenders seem to be stuck on cookie cutter loans.


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For every bad loan a bank makes, they need to make 10 good ones. Something tells me after the burns of 2006 only the smaller newer banks are willing to take higher risks.


I know a few who had retired only to have to go back to work. Perhaps their retirement income wasn't enough. Or perhaps the modeling assumes the worst case historical market losses +margin which would mean even if you had 1mil, the model is valuing your portfolio at >500k for that historical "worst case" model