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We are buying a home in south Florida. Price is $1.2 million. Putting down $300K. Borrowing $840K on a first, $60K HELOC combination. The bank has had our file for over a month. We are scheduled to close a week from today.
Firstly my husband has had one year where his income was $750K. A normal year would be around $325K. When we applied for the mortgage we told them to run the numbers at $300K. They asked for three years of tax returns and of course the returns show the one high year and now they are asking for an explanation even though we never showed the higher income.
I don't think this is big deal. Does anyone else think it is?
The underwriter is JUST TODAY asking my husband for an income statement and balance sheet for his business (he is a 50% owner in a law firm). This is not something that is normally created.
My husband called the underwriter and she agreed that the YTD revenues (which he does have) were sufficient for her, but she was not sure whether that would be sufficient for the investor. Is it common for an underwriter to ask a business to create special documents because one of the principals is taking out a mortgage? What are the chances the loan gets denied because the law firm does not create interim financial statements?
I do work at the firm and I can create interim financial statements over the weekend. However, I think it is unreasonable because the underwriter is asking the firm to pay for something that is not for the benefit of the firm. That said-I will probably go in and create the statements and worry about whether I will get paid later.
See my last post in the thread about the HELOC, asking for YTD P&L and balance sheet becomes more common the further into the year... particularly if there were years of uneven income. Usually it has to be done by a CPA as well, if they come from the borrowers spouse (you) it may not be found acceptable.
See my last post in the thread about the HELOC, asking for YTD P&L and balance sheet becomes more common the further into the year... particularly if there were years of uneven income. Usually it has to be done by a CPA as well, if they come from the borrowers spouse (you) it may not be found acceptable.
Well-there was only one year of uneven income and we never claimed that income when we initially applied for the loan. For the tax years 2003-2009 his income has been between $325-$350K except for 2008 when it was higher. Why a question today and not a month ago? I don't think the income is a big deal as we never claimed to make more than $325K per year.
The bank asked for 3 years of personal and 3 years business returns a month ago. We provided it the next day. If the bank had additional requirements a month ago was the time to address those issues. At that time I would have had plenty of time to create financial statements and have them certified by a CPA (even if I did not get paid for it). I can create them this weekend but I have no idea how long it will take the CPA to certify them. I have no idea whether the CPA is even in town next week.
The underwriter told my husband that YTD revenues would be fine for her. She will send them along to the investor with an explanation of why we do not have YTD income statments (not uncommon for law firms-especially small ones).
It's kind of hard for me to believe that we can have $325K of income for the past 7 years, great credit, 25% down payment AND find ourselves living at Motel 6!
The underwriter is JUST TODAY asking my husband for an income statement and balance sheet for his business (he is a 50% owner in a law firm). This is not something that is normally created.
I did some re-fi's with major lenders while self-employed and they never required anything other than a couple of years tax returns and a pro-forma income statement for my business for the period since my last return. I was allowed to do it myself (I'm not a CPA) and submit as a printout from a spreadsheet. Of course those were the days when they'd practically take something on the back of a bar napkin. Perhaps since getting burned they've changed their requirements.
I did some re-fi's with major lenders while self-employed and they never required anything other than a couple of years tax returns and a pro-forma income statement for my business for the period since my last return. I was allowed to do it myself (I'm not a CPA) and submit as a printout from a spreadsheet. Of course those were the days when they'd practically take something on the back of a bar napkin. Perhaps since getting burned they've changed their requirements.
They very much have.
My parents are builders. They are self employed, always have been, and have excellent (800+) credit scores. During the crazy years, the banks would give them whatever loans they asked for with 5 minutes worth of paperwork, literally. Fast forward to today, when they still have 800+ credit scores, and are asking for much less money. The banks require about 8 hours worth of work, which equates to about 3"-4" of paperwork, and they require it every 3 months in order to not call the loans (even though our interest payments are never late). And it is paperwork we don't normally do at all, so it is all done ONLY for the banks.
Granted that is for construction loans, but that just makes it worse, because there are only 2 companies locally who will even DO a construction loan, and the other is just as crazy, and we don't have a history with them. We've worked with this bank for over 10 years, and never defaulted on a single penny, and they are requiring this from us.
Edit* And as for residential loans, read the post in the real estate forum about lenders killing deals. It is an epidemic right now. We currently have 4 deals we can't get closed because of delays from lenders. One is now 6 weeks past its closing date, all because of the lender.
Edit2* Oh, and it may not be the underwriter's fault. On the one that is 6 weeks past closing, the underwriter didn't even get the file until about 3 weeks ago. It was purely lender fail. So that might be why the underwriter is asking now. They might have just gotten the information.
I did some re-fi's with major lenders while self-employed and they never required anything other than a couple of years tax returns and a pro-forma income statement for my business for the period since my last return. I was allowed to do it myself (I'm not a CPA) and submit as a printout from a spreadsheet. Of course those were the days when they'd practically take something on the back of a bar napkin. Perhaps since getting burned they've changed their requirements.
Do you think they knew they needed a YTD income statement a month ago? I am not irritated that they asked. I am irritated that they asked TODAY and not last month.
The way these things are done is that the firm's accountant (that's me since 2002) prepares the statements, sends them off to the CPA along with the supporting documentation and the CPA certifies the statements.
Momma bear needs a better banker. Seriously your situation is CRYING out for a "private banking relationship". If you are within driving distance of a NorthernTrust office I wou
D betheir tomorrow if I wer in your shoes... That Sid EVEN with a grate private banker you still will be required to produce much more detail thanl was required just a few years ago. It sucks it is the roans to the cheats...
Momma bear needs a better banker. Seriously your situation is CRYING out for a "private banking relationship". If you are within driving distance of a NorthernTrust office I wou
D betheir tomorrow if I wer in your shoes... That Sid EVEN with a grate private banker you still will be required to produce much more detail thanl was required just a few years ago. It sucks it is the roans to the cheats...
The thing is that we ARE private wealth clients. We went with this bank because of the banking relationship that my husband's firm has with the bank. The people at the local branch level have been very responsive. We are only starting to have issues now that the documentation has left the local area.
I think they will be able to close the deal. They will just make us crazy in the process.
Well-there was only one year of uneven income and we never claimed that income when we initially applied for the loan. For the tax years 2003-2009 his income has been between $325-$350K except for 2008 when it was higher. Why a question today and not a month ago? I don't think the income is a big deal as we never claimed to make more than $325K per year.
Even if you don't try to use it for qualifying they are still going to ask questions. They are making up for the days when a dog with a note from it's owner could get a mortgage. The industry has gone from complete and utter chaos to requiring documentation on your every move. I used to never need tax returns from my salaried/W-2'd clients, now we request tax returns upfront on every loan because we don't want to be burned when the underwriter pulls 4506t results and sees Form 2106 expenses, or a Schedule C side business with small losses, as that starts to reduce qualifying income.
It appears in your situation the local branch is the information gatherer and processor, and the underwriting is being done in an offsite location. However even if underwriting was being done at the branch, this is a loan condition that is only known after underwriting reviews and determines it is needed. It may have been that the loan wasn't submitted for underwriting review until just recently, even though you are 30+ days into the process.
We are buying a home in south Florida. Price is $1.2 million. Putting down $300K. Borrowing $840K on a first, $60K HELOC combination. The bank has had our file for over a month. We are scheduled to close a week from today.
Firstly my husband has had one year where his income was $750K. A normal year would be around $325K. When we applied for the mortgage we told them to run the numbers at $300K. They asked for three years of tax returns and of course the returns show the one high year and now they are asking for an explanation even though we never showed the higher income.
I don't think this is big deal. Does anyone else think it is?
The underwriter is JUST TODAY asking my husband for an income statement and balance sheet for his business (he is a 50% owner in a law firm). This is not something that is normally created.
My husband called the underwriter and she agreed that the YTD revenues (which he does have) were sufficient for her, but she was not sure whether that would be sufficient for the investor. Is it common for an underwriter to ask a business to create special documents because one of the principals is taking out a mortgage? What are the chances the loan gets denied because the law firm does not create interim financial statements?
I do work at the firm and I can create interim financial statements over the weekend. However, I think it is unreasonable because the underwriter is asking the firm to pay for something that is not for the benefit of the firm. That said-I will probably go in and create the statements and worry about whether I will get paid later.
Are all underwriters like this?
Banks often have a tactic of asking for a lot of extra documentation when they are a little reluctant to make a loan.
I think you're borrowing a very big amount relative to your income. They seem nervous that the income may not be steady. Maybe they're thinking that if it can spike up a lot, it can spike down a lot too. And your income ratios are going to be razor tight under the best of circumstances. I can say that for myself personally, I wouldn't be comfortable borrowing that amount of money even on my income (which is higher than your husband's). I'd be very concerned about taking on such a big loan with that income.
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