In many industries, there’s a statement that professionals often hear which makes them shudder.
For physicians, it could be, “Why should I quit smoking? I feel fine!”
With Financial Planners, its, “The other guy promised me a 25% annual return, with no risk!”
And CPA’s just love to hear, “Receipts? What receipts??”
For me, I cringe whenever some unsuspecting borrower tells me, “I’d like to try “MY Bank” first. They know me there. I’m a good customer.”
It’s like watching a lamb, unaware while it happily goes to slaughter.
Let me share this story of a recent client:
“Bob” just sold his house and signed contracts to purchase a new one. He needed a jumbo mortgage. Bob had good credit, significant income, and money in the bank. To him, obtaining a mortgage was an afterthought. After all, any lender would love to give him a mortgage. Wouldn’t they?? Besides, he had significant business and personal accounts at “HIS Bank” and believed they would bend over backwards for him.
Bob’s Personal Banker assured him all would be fine. They would take care of everything. Bob provided all the requested paperwork, signed the forms, and waited, expecting a quick and easy approval.
About four weeks later, Bob received in the mail, a Denial Letter based on insufficient income. His shock slowly turned to anger as he called his Personal Banker for an explanation. His Banker investigated; but it was clear from the conversation that Bob’s Banker didn’t understand the reasons either.
While Bob was a salaried employee, he owned 30% of the company where he worked. Underwriting guidelines considered him self-employed. Therefore, the underwriter calculated his income by averaging the most recent two years of his personal and corporate returns. As is common with many companies, the business’ accountant depreciated company equipment and wrote off old inventory in order to reduce the company’s tax basis. However, this perfectly legal accounting technique is a double-edged sword, as many bankers, loan originators, and even underwriters have only a cursory knowledge of business accounting practices.
Flipping through his personal and corporate tax returns, I showed Bob why “HIS Bank” denied the mortgage. I then restructured his loan and presented it to another lender, with the correct tax documents and an explanation of how his income should be calculated.
His loan was approved and Bob closed on his new house.
It makes little difference whether you have millions invested in “YOUR Bank” or whether you’re Chairman of their Board. When it comes to mortgage lending, yours is just another loan that must meet the same underwriting guidelines as every other. I’ve seen this scenario replay at the “Big Banks” countless times. Only the names and loan amounts change.
Don’t entrust the biggest financial decisions of your life to some bank representative or salesperson. Put your trust in a seasoned and Certified Mortgage Planning Specialist with a proven track record. Only then can you ensure your transaction goes smoothly, your mortgage complements your financial plans, and that you’ll truly enjoy your new home for years to come.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist, and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.