Why Your Millionaire Neighbor Won’t Qualify for a Home Loan

Posted on January 27, 2015 by theloanman
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You might just assume that a very wealthy person would have no trouble at all getting a home loan. Unfortunately, that’s not always true. The wealthy don’t always qualify.
Here’s why:
1. They do like to avoid paying income tax on all that wealth.

As a result, they may leave most of their money in their corporation, or “expense out” so much that someone looking at their income might wonder how they manage to eat and put fuel in their cars. This is perfectly legal, but can come back to bite when they want a home loan.

Lenders qualify borrowers based on their verifiable income – in other words, the personal income they report to the IRS.

2. They might not have enough credit to qualify.

Paying cash as you go – even for a new car – seems pretty honorable. But mortgage underwriters don’t see it that way. They want to see at least 3 credit accounts on which the prospective borrower makes regular monthly payments. In their eyes, having no credit can be just as bad as having poor credit, because they’re looking for a pattern of behavior.

3. They might actually have bad credit.

This seemed strange to me, so might seem strange to you as well. Why would someone who has plenty of money ever get behind on their bills? Perhaps because they aren’t worried about their credit. Perhaps because they don’t mind paying late fees? Perhaps because they hire someone to take care of their books and that person doesn’t pay attention to due dates?

Whatever the reason, it’s not all that unusual for extremely wealthy people to have poor credit scores.

4. High income earners aren’t afraid to take on debt. They can also be tapped by family members to co-sign loans. All of that can add up to debt to income ratio that exceeds lending guidelines, even though they still have more than enough to live on after all obligations are paid. After all, 20% of a million is a lot different than 20% of $60,000.

Their available funds are a help here. Some banks are willing to look past high debt when the borrower makes a down payment of 30 or 40%.

The bottom line: No matter what your income, it pays to pay attention to your credit scores.
• Pay all your bills on time
• Maintain at least 3 credit accounts
• Refrain from taking on excessive debt, or co-signing loans that will harm your credit rating.

 

Don’t forget I offer a Stated Income Jumbo loans. Go here for the details.

Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

Apply at: www.mikeclover.com

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