Sorry.. You Don’t Qualify for a Loan Mr. Phillips.

What do you mean I don’t qualify for a loan…

Look of shock

Are you crazy…?

I make over $100k a year,  have an 800+/- FICO,   AND…  Several Million in the Bank!

That’s just exactly what Mr. Phillips was told by Wells Fargo Bank  recently.  He’s in contract with us to purchase a duplex in the area and while waiting for the Short Sale approval,  was going through a “refinance” on a duplex he paid cash for about 6 months ago.

Because of the “new lending rules” regarding investors, Mr. Phillips had to wait 6 months just to be able to even put in an application to borrow some money on this property.

The property was appraised at over $230,000 and he only wanted to borrow 60% of this amount.. about $138,000 maybe a little more and use this money for a down payment on a new investment.

Wells Fargo is offering fixed rates at about 6%,  30 year fixed or maybe a little lower, but Mr. Phillips doesn’t qualify because his income is all passive.

Let me tell you that Mr. Phillips has had this problem in the past because I have described him in earlier posts to this blog.

By the way… He can get a loan… but it won’t be at the rates a person who has a W-2 type employment would ordinarily qualify for.   No,  Mr. Phillips, inspite of his net worth, low debt and high FICO scores doesn’t qualify for the “best available” rates.    Mr. Phillips deserves 12% and higher in loan rates..!  Isn’t that amazing…?

What is the “effect” on the Real Estate Market when this occurs hundreds of times over in this area..?

Well… someone once told me the average income multiplyer that occurs for every real estate transaction is around $30,000 and higher.   Because, not only are commissions paid to real estate agents.. fees go to title insurance and escrow companies, city & county taxes & fees,  loan companies , pest control companies, roofers, furniture companies, movers, inspectors and appraisers, contractors, and suppliers are all a part on just one deal in most cases.

In Mr. Phillips’ case, he’s taking a 2nd look at this new deal because his rate of return of his investment  is being devalued only because he’s been a success.

When you slow down people like Mr. Phillips…?  you slow down the recovery of the Real Estate market and the rest of the economy.   Ask around you’ll hear lots of stories like these.

Does that make sense to you…?

Make it a Great Day…!

Ed Favinger, Broker, CRS, GRI 916-203-1260

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