How Difficult Is It To Get A Mortgage Nowadays?

One of the reasons why I think the housing market will stay strong for years to come is because getting a mortgage nowadays is extremely difficult. When lenders are only lending to the people with the highest credit and a minimum 20% down, it's hard to see mass defaults in the future.

Ever since the global financial crisis that began in 2007, banks have been much more stringent about whom they lend money to. Although strict lending practices lock out people with poor credit, it has helped existing homeowners tremendously. Now with the Fed going on a multi-year interest rate cut cycle, existing homeowners will like see even greater home equity gains.

I recently went through a painful mortgage refinance. The process showed me that only the most qualified people are getting loans and refinancing. If someone like me, who has 10X more assets than the amount to be refinanced went through a lot of difficulty, so are many other people.

There was a time when no-documentation mortgages, negative amortization mortgages, and NINJA loans (no income, no job, no asset) were common place. Those loans are equivalent to when passengers could smoke on airplanes so long as they were in a “smoking row.” Unbelievable.

How Difficult Is It To Get A Mortgage Nowadays?

I documented back in 2012 that it took 100 days to refinance my mortgage. It was a painful experience given just two years before it only took 45 days to refinance. I was anxious the refinance wouldn't go through because once you don't have any W2 income, you are DEAD TO BANKS.

I was determined to save an extra $300+ in mortgage interest a month if it killed me. Definitely refinance your mortgage BEFORE you quit or engineer your layoff folks.

Now that we're 12 years into a bull market in 2023+, you'd think that getting a loan would be a little easier. Nope. Getting a mortgage is as brutal as ever. As rates have moved up, the number of people who can qualify for a mortgage has gone down. Further, lenders are being more cautious just in case the economy heads into a recession.

Overall, the maintained difficulty of getting a mortgage nowadays is a GOOD THING. As a homeowner, you only want other well-qualified buyers to get a mortgage to prevent what happened in 2008-2010 again.

Let me share my latest journey about how difficult it was to get a mortgage. For reference, I have over a 820 credit score and a low debt-to-equity ratio.

The Mortgage Application Process Takes Forever

If you are going to purchase a property, you best get a pre-approval letter from your bank for how much property you can buy and how much mortgage you can borrow from them long before you find your baby.

The number one concern for sellers is whether buyers can actually get a loan or come up with the cash to buy the property. With a pre-approval letter, a personalized letter with pictures, and copies of your assets, you will significantly help your case if your bid price is within the ball park.

After shopping around for mortgages online, like I always do given their massive mortgage network, I decided to go with Citibank. They offered a competitive 2.5% 5/1 JUMBO ARM since I have more than $250K in assets with them. They also have my primary home mortgage and my other small rental property mortgage, so I figured the process would be a piece of cake. NOT SO!

Despite never missing a mortgage payment in 11 years and having more in assets than the mortgage amount I was seeking, they still put me through the ringer. I was going for a “no financing contingency” offer that would be equivalent to paying cash for a property.

By going no financing contingency, I would simply wave the normal 10-14 day financing contingency clause in the contract so the seller could rest easier knowing I was a legitimate buyer. If I decided to pull out of the deal for whatever reason, the seller would keep the earnest money deposit, which is generally 3% of the purchase price at minimum.

Mortgage Denied At First (14 days into the process)

My first go around for getting a no financing contingency approval was actually rejected after two weeks. I gave them all my documents (last two years W2, all my assets statements, last two pay checks, insurance forms, rental income deposits, rental contract, K1s, etc) and I still got denied by underwriting mainly because:

1) They disavowed 100% of my online business revenue because it wasn't at least two years old.

2) They disavowed 100% of my consulting income with Personal Capital, because it wasn't at least two years old. The income is decent, but I just started with them on January 13, 2014.

3) They only included 75% of my rental income to account for expenses and vacancies even though I have never had a month of vacancy for my primary rental in nine years. Based on my math, I'm AT LEAST $1,500 a month cash flow positive after paying HOA, mortgage, and property taxes, but based on their math, my main rental was $686 cash flow negative. I pressed them to explain their math to me, and they just kept saying they could only allow 75% of rental income, which didn't make sense. They were cutting my rental income down by more like 60%.

4) They disavowed 100% of my deferred income from my old employer of 11 years even though I continued to receive a W2 from them in 2012, 2013, and for sure in 2014 and 2015 due to my deferred compensation. The amounts are significant per year, but they said that unless I prove I will receive another two years of deferred compensation from my old employer, the income is inadmissible to the underwriter.

5) Curiously enough, the only income they allowed was my W2 income from my online revenue even though I just started paying myself last September, 2013. I've been purposefully paying myself a modest wage because I don't need more income, I don't want to pay 15% FICA tax on the income, and I need to pay myself at least some income according to the IRS for S-Corps. If it was completely up to me, I'd pay myself $1,000 a month and do year end distributions.

Because I was denied a no financing contingency loan, I didn't bid with confidence because why bother? Everybody else was coming in with cash or a no financing contingency loan, so I wasn't even competitive. As a result, I lost the first home I bid on.

The Second Time Around Apply For A Mortgage – New Strategy (took another 10 days)

I was clearly not happy that my loan was rejected, so I e-mailed my personal banker to help me find another way (See: How To Get Better Service From Banks). I was working with an unfamiliar mortgage officer who didn't seem to have his act together because he'd e-mail me the same question two or three times, on multiple occasions, and was unresponsive when I contacted him.

My personal banker got me in touch with another mortgage officer who I recognized after speaking to him years ago. He was much more on the ball and had an assistant to help gather all the documents and cross things off the list. He responded to all my e-mails, and I was equally responsive to all of his.

Since 90% of my income was disavowed, we went a new strategy of doing an Asset Based Income analysis to supplement my current income. In addition, he routed my loan to their “Affluent Channel”; a specialized group that will fully underwrite, review my income, assets and credit profile; thereby eliminating any guesswork so that I could bid a no-contingent offer. Again, I could pay cash for the property, but I wanted to get a loan since interest rates are so cheap.

In about 10 days, he sent me a congratulatory e-mail saying I was approved for a no financing contingency loan. Fantastic! But of course things were not so easy. In order for me to get the no financing contingency loan, he sent me a list of 21 more things I needed to fulfill according to the underwriter!

What is the point of getting approved for a no financing contingency loan when I've got so many other things I need to prove? At this point, I was very distraught and was about to just forgo the entire mortgage application process altogether. Paying cash is so much easier because you answer to nobody. An appraiser isn't even necessary. But I stayed calm and carried on.

The list of 21 new things I need in order to qualify for a mortgage AFTER I had already supposedly qualified:

1. A copy of the Hazard Insurance policy, binder, or certificate verifying coverage amount, premium, and the first year's paid receipt, if applicable.
2. A copy of the fully executed Contract of Sale verifying purchase price of $XXXXXXXX.
3. A copy of the Earnest Money check #__________ in the amount of $____________ clearing prior to___________ .
4. Borrower must sign and date form 4506T at Application for 2012 & 2013 personal federal tax transcripts AND must sign and date form 4506T at Application for 2012 & 2013 business federal tax transcripts for your business.
5. This program requires minimum deposits with Citibank and/or assets held in a Citi institution at loan closing of at least $250,000. The assets must be in place at least 10 business days prior to closing in order to avoid federal Truth in Lending redisclosure and closing postponement requirements. The terms of your loan are subject to this verification of assets, if unverified your loan terms will change.
6. Borrower(s) to provide an acceptable copy of the most recent months' asset statements and/or other documentation to verify that a minimum of $1,000,000 in investable assets plus 12 months verified Principal, Interest, Taxes, Insurance and Assessments (PITIA) will be available after the loan is closed.
7. This interest rate requires verification of $250,000 or more in investable assets with Citibank no less than 10 days before the settlement date in order to avoid Federal Truth in Lending re-disclosure and possible delays with your loan closing. The minimum $250,000 in investable assets must be above and beyond any monies used to close your mortgage loan with Citi.
8. You have applied for a loan program that requires the payment of upfront fees. Payment has not been received. Please contact your sales representative to pay the upfront fees.
9. Borrower's credit report reflects an alert for a previous address unit/apt number X was not a residential address but rather a restaurant/bar/nightclub. Borrower to provide letter addressing whether he has any knowledge of a previous address with this unit/apt number. (letter must be signed and dated)
10. Borrowers to provide copy of Bank of America mortgage statement for loan #XXXX for property located in Lake Tahoe to verify payment includes taxes and insurance. In addition, provide copy of HOA billing to verify monthly assessment for condo.
11. Borrower to provide most recent Citibank account statement for account #XXXX.
12. Borrower to provide documentation to verify that the following CDs do or do not have penalties for early withdrawal: Citibank #XXXX, First Republic Bank #XXXX, First Republic Bank #XXXX.
13. Borrower provided on-line account statements for three CD account but the statements do not verify the owner of the account or depository or date verified. In addition, Borrower to provide statements that contain the required identifying information. In addition, provide documentation to verify that the following CDs do or do not have penalties for early withdrawal: #XXXX, #XXXX and #XXXX.
14. Borrower to provide documentation to verify the source of deposit to Citibank acct#XXX 2/5/14 for $XXXXX.
15. Borrower to provide documentation to verify the source of deposits to Citibank acct#XXXX 3/10/14
transfer $XXXX, 3/10/14 transfer $XXXX and teller deposit 3/24/14 $XXXXX.XX.
16. Borrower to provide letter addressing the deposit to Citibank acct#XXXX 3/8/14 for $XXXX from X Bank. This was an ACH transaction, please explain nature of relationship with the company. Additional conditions may be requested.
17. Borrowers to provide copy of HOA billing for XXXXX as property is listed as a townhome per Citi mortgage records.
18. In order to use rental income for departure residence located at XXXXXXXX, San Francisco, the following requirements must be met: 1) Exterior appraisal to verify not less than 30% equity in the property, 2) fully executed lease agreement and documentation that security deposit from the tenant has been deposited to borrower's account. If the 30% equity in the property cannot be documented the full PITIA payment must be used to qualify and six month PITI reserves is required in addition to the twelve months PITI reserves required for property being purchased. An appraisal to be order by Citibank.
19. Borrower to provide copy of HOA billing for condo property located at XXXXXX (Primary rental).
20. Borrower to request a Profit & Loss and Balance Sheet for the first quarter ended 3/31/14. **For Corporations, S-Corportions and Partnerships, the P&L and Balance Sheet must be on a CPA's letterhead or evidence provided that the document(s) has been reviewed by a CPA. All documents must be signed and dated by borrower(s) and CPA**
21. Borrower's credit report reflects an alert for a previous address that is indicated as a receiving or forwarding service. Borrower to provide letter addressing whether he is aware of using a mail service in the past.

The following items will be required at your closing.

1. Changes to sales contract to be initialed by borrower.
2. All Borrowers must sign and date form 4506T for personal 1040s and business 1120S for 2013 and 2012
at Closing.
3. Provide Hazard Insurance Binder and paid receipt. (Does not apply to Cooperatives.)
4. If your loan becomes a higher-priced covered transaction as defined in the federal Truth in Lending Act's Regulation Z, we may require additional documentation and verifications, re-underwrite your loan, and withdraw this approval if your loan fails to meet Citi's requirements.
5. If your loan becomes a higher-priced mortgage loan, the federal Truth in Lending Act's Regulation Z requires that an escrow/impound account be established and maintained. We may revoke any waiver of escrow requirements.
6. If your loan becomes a higher-priced mortgage loan but is not considered a qualified mortgage, it may be subject to special appraisal requirements under the federal Truth in Lending Act's Regulation Z. This approval may be withdrawn if these appraisal requirements are not met.

SHOOT ME NOW!!!! Providing all these endless documents in order to qualify for a mortgage is maddening. No wonder why only the most organized, wealthiest, and most credit-worthy people can qualify for a mortgage nowadays.

Related: All The Closing Costs In A No-Cost Refinance

A Misunderstanding In My Mortgage Application Perhaps? (7 more days)

After three and a half weeks of gathering all my documents, getting rejected the first time around, and now finally getting “approved” I was absolutely distraught to receive this MEGA LIST of follow up things to do before I could qualify for my pseudo no financing contingency loan. I took a week long break to get back any documents because I was burnt out.

I didn't feel confident at all bidding with a no financing contingency. What if I won and Citibank turned around and screwed me? I would either have to forfeit my earnest money, or sell securities and pay early CD withdrawal penalties to come up with 100% cash. That is not an ideal situation. I calculated I'd have to pay $14,000 in interest penalties for one group of CDs for example if I withdrew early.

I told my new mortgage officer that their list of 21 things was ridiculous and that I was strongly considering just paying cash to avoid this hassle.

No-Contingency Offer Is A Misonomer

Here's his response,

“I think there's some misunderstanding to what it really means for a no-contingency offer, as this is being misused in this industry. The only person that can remove a no-contingency is you the buyer. No lender  can ‘remove’ the loan contingency even though I get questions like this from both buyers and agents alike all the time. We are responsible for informing you what given conditions are remaining and that we ask if you can demonstrate the required conditions, if you feel confident that you can meet those requirements, you can remove or submit an offer without contingency.

The purpose is to have your loan fully underwritten so that the underwriter can fully list items that needs to be met. Initially we submitted a pre-approval, that is with a credit check, income and asset analysis and generally if the basic parameters are met—you will be issued a pre-approval letter.

In your situation, your file has been escalated to an underwriter and a 2nd level that has put signatures on this loan for approval.  You will note that the conditions are very detailed and explicit and that’s the intention, to keep you informed of what is still outstanding. We do not entertain this for everyone as the standard industry practice is to do a basic review until a buyer has a property in contract.

Some of the conditions are merely informational, such as the requirement for the $250,000 deposit with Citi, others only apply at the time you offer is accepted such as items 1-3, 8, etc.”

In other words, even if you are approved for a no financing contingency loan or regular mortgage, there is still a lot of work to be done. In my case, it was simply spelled out in detail. No wonder why many deals fall through. If sellers knew how difficult it was for a buyer to borrow money nowadays, they would only accept real cash offers!

Mortgage Lending Standards Are Stricter than Ever

Do not believe your eyes and ears when you hear the media talking about loosening lending standards. They are probably reporters who are just highlighting hearsay. I'm down in the trenches and reporting to you guys first hand what's going on.

Sure there will be some banks that will be more lenient than others. But based on my own refinancing experience and this current mortgage application experience, I've never had it so tough. Yes, my W2 income is a former shell of what it once was, but my assets are greater than ever.

Despite the bank seeing my cash situation that is way more than the loan I was looking for, they still wouldn't provide any leniency. I'm thinking this has something to do with California being one of the no-recourse states which let's you walk away from your mortgage without any repercussions for your other assets.

Average Credit Score For Mortgage Applicants At All-Time High

The average credit score for a rejected mortgage applicant of 760 is just the tip of the iceberg. The greatest irony is that government sponsored first time homeowners programs are MORE lenient and MORE risky than private mortgage programs.

I don't see how allowing only 0-3% down for first time home buyers is a good idea since the reason why they are going through this program is because their income and existing assets are probably a little too light for private mortgage programs.

The government is allowing first time homebuyers to kayak right next to a bottomless whirlpool in the middle of the ocean. Now you know why interest rates for Jumbo loans are lower than conforming loans. Lower income, lower asset borrowers are actually more at risk.

Main Takeaways Of Trying To Get A Mortgage

* Prepare to go through documentation gathering hell for one month.

* Prepare to still spend two to three months to refinance a mortgage.

* Just when you think it's over, it's not over. It's like waiting in the terminal for a delayed flight. They give you hope with a 30 minute update, and dash your hopes away until you realize you've been sitting in the waiting lounge or tarmac for four hours.

* Borrowers today are much more qualified than borrowers of the past.

* The next housing correction will not be as severe as 2007-2010 because less people will be forced sellers.

* Super strict lending standards are good for the long term health of our country.

* There might be widening dissension among renters and homeowners in major cities that are experiencing property appreciation.

* You will want to give up. You will ask yourselves many times, “Is this all worth it?”

* Selling stocks to pay cash for a home may be better than getting a mortgage

If you have W2 income, are extremely patient and organized with your finances, and have a credit score above 729, you should be able to qualify for a mortgage. You might not get as much as you wanted, which is why it's more important than ever to have as large a cash buffer as possible.

You don't want to find your forever dream house and put in a weak bid because you have no confidence in getting a loan. The time to search for a good mortgage officer is a month before you are serious about buying a home. Success rewards the prepared!

Invest In Real Estate Without A Mortgage

If you don't have the downpayment to buy a property, can't qualify for a mortgage, don't want to deal with the hassle of managing real estate, or don't want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today. I've personally invested over $270,000 in Fundrise to earn more passive income and diversify.

Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible. For example, cap rates are around 3% in San Francisco and New York City, but over 10% in the Midwest if you're looking for strictly investing income returns.

Overall, I've invested $954,000 in private real estate funds since 2016 to diversify and earn more passive income. Fundrise is a long-time sponsor of Financial Samurai.

Fundrise

How Difficult It Is To Get A Mortgage is a Financial Samurai original post. Well-qualified borrowers are getting mortgages at lower rates than average. Therefore, it behooves you to get your credit score and finances right.

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Mike
Mike
8 years ago

Hahaha! I have to laugh because I am going through the process right now. Credit score above 800; financial assets that will allow me to pay cash–5 times over–if I decide to go the cash route; income that would allow me to qualify for a mortgage 3 times what I am going to borrow; well, you get the point. And still being pulled through the eye-of-the-needle. Please, please, someone hit me on the big toe with a hammer–twice so this pain will go away. And oh, the underwriter takes no initiative at all. UW – “Where is your K1 for X company?” ME – “You have it.” UW – “I don’t see it.” Me – “How about looking at the full 1065…you will see the K1 toward the end.” UW – silence. UW – “Explain the deposit on given date.” Me – “Transfer from one account to another…all within you bank.” UW – silence. UW – “Have to have K1 for Y company for this year.” Me – “Don’t have; return extended.” UW – “I have to have.” Me – “We are closing on the 2nd. IRS regs state if return extended K1 not required until Sep. 10. Please see the regs I have attached.” UW – silence. UW – “Explain difference in current property address.” Me – “Huh?” UW – You listed as Terrace, but I see an example where you have property listed as TE.” Me – “Are you #&@^$ with me? Did we date in college and now you hate me because I broke up with you????” Okay, did not send that last part, rather… “Please note sometimes addresses are abbreviated (e.g. Circle as Cr.). UW – silence. Folks, you can’t make this stuff up!

Mike
Mike
8 years ago

Very true…the comment about the next downturn not being as bad.

Hot off the presses. UW – Need to sign federal 1040 extension. Me – IRS does not require. UW – Need to sign. Me – I would respect you more if you just came out and said you did not trust me. BTW, if I lie, I lie. Still can be prosecuted; you don’t need my signature. So, if you want my money, approve the mortgage.

Have not heard anything for over 24 hours. BTW, really don’t care. They need my money. I can walk away from the property.

Andrew
Andrew
8 years ago

This is a good write up and so on point. I am in the final phases of closing my loan and it has been a nightmare. Already put down non-refundable earnest money of 3% on negotiated contract price and deadline to close with this deal intact for end of month. If not closed by end of month I lose my 5% discount of the home price and will cause more problems/delays since appraisal will be under priced. Underwriters want everything and when you think you are in the “clear” you will get another request of letter of explanations of your job activities and more supporting documentation needed. If I known it would be this strict I would bought a house at a lower price and all cash. Wish me luck on closing before end of this month as I’ll need it!

Ann
Ann
8 years ago

Gosh we are in the last week until closing. Loan contengiency ends tomorrow. We are stuck, but my morgage broker is really fighting for us. It’s so frustrating…3 times we have supplied extra info to them. And a few days ago underwriter ask for a cash flow analyis for our business and we had our cpa sign off. They came back and said this is not what we are looking for…ugh. Sitting here thinking about the convo my morgage broker and i had over the phone. “So then what….are they looking for… I dont get it….hummm they ask for cash flow anylsis and my cpa who has been in business for 30 year gives me one and underwriter says this is not what they are looking for. Nothing else, they say no more.” Ugh i’m disgusted with the whole process. Unsure what to do tomorrow. I am feeling like they really dont want to loan to us. SF area.

Ann
Ann
8 years ago

Earlier convo with broker…still dont know what they are asking for. I know thats a bad answer and looks bad for the broker too. Broker is also frustrated with underwriter not clarifying what do WE need to prove. Seriously at this point there is no other info that we can supply them. They have it all. We have a plan B but its a long shot. Might work thinking outside of box…or not. I will update later.

Gen
Gen
9 years ago

Thanks for sharing this info. We are currently trying to get financing for a home, but having zero luck. We went thru a foreclosure two years ago. Other than this one issue, everything else is squeaky clean. We have built up our credit, are willing to put 20% down and the SOBs still wont approve us just because of the foreclosure that happened years ago.. Any advice as to how we can get back into purchasing another home???

Nightvid Cole
Nightvid Cole
10 years ago

Why don’t you borrow against another property to pay “cash” for this one if it’s so tough?

Damon
Damon
10 years ago

Being a 23 year old working as hard as I can to come out of the last of my debt, this article and the comments makes it seem I wont be able to be qualified for a mortgage for about the next 50 years. I wish I would have known more about how important my personal finances were before I jumped head first into 25k in debt by the time I was 22.

I guess the bed I made is starting to get more comfortable being on the right track now.

My plan was to save and pay 40k or less for a starter/fixer upper primary residence then use my VA home loan to buy a small rental property. Would a bank even think about looking at me with a horrible credit score due to missed payments, even if all debts are paid and I have a paid for property as an asset?

Oh what I would give to go back a few years knowing what I know now.

andy
andy
10 years ago

First lesson: do not ask big banks for money… you can have $500,000 on citi or chase or wells fargo.and they probably loan you $50k … crazy.. then you dont have a penny in a bank you never heard of and they loan you lots of money.

andy
andy
10 years ago

Well, that lesson is just for me, what I have seen. Either way a good broker should help you find the best deal possible for them and for you.
Lesson 2 : dont have one but, if had to add one.. pay cash. But, I also follow this guy mark Ferguson which makes sense… it depends how agressive you want.to be.

Davey Pockets
Davey Pockets
10 years ago

Hi Samurai,

I just finished the loan application process on what will be my 2nd rental property set to close June 9th. My first loan app went super smooth. I felt like my second one was tougher that is until I read your post! Wow they really put you through the ringer!

As someone who looks up to your advice what would you recommend to a young investor like myself who is just getting started and is looking for the smoothest loan application process even if it costs a bit more in the long run?

Thanks in advance.

-Davey Pockets

Zee @ Work To Not Work
Zee @ Work To Not Work
10 years ago

I went through a refinance about a year and a half ago and it was terrible. My loan officer kept asking me the same stuff multiple times, I had to remind him repeatedly that my house is a co-op so I already knew that certain types of loans I didn’t qualify for even though he kept telling me I would. Low and behold as the process got along further he said, “oh we don’t do that.”

I think the most annoying part is that I already had the loan through them, I was just refinancing. When we were getting to the end of the process he asked me for a copy of my latest pay stubs. I told him that I had given him that during the first week so why did I need to do that again. Well, apparently it had been long enough since the process started that they needed more current ones.. I still don’t know why it took almost 6 months.

Yes it’s complicated, but I feel like there was a lot of incompetence on my banks behalf.

darren
darren
10 years ago

$#!? I can’t believe how difficult financing another mortgage is, even with a net worth as high as yours! I’m going to be retired from the military next year and am looking to buy another property to live in, fix up, and rent out after three to four years. I’m starting to see just how difficult it’s going to be to procure financing. I don’t want to tie up all my cash in purchasing my home outright, which is why I want to finance it. You would think having a high net worth and outstanding credit history would be enough…

I do everything through USAA and I have a few accounts through decent credit unions. Looks like I’ll test them out and see how friendly they are. Informative post…especially all the comments!

Steve
Steve
10 years ago

I’m invited to a lavish cocktail party in a few weeks from the dude who handled my first and second refi — who just joined a new firm (I’m now on my third — 3.75% fixed). Lot o’ documentation and a lot of manual processes. E-signature capture? Not so much. For us, worth all the time. Our monthly mortgage payments are now 27% lower than they were when we first purchased our house nearly 11 years ago.

Kalen @ MoneyMiniBlog
10 years ago

Great article! I think it’s crazy how mortgages have gone from:

“need a mortgage? don’t have any money? Sold! Here ya go.”

to

“need a mortgage? Oh you have 10%-15% down? We may be able to give you a loan…but we really don’t want to.”

The banks made a lot of bad loans in the past and now they are paying for it. It’s been a while since my wife and I got our mortgage, but I know things have changed.

Stewart J
Stewart J
10 years ago

Hi Sam,

Great article. I’m so pleased I’m not the only one finding in tough to get a mortgage. I’m a British guy married to a American. My wife has been living and working in London for a few years and makes a modest income. I wanted to buy a property in Chicago (initially to rent out, and then live in it in a couple of years time). Since my wife has been living and working in London for a few years and makes a modest income I decided to do a mortgage in my name. I work in Banking in London and earn a dollar equivalent of $150k per year. I have no debt, a great credit score in the UK and wanted to put down 50%. After months of providing endless lists of information, they keep changing the requirements and I’ve pretty much got no where despite the hours I’ve put into it. I was hoping to take advantage of a) low mortgage rates, and b) low real estate prices, but to be honest I’ve given up. Perhaps as rates increase, more lenders will be attracted to the market and the credit conditions will loosen. Perhaps!

Stewart J
Stewart J
10 years ago

Cheers Sam. Yes I was blown over the first time I went to Chicago. In London I rent a tiny 1 bedroom flat in Kensington (a nice area). I guess the flat must be worth about £500k. For the same money (or slightly less) you can something pretty special in Chicago. So long as you can live with the cold weather! All the best,

Stewart J
Stewart J
10 years ago

Wimbledon is fantastic. I’ve been a few times. If you go in the first week and you aren’t fussed about getting into center court you should be fine queuing, in fact its all part of the experience. Personally I’ve never bothered with center court because there’s so many great matches to watch on the other courts. You’ll need to join the line early; between 6 and 6.30 am, but once you’re in the line you’ll queue past places to get coffee and breakfast, and on a good day you’ll be in the grounds by 10 am. The atmosphere both in the queue and in the grounds is excellent.

The Wharf side of London is up and coming, but as you will see, it all looks the same. Lots of mid rise apartment blocks – far less character than central and west London.

Stewart J
Stewart J
10 years ago

Yes, unfortunately unless you buy a ticket through an agent, the only way to get in is to queue up. I joined the line at about 8 am once and didn’t get in. And that was in the first week. Turn out will be lower if the weather isn’t so good, but then you run the risk of the tennis being cancelled due to the rain. Ultimately, the earlier you get up the better! If you don’t fancy that much, there’s also a late entry option. Capacity within the ground increases in the late afternoon as some people head home, so they let more people in, but only at around 5pm, so you’ll only see about 3 hours of tennis.

Let me know if you need any recommendations on other things to do or places to eat.

Stewart J
Stewart J
10 years ago
Reply to  Stewart J

Haven’t tried Hawksmoor myself but have heard its good. It’s in a quite a lively part of town. Enjoy Wimbledon. I hope the weather will hot this year!

MD
MD
10 years ago

I refinanced 14 months ago into a 15 year. It took less than 30 days total. However, I do have significant W2 income. I know the story would be much different without it. We also have FICO scores greater than 810. The title agent who closed our last refi did say that the average was taking way longer than what ours did.

Jason (formerly of WSL)
Jason (formerly of WSL)
10 years ago

Being in the industry, I have to say I really enjoy reading these posts about mortgages.

You got what’s called a ‘conditional loan approval’. Those 21 items were just the conditions you needed to meet to get final loan approval. Why didn’t you just go back to underwriting (prior to looking at homes) to clear a majority of those conditions? You could get most of the ones related to you eliminated and just be left with the contract and the Citi assets. 21 is a huge number and I’m with you: if I had a borrower that had that many conditions I wouldn’t feel too comfortable telling them to remove a financing contingency on a house.

I do agree with your banker in the fact that there is no such thing as a no-financing contingency. There will ALWAYS be loan conditions based on a clear title and the contract; so until you have those you can’t get a loan approval. So I dont’ think you could ever get what you’re looking for until you have a house under contract, but you could at least get a ‘conditional mortgage commitment’ with the only conditions being title/contract related.

Getting a loan isn’t as hard as you make it sound. You just don’t fit in the box as easy as others. :) Thank Mr. Dodd and Frank for all of the ridiculous regulations on how to qualify people that have assets as opposed to “qualifying” income sources.

Peter K
Peter K
10 years ago

Ditto @M above. I went through the mortgage process in February 2013. One of the best recommendations I got from my realtor was to use a specific mortgage broker in town. While my friends and family who were buying houses were waiting 3+ months for an answer from the bank, my own mortgage was underwritten in 2 weeks and I was closing within 3 weeks. Sure, there was a cost attached, but I’d never go back and do it differently.

Joe
Joe
10 years ago

Oh man, we’ve been putting the loan application until our place sold, but it looks like we have to get going. I talked on the phone with a couple of lenders and they said, we should be okay to go. I’m getting all my docs together now and will see what happens next. Not looking forward to it.

M
M
10 years ago

I would suggest going through a good mortgage broker. Much easier to deal with than the bank directly especially when you have your own business in California. Yes it is more paperwork than before but if you are well organized it’s not that bad. I have bought 8 properties since 2009 in California and out of state.

M
M
10 years ago
Reply to  M

Also I believe you may be misunderstanding waiving the loan contingency. I have done that. You do not need to involve the lender at all. It’s just a box you check on the contract that says you waive it and risk your deposit if you don’t qualify for the loan.

Little House
Little House
10 years ago

This scared the heck out of me! If you can’t get a mortgage, I can’t imagine that I would qualify! However, based on the comments on this post, it looks like a smaller credit union might be the way to go. I’m hoping to purchase something next year, but we’ll see how things pan out (like if property values dip down a bit or if lending loosens up.)

Nbsdmp
Nbsdmp
10 years ago

Geez, that’s just crazy what you have to go through…that’s exactly why I have vowed to only pay cash, yep it is not the “smartest” money move not to take advantage of the cheap money, but not having to go through this bs, or answer to some “banker” who makes $100k + but is up to their eyeballs in debt is worth it.

Josh
Josh
10 years ago

Banks were badly burned with lax lending standards during the boom and hence much more stringent with new mortgages these days, but it’s a bit surprising to hear that a very good and well off customer such as yourself would still have to clear so many hurdles. I guess maybe it’s because the dollars figures in SF are so much higher, thus a much high bar to clear? With the FHA loans, I think the government agencies will pick up the tab in case of a non payment maybe. Thus, the low down payment requirements and is meant mainly for first time home buyers, or lower/moderate priced homes. Also wonder, if you paid cash for the house and then immediately take cash out refinance, would the rate/approval process be any different?

Regarding any future housing bust, I don’t believe it’ll happen much, especially in SF. So many rich people want to own properties there and the housing policies does not really permit enough housing stock to be added to put downward pricing pressure. Even in the 2008 & 2009 crash, SF and NYC housing declined 20% max, unlike over 40% in low to mid income areas. Finally the media tends to sensationalize things to grab headlines, so it’s nothing new(e.g tech workers are mostly all millionaires in bay area sort of thing). Good luck with your housing/financing search.

Jonathan
Jonathan
10 years ago

You need to try smaller banks or local banks that can afford to be more aggressive. Most big banks are useless and will not even look at me anymore and say they cannot count rental income unless it’s been on tax returns for two years. However, I’ve been able to find smaller ones who are aggressive and will count any rental income as long as I can show a lease. This offsets my mortgages and allows me to get many loans all still under Fannie Mae conventional financing. Portfolio loans can be significantly more expensive and have heavier requirements. I am working on loan 8 and you can have a max of 10 Fannie Mae loans.

Mrs PoP @ Planting Our Pennies

Our experience has been that it’s been very supply/demand related. In summer 2009, we had amazing service getting a mortgage because there were so few qualified buyers in our area – the downside was our rate was over 5%. Getting a refi in late 2012, though… well, we had a heck of a lot of trouble closing that despite having a lot more income and assets and I think it was largely related to the backlog of mortgage and refi applications at that time.

John
John
10 years ago

Just re-financed again… was most difficult re-financing I had gone through…mainly because I was pulling out a lot of equity on my home to make other real estate investments in North Carolina.

I have over 800 credit score…debt to equity of about 11%, debt to income of about 10%…good W2…..still took over 3 months. Worked with a regional bank that I have done business with for over 10 years.

For me, they were concerned on the W2 volatility. Stock Options/RSUs are on the W2..and for me, this is somewhat volatile. They needed all kinds of back-up from my company….

Although painful, I will take this level of scrutiny ANY DAY over the NINJA world…. we don’t need to relive 2007-2009 again.

Justin @ Root of Good
10 years ago

That’s crazy, Sam. I think your difficulty was mainly due to not being a cookie cutter borrower. For the majority of folks with 99% of their income on their W-2’s, they would probably sail through as long as the other criteria met (debt to income, appraisal, credit score, etc).

I’ve refi’d 3-4 times since the bottom dropped out of the housing market and never had much of a problem. Of course I had 5-10x the assets to cover the tiny loan balance, and the LTV was never over 60%. And I wasn’t in one of the “problem areas” like FL, CA, AZ, or NV that sometimes had stricter underwriting requirements.

Overall, I’m glad they gave you hell from a system-wide perspective (it will limit the bubble and prevent mass losses in CDOs and FNMA/GNMA). But sorry it happened to you on a personal level of course!