Perils of FIRE and new CREDIT

[tryan]

Thought this was interesting ... was just DENIED a re-fi on an existing HELOC. Reason being "Insufficient Income for Amount of Credit Requested; Excessive Obligations to Income". Was hoping to drop my rate 1% ... looks like this ain't happening with these people.

Here's the nitty-gritty .... been developing some waterfront land as a vacation rental. Almost done ... dipped into two HELOCs to polish the place. Good news is the realtor (who sold me the land years ago) says the place is worth almost twice what I put into it. It's free n'clear .. and has NO rent history - yet.

Went back and forth with the bank identifying rental income, two years taxes where provided. End result they want me to keep paying prime when prime -1 is available. Not the end of the world, but it seems that the WORKING get better rates.

So, what are the FIRE'd doing to renew thier credit?

As a side note my credit score >700.

I plan on never needing to borrow any money. I only lend money now. leveraging money to make money at this stage in my life is a risk, I do not want to take.

I use a credit card to purchase everything and pay off the balance each month. If having no wage income makes your credit worthless, that is fine with me.

[d]

go to a different bank!

[brewer12345]

Quote:

Originally Posted by d go to a different bank!

Beat me to it. I think you are just dealing with the wrong bank.

[MasterBlaster]

What you are seeing here is that credit guidelines are tightening. After all those years of "wild-west" lending and after banks are taking back properties bought with marginal finances the rules for lending are getting tougher.

The banks always seem to learn the hard way after a boom

[Patrick]

Quote:

Originally Posted by tryan Thought this was interesting ... was just DENIED a re-fi on an existing HELOC. Reason being "Insufficient Income for Amount of Credit Requested; Excessive Obligations to Income". Was hoping to drop my rate 1% ... looks like this ain't happening with these people. Here's the nitty-gritty .... been developing some waterfront land as a vacation rental. Almost done ... dipped into two HELOCs to polish the place. Good news is the realtor (who sold me the land years ago) says the place is worth almost twice what I put into it. It's free n'clear .. and has NO rent history - yet. Went back and forth with the bank identifying rental income, two years taxes where provided. End result they want me to keep paying prime when prime -1 is available. Not the end of the world, but it seems that the WORKING get better rates. So, what are the FIRE'd doing to renew thier credit? As a side note my credit score >700.

I had a very similar thing happen to me when applying to refi my residence. Lenders said my debt-to-income (DTI) ratio was too high (too much outgo compare to my income). : So at first they say I can go "stated" income, which means I just tell them how much I make without documentation. Only problem is that's about 0.5% higher. Then when I tell them I'm retired, they say I can't go "stated" because I have no possibility of overtime or bonus income, so I would have to go "no-doc" (no documentation), but that's about another 0.5% higher on the interest rate than the "stated" rate. Forget the fact that I live WAY below my means and most of my income goes to my real estate. They just have some number in the computer and that's what they go by. I told them to forget it, I'll stick with what I have and they won't get their commission on the loan. P.S. you might want to try www.amerisave.com. They have the lowest interest rates and fees that I've been able to find.

[maddythebeagle]

One of the guys that visits the credit boards that I frequent claims to have had good luck with citibank....he is self employed so probably similar issues as FIRE folks....they apparently even try to entice him to use the HELOC more often with teasers....

I would pay off the heloc with credit card money and use the heloc as a placeholder if needed....but that's me and dont mind tracking a few credit cards...and few credit cards verify income...

[Nords]

Quote:

Originally Posted by tryan So, what are the FIRE'd doing to renew thier credit? As a side note my credit score >700.

I don't think it's about you or FIRE or your credit score.

I think the bank has scared themselves and they're grubbing for every dollar.

We've been FIRE'd over four years and we're still getting money thrown at us by credit unions and credit-card companies. Spouse's credit score has actually gone up.

Take your business elsewhere, especially if it's a credit union!

[kramer]

I am with cutthroat in that I never intend to borrow anything again.

I am a renter and plan to continue to rent in FIRE. So credit rating and stated income can affect one's ability to get a rental, and sometimes it is not even possible if there are rigid rules.

Also, your credit rating can affect your ability to get a mobile phone contract.

Kramer

[Mr._johngalt]

Quote:

Originally Posted by kramer I am with cutthroat in that I never intend to borrow anything again. I am a renter and plan to continue to rent in FIRE. So credit rating and stated income can affect one's ability to get a rental, and sometimes it is not even possible if there are rigid rules. Also, your credit rating can affect your ability to get a mobile phone contract. Kramer

I am with Cutthroat also, with two (2) exceptions. When someone
offers you -0-% money you have to be a fool not to take it IMHO.

Also, I reserve the option of a reverse mortgage at some point,
although (like drawing down my IRA) it looks less and less like
that will be necessary. BTW, I have no idea what my credit score is and don't care. I would guess my available CC lines are around 250K.
That's enough.

JG

[LOL!]

Quote:

Originally Posted by tryan As a side note my credit score >700.

I have read more than once that one should probably put a HELOC in place before retiring as folks without jobs don't get the best rates. Even if you don't use it, having it available could make sense for some folks.

As a side note, a credit score of > 700 could be below average, because the average FICO score is reported to be somewhere in the 700s.

[tryan]

CT, JG and Kramer,

Yeah, I hear ya .... just couldn't stay away from this one (developing waterfront). Call it a "sixth sense" ... I knew the return would be good. Real estate is in my blood; can't just sit on the side line. Making the big score was like hitting a hole-in-one or catching a 35 lb salmon on 10 lb test. When this is done (renting well or slaughtered for the loot), I'll be looking for the next big catch.

d, Brewer, Patrick, Maddy, Nords,

Looks like I need to bankshop. Thanks for the leads! Also have been getting stuff in the mail from prior lenders. Problem will be when they want to use prior years taxes as an income statement. The rentals are a great source of cash; but by the time I deduct the expenses (which include mileage, cell and home phones, internet access, the newspaper and RE literature, blah, blah, blah) Uncle doesn't see much - and legaly so. Don't expect no/low doc loans to top what I have (prime).

LOL, Masterblaster,

I lined these HELOCs up just before retiring (last Oct). Was told my credit score (720-something) was "good" and qualified me for the best rate available. This score included a fraudulent city lein (taxes for a period I never owned the property) which has since been cleared ... so I expect my score has gone up.

This is a large pretty conservative bank with pretty decent rates (prime - 1). Don't think the lending standards have gotten tighter ... just know my income dropped significantly (on paper) when I left mega-corp.

I have all the credit I need to play RE the way I want to ... would be nice to know I can re-fi when I want to AND get the best rates. It appears one of these 2 ain't happening.

[brewer12345]

tryan, where are you? Maybe someone could suggest a bank. I would imagine that a local bank that you might have a relationship with might be more willing to deal with you.

[Dawg52]

Quote:

Originally Posted by Cut-Throat I plan on never needing to borrow any money. I only lend money now. leveraging money to make money at this stage in my life is a risk, I do not want to take. I use a credit card to purchase everything and pay off the balance each month. If having no wage income makes your credit worthless, that is fine with me.

Ditto.

[tryan]

Quote:

tryan, where are you?

Most of the RE is in northern MA and southern NH.

[Mach1]

tryan,

Like you, I am heavy in RE development. Between the business line of credit at prime plus .5% and the HELOC at prime plus .25% I am out about 8K a month, I am about to call my banker and ask for prime minus 1 or else I'll the business to another bank.

Mach1

[boont]

The best way to handle this is to find a smart mortage broker. Talk to several. These guys know all the ins and outs of finding money.

And no, it is not more expensive than doing it yourself.

I just follow their lead and the money always appears.

If you need to fix your rating they can tell you how to fix it.

boont