Getting a mortgage for our last two homes should not have been difficult, but it was. My wife and I both have excellent credit. She had a contract for employment. We had 20% down and enough income to afford the houses we wanted. And still, two years in a row, getting a loan was nearly impossible. And two years in a row, we were saved by First Federal.
When we were relocating to Kansas City, we did not have a specific lender in mind. We needed to get out of Milwaukee, but I was cool with any lender. While I didn’t save all the specific details from other lenders, I can certainly attest to the fact that unconventional circumstances make getting a conventional loan nearly impossible. I failed to mention that we owned a house that we would be renting out, and I am self-employed. Oh, my wife also is considered a minister in the church, so we have used a portion of her income as housing allowance, which skews our taxes.
We started with Lender A, a company we figured knew about interesting circumstances because their typical borrower is a minister. Basically, this lender refused to separate my wife from myself when it came to the loan. Even if we’d sold the house, my income would not have counted because I was self-employed (one year), but there was no option at all to just say she was going to afford the house on her own. We could have gotten a loan, but the house would have been below our desired price range because of the strange circumstances, and that would have included selling our current house. While this lender did understand the minister pay, it was my self-employed status and desire to rent out our first house (not yet rented) that killed our discussions. And it’s not like we were underwater on the Milwaukee house, owing about $100,000 on a house worth $185,000. I think there were just too many moving parts and oddities, though I expected more creative thinking.
Other lenders we contacted were just as bad or worse, so I’m not bad-mouthing Lender A. Most of the other lenders did not want to deal with my wife because she had that low income in the past (housing allowance / working part-time). Our last two years of income looked pretty rough, with me being laid off while she was still taking a housing allowance and almost no cash from her employer. Most, if not all of these other lenders (the kind you find on Bankrate and other referral sites) also did not want to take me out of the equation, and apparently that then led to off-the-charts debt to income levels, worse because the house was not yet rented (we were living in it).
We were stuck in a tough situation, able to use our $40,000 in savings and possibly another $80,000 from the sale of our house, but we didn’t have a lender willing to give us a loan for what we wanted, even with that kind of money down. That’s a lot of potential cash down, but we were looking at having to rent or buy a cheapo house for cash. That’s when our realtor suggested we work with his friend at First Federal. I’m sure this bank is just as restrictive as others most of the time, but we finally had a guy who wanted to understand the specific situation. He was fine with the loan just being in my wife’s name, he came to understand the minister housing, and he accepted the contract as proof she was going to get paid enough to afford the new house on her own. Sure, the underwriters took a long time on it and asked for all kinds of extra proof of this or that, but we got the loan and the house we wanted.
Even though we loved the house and neighborhood, my wife’s life to work balance was non-existent, so we had to move the very next year. No problem, I figured. MKE house is rented. We made payments on time for a year on new home. New job contract signed. But I figured wrong again.
This move was to Florida, and I got the impression fairly quickly that loans work differently in the land of the endless summer. Almost no one in Kansas questioned my wife’s future income, but no lender in Florida would touch us without at least the first (usually the second) paycheck. Basically, all of the lenders I contacted wanted her to somehow be working for weeks before we could close on a house. How could that even happen? Even after we had an offer on our house, lenders said the same thing. Even when that offer meant we'd actually make money off selling a house in one year ($22,000 minus $15,000 in closing costs).
We went back to Lender A, figuring this would be its chance to shine. This time, the lender was willing to look at my wife as a solo borrower, but the terms were not what we wanted. It wasn’t a conventional loan, which means she was not seen as a “well-qualified buyer.” It may have included PMI and other restrictions, but I’m not totally sure. It was an ARM loan, and maybe it would have been fine, but I figured a year of paying on time and an "very good" bordering on "excellent" credit score would warrant her being well-qualified. Plus, the loan we were offered was for 5% down, but we were looking at putting 20% down. We asked some questions, but we basically got the answer that this was the best and only offer. This lender DID allow for getting the house based on future income, so it was still in the running. We just felt like the deal could have been modified based on our unique situation, but this lender wanted to deal only with Lisa, and she was working all the time. I know, it's probably the law, but most of the other lenders would just answer an email from her (sent by me). In fact, I don't think we could have gotten all the information and offers in on time had she been the one needing to physically do all the work, since she was working 70-hour weeks.
Our realtor tried to help in Florida, just as our realtor had done in Kansas. However, it seemed like the recommended lenders were just lazy, never trying to think outside of the box in any way, usually telling me it was a federal law that we needed paychecks before the closing. The only other local Florida lender willing to deal with us and future income wanted to give us an FHA loan. I know sellers don’t always love FHA, I know they’re made for people with credit problems, and I know it wasn’t the loan we really wanted.
So we were down to an ARM and an FHA. I was in the middle of a lease on my other house, so I was no help this time to add cash to the equation, and my own business/house rental was not lucrative enough to add me and my outlandish credit score in to help. The offers we would have been qualified for on the ARM and FHA turned out to be on the low end of what a house in a decent neighborhood would take to purchase, so that was also a dilemma. But we had a buyer and a moving truck booked, so it was time to find a loan.
That’s when I asked my First Federal lender if he knew anyone who could help us in Florida. To my surprise, he said First Federal could do it again. 30-year fixed. No points or PMI or FHA or ARM. After our first offer fizzled with termites, First Federal told us we’d be fine to increase our offer for another house by $50,000. I know, we were probably pre-qualified to that amount from the start, but the lender explained that it was not a lot more on the monthly payment, and the bank saw us as good for it. I’m not saying we got the lowest rate of others available at the time, and First Federal did drop the ball at the closing (the payment wasn’t ready as we sat there for a couple hours). But we got our loan and our home.
In the end, I was surprised that it took so much effort two years in a row to secure a decent loan. None of the online lenders wanted to deal with us. None of the local Florida lenders wanted to try very hard. Some lenders either break or don’t know federal laws. Basically, almost no one really wanted to do any work to give us a loan that would make us pay them the same amount in interest as we were paying for the house over the next 30 years. Keep in mind that I am a mere 15 points from the top possible FICO score, and my wife is solidly in the “Very Good” range, too, so it’s not like we had any real risk--just an oddball loan that only one lender bothered to figure out. Twice.