How Difficult Is It To Get A Mortgage Nowadays? Brutally Difficult And Extremely Painful

Hidden Mosaic Steps, San FranciscoOne of the reasons why I don’t think the next housing collapse will be as long and painful is because getting a mortgage since 2008 has become brutally difficult. There was a time when no-documentation mortgages, negative amortization mortgages, and NINJA loans (no income, no job, no asset) were common place. Those loans are equivalent to when passengers could smoke on airplanes so long as they were in a “smoking row.” Unbelievable.

I documented back in 2012 that it took 100 days to refinance my mortgage. It was a painful experience given just two years before it only took 45 days to refinance. I was anxious the refinance wouldn’t go through because once you don’t have any W2 income, you are DEAD TO BANKS. I was determined to save an extra $300+ in mortgage interest a month if it killed me. Definitely refinance your mortgage BEFORE you quit or engineer your layoff folks.

Now that it’s 2015 and the economy seems to be much better, you’d think that getting a loan would be a little easier. Nope. Getting a mortgage is as brutal as ever. Let me share my latest journey.


If you are going to purchase a property, you best get a pre-approval letter from your bank for how much property you can buy and how much mortgage you can borrow from them long before you find your baby. The number one concern for sellers is whether buyers can actually get a loan or come up with the cash to buy the property. With a pre-approval letter, a personalized letter with pictures, and copies of your assets, you will significantly help your case if your bid price is within the ball park.

After shopping around for mortgages online with LendingTree like I always do given their massive mortgage network, I decided to go with Citibank given they offered a competitive 2.5% 5/1 JUMBO ARM since I have more than $250K in assets with them. They also have my primary home mortgage and my other small rental property mortgage, so I figured the process would be a piece of cake. NOT SO!

Despite never missing a mortgage payment in 11 years and having more in assets than the mortgage amount I was seeking, they still put me through the ringer. I was going for a “no financing contingency” offer that would be equivalent to paying cash for a property. By going no financing contingency, I would simply wave the normal 10-14 day financing contingency clause in the contract so the seller could rest easier knowing I was a legitimate buyer. If I decided to pull out of the deal for whatever reason, the seller would keep the earnest money deposit, which is generally 3% of the purchase price at minimum.

Denied At First (14 days)

My first go around for getting a no financing contingency approval was actually rejected after two weeks. I gave them all my documents (last two years W2, all my assets statements, last two pay checks, insurance forms, rental income deposits, rental contract, K1s, etc) and I still got denied by underwriting mainly because:

1) They disavowed 100% of my online business revenue because it wasn’t at least two years old.

2) They disavowed 100% of my consulting income with Personal Capital, because it wasn’t at least two years old. The income is decent, but I just started with them on January 13, 2014.

3) They only included 75% of my rental income to account for expenses and vacancies even though I have never had a month of vacancy for my primary rental in nine years. Based on my math, I’m AT LEAST $1,500 a month cash flow positive after paying HOA, mortgage, and property taxes, but based on their math, my main rental was $686 cash flow negative. I pressed them to explain their math to me, and they just kept saying they could only allow 75% of rental income, which didn’t make sense. They were cutting my rental income down by more like 60%.

4) They disavowed 100% of my deferred income from my old employer of 11 years even though I continued to receive a W2 from them in 2012, 2013, and for sure in 2014 and 2015 due to my deferred compensation. The amounts are significant per year, but they said that unless I prove I will receive another two years of deferred compensation from my old employer, the income is inadmissible to the underwriter.

5) Curiously enough, the only income they allowed was my W2 income from my online revenue even though I just started paying myself last September, 2013. I’ve been purposefully paying myself a modest wage because I don’t need more income, I don’t want to pay 15% FICA tax on the income, and I need to pay myself at least some income according to the IRS for S-Corps. If it was completely up to me, I’d pay myself $1,000 a month and do year end distributions.

Because I was denied a no financing contingency loan, I didn’t bid with confidence because why bother? Everybody else was coming in with cash or a no financing contingency loan, so I wasn’t even competitive. As a result, I lost the first home I bid on.

The Second Time Around – New Strategy (10 days)

I was clearly not happy that my loan was rejected, so I e-mailed my personal banker to help me find another way (See: How To Get Better Service From Banks). I was working with an unfamiliar mortgage officer who didn’t seem to have his act together because he’d e-mail me the same question two or three times, on multiple occasions, and was unresponsive when I contacted him.

My personal banker got me in touch with another mortgage officer who I recognized after speaking to him years ago. He was much more on the ball and had an assistant to help gather all the documents and cross things off the list. He responded to all my e-mails, and I was equally responsive to all of his.

Since 90% of my income was disavowed, we went a new strategy of doing an Asset Based Income analysis to supplement my current income. In addition, he routed my loan to their “Affluent Channel”; a specialized group that will fully underwrite, review my income, assets and credit profile; thereby eliminating any guesswork so that I could bid a no-contingent offer. Again, I could pay cash for the property, but I wanted to get a loan since interest rates are so cheap.

In about 10 days, he sent me a congratulatory e-mail saying I was approved for a no financing contingency loan. Fantastic! But of course things were not so easy. In order for me to get the no financing contingency loan, he sent me a list of 21 more things I needed to fulfill according to the underwriter!

What is the point of getting approved for a no financing contingency loan when I’ve got so many other things I need to prove? At this point, I was very distraught and was about to just forgo the entire mortgage application process altogether. Paying cash is so much easier because you answer to nobody. An appraiser isn’t even necessary. But I stayed calm and carried on.

The list of 21 new things I need in order to qualify after I qualified:

1. A copy of the Hazard Insurance policy, binder, or certificate verifying coverage amount, premium, and the first year’s paid receipt, if applicable.
2. A copy of the fully executed Contract of Sale verifying purchase price of $XXXXXXXX.
3. A copy of the Earnest Money check #__________ in the amount of $____________ clearing prior to___________ .
4. Borrower must sign and date form 4506T at Application for 2012 & 2013 personal federal tax transcripts AND must sign and date form 4506T at Application for 2012 & 2013 business federal tax transcripts for your business.
5. This program requires minimum deposits with Citibank and/or assets held in a Citi institution at loan closing of at least $250,000. The assets must be in place at least 10 business days prior to closing in order to avoid federal Truth in Lending redisclosure and closing postponement requirements. The terms of your loan are subject to this verification of assets, if unverified your loan terms will change.
6. Borrower(s) to provide an acceptable copy of the most recent months’ asset statements and/or other documentation to verify that a minimum of $1,000,000 in investable assets plus 12 months verified Principal, Interest, Taxes, Insurance and Assessments (PITIA) will be available after the loan is closed.
7. This interest rate requires verification of $250,000 or more in investable assets with Citibank no less than 10 days before the settlement date in order to avoid Federal Truth in Lending re-disclosure and possible delays with your loan closing. The minimum $250,000 in investable assets must be above and beyond any monies used to close your mortgage loan with Citi.
8. You have applied for a loan program that requires the payment of upfront fees. Payment has not been received. Please contact your sales representative to pay the upfront fees.
9. Borrower’s credit report reflects an alert for a previous address unit/apt number X was not a residential address but rather a restaurant/bar/nightclub. Borrower to provide letter addressing whether he has any knowledge of a previous address with this unit/apt number. (letter must be signed and dated)
10. Borrowers to provide copy of Bank of America mortgage statement for loan #XXXX for property located in Lake Tahoe to verify payment includes taxes and insurance. In addition, provide copy of HOA billing to verify monthly assessment for condo.
11. Borrower to provide most recent Citibank account statement for account #XXXX.
12. Borrower to provide documentation to verify that the following CDs do or do not have penalties for early withdrawal: Citibank #XXXX, First Republic Bank #XXXX, First Republic Bank #XXXX.
13. Borrower provided on-line account statements for three CD account but the statements do not verify the owner of the account or depository or date verified. In addition, Borrower to provide statements that contain the required identifying information. In addition, provide documentation to verify that the following CDs do or do not have penalties for early withdrawal: #XXXX, #XXXX and #XXXX.
14. Borrower to provide documentation to verify the source of deposit to Citibank acct#XXX 2/5/14 for $XXXXX.
15. Borrower to provide documentation to verify the source of deposits to Citibank acct#XXXX 3/10/14
transfer $XXXX, 3/10/14 transfer $XXXX and teller deposit 3/24/14 $XXXXX.XX.
16. Borrower to provide letter addressing the deposit to Citibank acct#XXXX 3/8/14 for $XXXX from X Bank. This was an ACH transaction, please explain nature of relationship with the company. Additional conditions may be requested.
17. Borrowers to provide copy of HOA billing for XXXXX as property is listed as a townhome per Citi mortgage records.
18. In order to use rental income for departure residence located at XXXXXXXX, San Francisco, the following requirements must be met: 1) Exterior appraisal to verify not less than 30% equity in the property, 2) fully executed lease agreement and documentation that security deposit from the tenant has been deposited to borrower’s account. If the 30% equity in the property cannot be documented the full PITIA payment must be used to qualify and six month PITI reserves is required in addition to the twelve months PITI reserves required for property being purchased. An appraisal to be order by Citibank.
19. Borrower to provide copy of HOA billing for condo property located at XXXXXX (Primary rental).
20. Borrower to request a Profit & Loss and Balance Sheet for the first quarter ended 3/31/14. **For Corporations, S-Corportions and Partnerships, the P&L and Balance Sheet must be on a CPA’s letterhead or evidence provided that the document(s) has been reviewed by a CPA. All documents must be signed and dated by borrower(s) and CPA**
21. Borrower’s credit report reflects an alert for a previous address that is indicated as a receiving or forwarding service. Borrower to provide letter addressing whether he is aware of using a mail service in the past.

The following items will be required at your closing.

1. Changes to sales contract to be initialed by borrower.
2. All Borrowers must sign and date form 4506T for personal 1040s and business 1120S for 2013 and 2012
at Closing.
3. Provide Hazard Insurance Binder and paid receipt. (Does not apply to Cooperatives.)
4. If your loan becomes a higher-priced covered transaction as defined in the federal Truth in Lending Act’s Regulation Z, we may require additional documentation and verifications, re-underwrite your loan, and withdraw this approval if your loan fails to meet Citi’s requirements.
5. If your loan becomes a higher-priced mortgage loan, the federal Truth in Lending Act’s Regulation Z requires that an escrow/impound account be established and maintained. We may revoke any waiver of escrow requirements.
6. If your loan becomes a higher-priced mortgage loan but is not considered a qualified mortgage, it may be subject to special appraisal requirements under the federal Truth in Lending Act’s Regulation Z. This approval may be withdrawn if these appraisal requirements are not met.


A Misunderstanding Perhaps? (7 more days)

After three and a half weeks of gathering all my documents, getting rejected the first time around, and now finally getting “approved” I was absolutely distraught to receive this MEGA LIST of follow up things to do before I could qualify for my pseudo no financing contingency loan. I took a week long break to get back any documents because I was burnt out.

I didn’t feel confident at all bidding with a no financing contingency because what if I won and Citibank turned around and screwed me? I would either have to forfeit my earnest money, or sell securities and pay early CD withdrawal penalties to come up with 100% cash. That is not an ideal situation. I calculated I’d have to pay $14,000 in interest penalties for one group of CDs for example if I withdrew early.

I told my new mortgage officer that their list of 21 things was ridiculous and that I was strongly considering just paying cash to avoid this hassle. Here’s his response,

“I think there’s some misunderstanding to what it really means for a no-contingency offer, as this is being misused in this industry. The only person that can remove a no-contingency is you the buyer. No lender  can ‘remove’ the loan contingency even though I get questions like this from both buyers and agents alike all the time. We are responsible for informing you what given conditions are remaining and that we ask if you can demonstrate the required conditions, if you feel confident that you can meet those requirements, you can remove or submit an offer without contingency.

The purpose is to have your loan fully underwritten so that the underwriter can fully list items that needs to be met. Initially we submitted a pre-approval, that is with a credit check, income and asset analysis and generally if the basic parameters are met—you will be issued a pre-approval letter.

In your situation, your file has been escalated to an underwriter and a 2nd level that has put signatures on this loan for approval.  You will note that the conditions are very detailed and explicit and that’s the intention, to keep you informed of what is still outstanding. We do not entertain this for everyone as the standard industry practice is to do a basic review until a buyer has a property in contract.

Some of the conditions are merely informational, such as the requirement for the $250,000 deposit with Citi, others only apply at the time you offer is accepted such as items 1-3, 8, etc.”

In other words, even if you are approved for a no financing contingency loan or regular mortgage, there is still a lot of work to be done. In my case, it was simply spelled out in detail. No wonder why many deals fall through. If sellers knew how difficult it was for a buyer to borrow money nowadays, they would only accept real cash offers!


Do not believe your eyes and ears when you hear the media talking about loosening lending standards. They are probably reporters who are just highlighting hearsay. I’m down in the trenches and reporting to you guys first hand what’s going on.

Sure there will be some banks that will be more lenient than others. But based on my own refinancing experience and this current mortgage application experience, I’ve never had it so tough. Yes, my W2 income is a former shell of what it once was, but my assets are greater than ever. Despite the bank seeing my cash situation that is way more than the loan I was looking for, they still wouldn’t provide any leniency. I’m thinking this has something to do with California being one of the no-recourse states which let’s you walk away from your mortgage without any repercussions for your other assets.

The average credit score for a rejected mortgage applicant of 729 is just the tip of the iceberg. The greatest irony is that government sponsored first time homeowners programs are MORE lenient and MORE risky than private mortgage programs. I don’t see how allowing only 0-3% down for first time home buyers is a good idea since the reason why they are going through this program is because their income and existing assets are probably a little too light for private mortgage programs.

The government is allowing first time homebuyers to kayak right next to a bottomless whirlpool in the middle of the ocean. Now you know why interest rates for Jumbo loans are lower than conforming loans. Lower income, lower asset borrowers are actually more at risk.

Main Takeaways Of The Article

* Prepare to go through documentation gathering hell for one month.

* Prepare to still spend two to three months to refinance a mortgage.

* Just when you think it’s over, it’s not over. It’s like waiting in the terminal for a delayed flight. They give you hope with a 30 minute update, and dash your hopes away until you realize you’ve been sitting in the waiting lounge or tarmac for four hours.

* Borrowers today are much more qualified than borrowers of the past.

* The next housing correction will not be as severe as 2007-2010 because less people will be forced sellers.

* Super strict lending standards are good for the long term health of our country.

* There might be widening dissension among renters and homeowners in major cities that are experiencing property appreciation.

* You will want to give up. You will ask yourselves many times, “Is this all worth it?”

If you have W2 income, are extremely patient and organized with your finances, and have a credit score above 729, you should be able to qualify for a mortgage. You might not get as much as you wanted, which is why it’s more important than ever to have as large a cash buffer as possible. You don’t want to find your dream house and put in a weak bid because you have no confidence in getting a loan. The time to search for a good mortgage officer is a month before you are serious about buying a home. Success rewards the prepared!


* Shop Around For A Mortgage: LendingTree Mortgage offers some of the lowest refinance rates today because they have a huge network of lenders to pull from. If you’re looking to buy a new home, get a HELOC, or refinance your existing mortgage, consider using LendingTree to get multiple offer comparisons in a matter of minutes. The Fed is signaling interest rate hikes due to inflationary pressures now. When banks compete, you win.

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Updated 2H2015

Photo: Hidden Steps in Golden Gate Heights, San Francisco. 2015.



Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

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  1. says

    I could be totally off base, but I’m guessing how hard it is to get a loan varies depending on what market you’re looking in. For example, I would imagine it’s much easier to get a loan in most areas of the Midwest, due to the fact that housing values are so much lower. Even if the ratio of income to loan amount is the same, the bank is taking much less risk on a $200,000 home than on a $1,000,000+ home. According to, the average home price in the US in 2010 was only $272,900. So maybe if you look across the US, getting a loan is becoming easier, but in high cost areas like SF, it isn’t?

    • says

      I think it should be the opposite. If the real estate market is that robust with so much demand, banks should feel more comfortable not being stuck with an underperforming asset.

      But maybe b/c there is so much demand, banks are swamped and have to filter more aggressively too. If a company gets 10,000 resumes to fill a job, then 3.8 GPA and above is understandable.

      • says

        Thinking about it a little more, most of the people I know went the FHA route, which is supposed to make a big difference in qualifying for a loan. I think when I bought my first place (a townhouse) it was FHA, but when I bought this house in 2007 it was a conventional mortgage. Didn’t notice a big difference in the process then, but that was back when they were giving loans to anyone and everyone.

        I did do a refinance with Chase in 2012, which was super easy, quick, and super weird. There is very little paperwork, and the whole thing took less than 30 days. They contacted me to refinance, and told me it was because I was “such a great customer” and they “wanted to keep my business”. I read shortly there-after that Chase was required by the government to refinance a certain number of their “high risk” loans before a certain date. With a past bankruptcy, and a house that may or may not have been underwater, I’m pretty sure they used me to fill their quota. I can’t complain; I ended up with a much better interest rate. But my mortgage was already very affordable, and I’d never been late/missed a payment before; I kinda feel like it missed the mark on the type of people the program was supposed to help.

  2. says

    Hey Sam,

    Really interesting post, and certainly consistent with what I’ve heard from others who are trying to obtain a mortgage in today’s low-rate, strict lending environment.

    I’ve been going through the mortgage application process over the past month or so, and while it has been tedious, it seems to be going okay so far. I think the key difference, and you’ve pointed this out, is the W-2 income. Oddly enough, even though my W-2 income is significantly higher than my “side business” (Schedule C) income, the underwriters had a lot of questions and conditions related to the side business.

    Even though I would be approved based on my W-2 income alone, the underwriters still wanted excessive documentation (YTD P&L, etc.) for the business. As a CPA, this is no big deal to me, but I can see how it might be extremely frustrating for someone else. It was almost as if this somehow clouded my creditworthiness in the eyes of the bank. What’s the additional risk? That the business loses money at some point, or that it suggests I might leave my secure and well-paying W-2 gig?

    Now, I’m at the point in the process where my fiance and I are essentially approved as individuals, but we are waiting on the property itself to be approved before we can get a written mortgage loan commitment. This has been far more frustrating to me. We’re buying a condo in Chicago, so in addition to the property itself, they need to look at the HOA and everything that goes with that. Although the property passed the appraisal step quite easily, it’s been like pulling teeth to get the necessary information from the seller and the HOA.

    I’m confident all will be fine in the end, but it’s no walk in the park, by any stretch of the imagination.

    Best of luck to you and your home buying.

    – Eric

    • says

      Thanks for sharing Eric. Sounds like you will be fine. As this is your first time around at this, everything is exciting and wonderful. But I’m comparing this go around with my ~10 other go arounds with refinancing and purchasing, and man…. things are as difficult as ever.

      Good luck on your close!

  3. says

    Well that’s certainly very different from when we got our NINJA mortgage back in 2005. Took just a couple of hours on the phone and they even offered us to pay whatever we wanted every month. Negative amortization? No problem! Worked out for us because I didn’t have any W2 income and used this as an easy way to get a house. Ahhh, the good old days. Sorry to hear about your experience. I’m looking forward to paying off our mortgage soon and never ever having to beg banks for money, especially now that they all went off the deep documentation overload end.

  4. says

    The pendulum has shifted considerably since the mortgage meltdown. This is not new, banks have done this before. I went through s similar situation when I was i business. It was one of the reasons I started a business after I achieved financial freedom. The banks discounted so much of my income property for various reasons. Banks view small business as very risky, but they loan billions to large public companies at prime or below.

  5. Chris says

    I’ve had similar experiences with various banks/brokers. However, I’ve had great success with USAA. I’m working on my fourth mortgage with them right now and they nearly make it painless compared to other companies I’ve dealt with.

    Good luck on your next house!


  6. Bryan says

    I just went through the mortgage process and it was every bit this bad. I actually walked away from the mortgage company and went with my credit union.

    The key difference for me is investors in loans versus the credit union holding and servicing the loan.

    I was very irritated with the process with the mortgage company because it was no risk for them but I was treated as a criminal. Even being forced to document any deposit of $500 and told that I needed to hold off on a raise or change in position until after underwriting was complete. I’m putting 20% down on the home and it will be my main residence. I have more liquid assets then than value of the home but they still wanted me to disclose the terms in which my retirement accounts could be liquidated in hardship situations. (Uh never!)

    On the other side of the pendulum we are selling our first home and the process for new first time buyers was much easier. We have newly wed friends with first jobs who got first time home buyer loans in a matter of an afternoon!

    It’s nice to know that they are being quite tight with money now but it’s hurting their business.

    I would recommend looking for banks (small regional banks) or credit unions that hold and service the loans. It’s much simpler and straight forward. I can even meet with the people reviewing my loan and discuss questions. Your rate won’t be as good as a large bank with more exotic offerings but the closing fees are much lower and you don’t need to take on another full time job of doing an underwriters bidding.

    • says

      Great call on looking at smaller shops and credit unions to hold the loan.

      Being treated like “a criminal” doesn’t feel good at all. I think there needs to be empathy training for mortgage officers who simply start off with a “I’m so sorry to have to ask for this, but bank regulations have made this a requirement….” Get the customer on your side.

  7. says

    I agree with you 1000%.

    We bought a new home this winter and I honestly felt like I was being treated like a criminal throughout the process, which is strange!

    First of all, we had already sold our old home before our new home purchase so we were 100% debt-free aside from small mortgages on our rental properties which are cash-flow positive.
    Second of all, we both had credit scores in the mid to high 700’s.
    Third, my husband has been in the same industry for over ten years!

    The details:
    -They wouldn’t count any of my income toward our loan because I have been self-employed for less than two years. However, my husband’s income was enough to take care of it. Our loan was less than 2X his annual salary.
    -We had far more than the standard 20% down payment.

    To get the loan-

    -We had to submit bank statements at least five times.
    -My husband had to have a certified letter stating that he no longer lived at his parents address (hasn’t lived there in over 15 years!)
    -We had to have a certified letter saying that we didn’t plan to rent out our house (they were worried because we own rentals)
    -They wanted a certified letter from our “corporate accountant” stating that the 25K I took out of my business account would not bankrupt my business. The corporate accountant is me and they would not accept that. They finally did but only after many phone calls and arguments.
    – They were very distraught that I had been taking money out of my business account and paying myself with it. I tried to explain to them that that is how I get paid- by paying myself. They acted like we were robbing my business account.
    – They had us explain numerous deposits and checks, many of which I couldn’t even remember and had to make something up.

    Sorry to write a whole blog post in the comments. I am glad that they have tightened standards but it really does seem a little bit ridiculous. If you can barely make a loan to someone with a long credit history, who is 100% debt-free, who works in the mortuary industry which has zero chance of going under, and who has a 50% down-payment, then who can you lend to?

    • says

      Okay, I seriously laughed about the “certified letter stating that he no longer lived at his parents address”. I mean, seriously?!? It’s not like he’s a 19/20 year old buying a house! He’s a grown man, married, with 2 kids! That’s ridiculous! Did his parents have to send the letter? I can just imagine the look on my Dad’s face if I asked him to write a letter to my mortgage company!

      • says

        Apparently, one of his student loans was still listed at his parents address. We paid them off years ago, so I’m not really sure why that matters now!

        Thankfully, his parents didn’t have to write the letter. They accepted one from Greg. It did have to be notarized.

    • says

      Gosh, a mortgage amount only 2X what one of you makes is not that much. Sucks they put you through the ringer too. As I said, people are dead to banks without W2 income or at least 2 years worth of entrepreneurial income.

      A housing downturn won’t be nearly as bad as 2008-2010. Everybody can hold on forever!

  8. JD says

    We have found with 20% down and no consumer debt, we have had no issues with buying a $300k primary residence and a couple $70k investment properties. However, we used a local credit union that actually funds and keeps the note on 15 year or shorter mortgages. So maybe that makes things easier?

    Location: Indiana

  9. Tiffany says

    We are closing on a house next week and have gone through the easiest mortgage process we have ever experienced over 6 home purchases. We used a small local credit union who lends their own money. We got a 30% down, 15 year mortgage.

  10. Dan @ The Mad Real World says

    Hey Sam, I fell your pain. Sometimes I wonder how these banks are making any money. They don’t seem like they want to lend. I have a low W2 income and have always had a hard time getting financing. After my primary residence, I have used commercial loans exclusively to purchase my rental properties. Commercial financing is a breeze.

    Have you tried some smaller, more local banks? I have found that dealing with the big banks has been a nightmare with all the hoops to jump through. Also finding a good contact at the bank is key. I had a good relationship with one bank, all my loans were through them. The lady I dealt with left the bank and the new guy was horrible. Al lending for me shut down.

    I also agree that they do not properly analyze applicant’s financials. I have also never missed a payment in my life, great credit, rental properties, cash in bank and often run into issues. A family member who does not make much money stretched and bought a relatively expensive primary residence that will not bring in any income. Obtaining financing for him was no problem.

    • says

      Seems odd banks are less strict on first time homebuyers, and way more strict on the experienced.

      I’ve never tried getting a commercial loan for rental properties. Are the rates the same?

  11. Mark Ferguson says

    It’s tough when you deal with big banks. They talk the talk, but don’t come through many times. I would always suggest a mortgage broker raise they know many banks and have different options.

    I deal with a local portfolio lender and try are awesome. They lend their own money and have much less strict guidelines. That’s why I have 11 properties and I can keep getting loans with them. Most banks stop lending after four.

  12. Gousalya Siva says

    I was looking for an investment property to own and went to the bank for pre-approval for 500K. Even with a 35% down, and a credit score of 798 I was denied. I had a W2 but I just started working for them and my W2 is from a consulting company. This is a no-no from them. They told me to try again in 6 months ;-(

    • says

      Gotcha. 35% down is a lot…. hmmm, I guess waiting six months won’t kill you, unless the housing market runs away from you, which I don’t think it will.

      There will always be another sweet property on the market. Not to worry!

  13. Syed says

    Very interesting read. I got a mortgage about 2 years ago and it was pretty easy for the most part. It will be interesting to see how the landscape will look when we plan to buy again in about 5-6 years. I guess the best thing to remember before we buy again would be increase assets, keep my credit score high and stay in a steady high paying job for as long as possible!

  14. says

    There is a simpler solution. Don’t cause yourself the continued headache of refinance after refinance (or recast). Just pay the loans off and be done. ;-)

  15. says

    It seems most of the trouble comes from a lack of W2 income. I have a few friends who have recently gotten mortgages with no problems whatsoever & I’m sure they’re not in as good of a financial position as you or some of the other commentors.

    I’d be interested to know why banks discount other sources of income so much. ie: your online income & rental income. Maybe due to the failure rate of people who set out on their own business ventures?

  16. Austin says

    6 months ago I refi’d to a 3.25 5/1 ARM with a 5 point periodic cap and a 5 point lifetime cap. Yesterday, out of the blue, someone from Quicken called me and said their new ARM periodic caps are 2 points. They offered to cover all costs for a refi to a 2.99 5/1 ARM with 2/5 caps.

    I keep looking for the gotcha here and I am not seeing it. They aren’t adding a point to principal and they say they’re covering all fees right down to recording costs and sending a notary to my house.

    Really it’s not that big of a hassle for me to scan a few docs, grab a few pdf statements and e-sign most of the paperwork. All-in-all, for an hour of my time, I see no reason not to do it. I don’t see any upside for Quicken here.

    • says

      Might as well do it.

      Perhaps look farther though? I’m getting a 2.5% jumbo 5/1 ARM with a 0.375% CREDIT. I could have done 2.375% and pay 0.125% points, but decided not to as the break even would be around 38 months.

      • Richie says

        I’m curious about your choice of a 5/1 ARM. Are you planning to pay it off before it adjusts? Don’t you worry about the risk of interest rate rises especially over a 5 year horizon?

  17. says

    It really is crazy now. When we bought our first home in 2006 we’d been in school for four years and really hadn’t been working much- we hadn’t even filed taxes in a few years because we’d basically been living off student loans. We had NO PROBLEM getting a mortgage based on our expected future earnings from our jobs we’d landed. Then in 2009 when we bought our second home things had changed dramatically. We’d been working extra jobs on the side to make extra cash and they acted like we were selling drugs or something. I truly felt like a criminal. It really wasn’t a whole lot better when we bought another home in 2012, they make you explain every detail of your life in excruciating detail. I was honestly surprised when they didn’t ask for a notarized rundown of the contents of my underwear drawer. It’s that bad.

  18. Tom says

    It sounds to me that perhaps lending standards haven’t necessarily gotten stricter (although I wish they would), but that lending standards are used to seeing your average US consumer than someone saving 40%+ of their income with tons of assets.

    They’re used to seeing people who live pay check to pay check with a solid W2 – it doesnt matter that they have student loans, car payments, and other miscellaneous payments. That is the norm to the banks, the underwriters can predict with relative success whether or not those people will be able to pay their mortgage. They then get a 30 year mortgage over-extending themselves, keeping them in a cube farm because they really wanted the house with the grand entrance so guests can be in awe. They are not used to someone in your situation.

  19. JayCeezy says

    Sounds like a real frustrating hassle, but let’s look at it from the lender’s perspective. The two main things a lender has to determine (and document) are 1) ability to pay; and 2) willingness to pay. If you are “not bidding with confidence” that should tell you something about the home, the price, and the loan.

    Citibank is in business to make money for shareholders, and to protect against a risk on a loan that will not be paid in total for 30 years. From what I am reading Citi is not seeing a clear and predictable ability to pay for more than a couple of years out. The S-Corp is nice for you, because it protects you from personal liability; but it is spooky for Citibank for that same reason. If you have entered this loan negotiation with the home as your primary residence (a much better rate than if you were going to purchase as a rental), Citibank is looking at a $1 million (I’m guessing, not asking) exposure on this one loan, in addition to your outstanding mortgages on your current home and rental property. If hard choices have to be made, the mathematical decision for you would be to default on this $1 million debt (avoiding recourse) and continue to service the other properties (which could be the subject of recourse). Nobody ever plans on their home being foreclosed, defaulting on a loan, or even missing or late payments. It just happens, and then the excuses begin (but don’t matter). This all has to be approved by a committee, by the way, who has no direct contact with the mortgage broker (to provide an arm’s length decision by the institution). Every single person involved with this loan at this institution is going to have to explain their decision to lend to you before the loan is made. If you think this is a hassle for you, imagine the hassle for these people (who’s jobs depend on it) if this loan goes bad.

    I know it is a drag to not get what you want, and hope you don’t take this experience as a measure of your character, or ability or willingness to pay. It is just business, and in spite of your great relationships with the people who work their, they do work for that business. Good luck on the next bid!

  20. JayCeezy says

    One last thought…if you have a legal partner or spouse, but do not have them on title, that is a ‘red flag’ for the lender. The quitclaim is a big deal, because the risk of transferring shared common assets is pretty likely if the loan goes bad. Putting a legal partner or spouse on title will not only help by giving the institution an additional party to hold responsible for recourse, but will also improve the outstanding debt/ability to pay ratios.

  21. AJ says

    Yup, sounds familiar.. just closed on a new primary residence today.
    2 months of working on the loan with non-seasoned rentals and DTI issues.
    Jumped through a ton of hoops to renew leases, dropped price to get a new tenant faster, etc etc. Then they changed their method of DTI calculation, and DTI went up 15%.
    What a waste of time (and $500 appraisal), so just paid cash to get it done.
    Will open a HELOC or do a cash out refi to have access to the equity.
    A mortgage at or below inflation is nice.

  22. Matt says

    Some of the follow-up details seem dumber than others. Why would Citi need info from you on your Citi accounts? It makes me wonder: what sort of privacy directions do you have with the bank? Have you told them that their affiliated companies can’t share info about you? Maybe it would be a good thing (gasp) to allow sharing, at least at a big bank at which you expect to exercise multiple products.

  23. jm says

    I’m a first time buyer, w/ cash to put 20% but I’m wondering if I should forego and pay MI if necessary especially w/ what may be a topping market? Thoughts? Any specific advice for FT buyers and special programs available to them.

    Or are sellers just going to prefer to go w/a conventional offer assuming an all cash bid isn’t available.

    I have high 700’s credit score and mostly straight forward w2 income. I’m not going to even mention side biz income as my primary job is sufficient to qualify.

    • says

      Jm, if you think the housing market is topping out, then I wouldn’t buy a home. Why bother losing money?

      But if you want to live in your home for 10 years, then that is a different story.

  24. Ace says


    It’s your lack of W-2 income which is the problem. Banks prefer W-2 income. So much easier to evaluate.

    I appreciate the post. I find your blog very interesting. But frankly, I don’t know why you are bothering to purchase a home in San Francisco. You already own a home there.

    Plus….. Property is way overpriced there; so what’s the point?

    • says

      Because I love it out here, and found a panoramic ocean view home. You can find such things elsewhere with the sun going down into the water, but if you can find such a thing in San Francisco, where six figure jobs are plenty, then you’ve found a hidden gem.

      Oh yeah, I’d generate massive passive income by renting out my current home to.

      • Ace says

        I’ll add another thumbs up for credit unions. I think overall a much more pleasant experience.

        I hear great things about USAA from several colleagues, but I have no personal experience (but that may change).

        Ocean view property is going to be challenging. Sam, you might have to pay cash and then refinance later. Check with your CPA, but I think if you do the refinance fairly soon after the purchase (like maybe six months), it would be considered a purchase loan.

        Showing up with cash would likely give you an edge.

  25. says

    That’s crazy, Sam. I think your difficulty was mainly due to not being a cookie cutter borrower. For the majority of folks with 99% of their income on their W-2’s, they would probably sail through as long as the other criteria met (debt to income, appraisal, credit score, etc).

    I’ve refi’d 3-4 times since the bottom dropped out of the housing market and never had much of a problem. Of course I had 5-10x the assets to cover the tiny loan balance, and the LTV was never over 60%. And I wasn’t in one of the “problem areas” like FL, CA, AZ, or NV that sometimes had stricter underwriting requirements.

    Overall, I’m glad they gave you hell from a system-wide perspective (it will limit the bubble and prevent mass losses in CDOs and FNMA/GNMA). But sorry it happened to you on a personal level of course!

  26. John says

    Just re-financed again… was most difficult re-financing I had gone through…mainly because I was pulling out a lot of equity on my home to make other real estate investments in North Carolina.

    I have over 800 credit score…debt to equity of about 11%, debt to income of about 10%…good W2…..still took over 3 months. Worked with a regional bank that I have done business with for over 10 years.

    For me, they were concerned on the W2 volatility. Stock Options/RSUs are on the W2..and for me, this is somewhat volatile. They needed all kinds of back-up from my company….

    Although painful, I will take this level of scrutiny ANY DAY over the NINJA world…. we don’t need to relive 2007-2009 again.

    • says

      Hear, hear, John! Give me stringent underwriting vs. NINJA loans any day too.

      Glad you were able to refinance, and hopefully you will be able to take down some nice cash flow generating properties!

  27. says

    Our experience has been that it’s been very supply/demand related. In summer 2009, we had amazing service getting a mortgage because there were so few qualified buyers in our area – the downside was our rate was over 5%. Getting a refi in late 2012, though… well, we had a heck of a lot of trouble closing that despite having a lot more income and assets and I think it was largely related to the backlog of mortgage and refi applications at that time.

  28. Jonathan says

    You need to try smaller banks or local banks that can afford to be more aggressive. Most big banks are useless and will not even look at me anymore and say they cannot count rental income unless it’s been on tax returns for two years. However, I’ve been able to find smaller ones who are aggressive and will count any rental income as long as I can show a lease. This offsets my mortgages and allows me to get many loans all still under Fannie Mae conventional financing. Portfolio loans can be significantly more expensive and have heavier requirements. I am working on loan 8 and you can have a max of 10 Fannie Mae loans.

    • says

      Wow, 10 loans with Fannie M? Seriously… I think the government is really working to F*CK this country over with their 0-3% down first time home buyer programs and allowing 10 loans with Fannie.

      This is why JUMBO loan rates are LOWER than conforming rates. I don’t know why people don’t realize the gov’t is seek to keep the masses DOWN.

      Clash For Clunkers! Trade in your perfectly fine $5,000 vehicle to buy a $30,000 vehicle on your $60,000 salary. Great job gov’t!

  29. Josh says

    Banks were badly burned with lax lending standards during the boom and hence much more stringent with new mortgages these days, but it’s a bit surprising to hear that a very good and well off customer such as yourself would still have to clear so many hurdles. I guess maybe it’s because the dollars figures in SF are so much higher, thus a much high bar to clear? With the FHA loans, I think the government agencies will pick up the tab in case of a non payment maybe. Thus, the low down payment requirements and is meant mainly for first time home buyers, or lower/moderate priced homes. Also wonder, if you paid cash for the house and then immediately take cash out refinance, would the rate/approval process be any different?

    Regarding any future housing bust, I don’t believe it’ll happen much, especially in SF. So many rich people want to own properties there and the housing policies does not really permit enough housing stock to be added to put downward pricing pressure. Even in the 2008 & 2009 crash, SF and NYC housing declined 20% max, unlike over 40% in low to mid income areas. Finally the media tends to sensationalize things to grab headlines, so it’s nothing new(e.g tech workers are mostly all millionaires in bay area sort of thing). Good luck with your housing/financing search.

  30. Nbsdmp says

    Geez, that’s just crazy what you have to go through…that’s exactly why I have vowed to only pay cash, yep it is not the “smartest” money move not to take advantage of the cheap money, but not having to go through this bs, or answer to some “banker” who makes $100k + but is up to their eyeballs in debt is worth it.

  31. says

    This scared the heck out of me! If you can’t get a mortgage, I can’t imagine that I would qualify! However, based on the comments on this post, it looks like a smaller credit union might be the way to go. I’m hoping to purchase something next year, but we’ll see how things pan out (like if property values dip down a bit or if lending loosens up.)

  32. M says

    I would suggest going through a good mortgage broker. Much easier to deal with than the bank directly especially when you have your own business in California. Yes it is more paperwork than before but if you are well organized it’s not that bad. I have bought 8 properties since 2009 in California and out of state.

    • M says

      Also I believe you may be misunderstanding waiving the loan contingency. I have done that. You do not need to involve the lender at all. It’s just a box you check on the contract that says you waive it and risk your deposit if you don’t qualify for the loan.

  33. says

    Oh man, we’ve been putting the loan application until our place sold, but it looks like we have to get going. I talked on the phone with a couple of lenders and they said, we should be okay to go. I’m getting all my docs together now and will see what happens next. Not looking forward to it.

  34. Peter K says

    Ditto @M above. I went through the mortgage process in February 2013. One of the best recommendations I got from my realtor was to use a specific mortgage broker in town. While my friends and family who were buying houses were waiting 3+ months for an answer from the bank, my own mortgage was underwritten in 2 weeks and I was closing within 3 weeks. Sure, there was a cost attached, but I’d never go back and do it differently.

  35. Jason (formerly of WSL) says

    Being in the industry, I have to say I really enjoy reading these posts about mortgages.

    You got what’s called a ‘conditional loan approval’. Those 21 items were just the conditions you needed to meet to get final loan approval. Why didn’t you just go back to underwriting (prior to looking at homes) to clear a majority of those conditions? You could get most of the ones related to you eliminated and just be left with the contract and the Citi assets. 21 is a huge number and I’m with you: if I had a borrower that had that many conditions I wouldn’t feel too comfortable telling them to remove a financing contingency on a house.

    I do agree with your banker in the fact that there is no such thing as a no-financing contingency. There will ALWAYS be loan conditions based on a clear title and the contract; so until you have those you can’t get a loan approval. So I dont’ think you could ever get what you’re looking for until you have a house under contract, but you could at least get a ‘conditional mortgage commitment’ with the only conditions being title/contract related.

    Getting a loan isn’t as hard as you make it sound. You just don’t fit in the box as easy as others. :) Thank Mr. Dodd and Frank for all of the ridiculous regulations on how to qualify people that have assets as opposed to “qualifying” income sources.

    • says

      Thanks for sharing Jason.

      Actually, I’m curious to know if you have ever applied for a mortgage and if so, how long did it take given you say “getting a loan isn’t as hard as you make it sound.”

      I’d love to know your experience on the refinance and mortgage approval process.


  36. MD says

    I refinanced 14 months ago into a 15 year. It took less than 30 days total. However, I do have significant W2 income. I know the story would be much different without it. We also have FICO scores greater than 810. The title agent who closed our last refi did say that the average was taking way longer than what ours did.

  37. Stewart J says

    Hi Sam,

    Great article. I’m so pleased I’m not the only one finding in tough to get a mortgage. I’m a British guy married to a American. My wife has been living and working in London for a few years and makes a modest income. I wanted to buy a property in Chicago (initially to rent out, and then live in it in a couple of years time). Since my wife has been living and working in London for a few years and makes a modest income I decided to do a mortgage in my name. I work in Banking in London and earn a dollar equivalent of $150k per year. I have no debt, a great credit score in the UK and wanted to put down 50%. After months of providing endless lists of information, they keep changing the requirements and I’ve pretty much got no where despite the hours I’ve put into it. I was hoping to take advantage of a) low mortgage rates, and b) low real estate prices, but to be honest I’ve given up. Perhaps as rates increase, more lenders will be attracted to the market and the credit conditions will loosen. Perhaps!

    • says

      Everything seems cheap compared to London doesn’t it? I don’t think interest rates will be going anywhere any time soon. In fact, we’ve been in a 35 year down cycle. Don’t give up! $150K income should be plenty enough for Chicago, especially with your downpayment %.

      • Stewart J says

        Cheers Sam. Yes I was blown over the first time I went to Chicago. In London I rent a tiny 1 bedroom flat in Kensington (a nice area). I guess the flat must be worth about £500k. For the same money (or slightly less) you can something pretty special in Chicago. So long as you can live with the cold weather! All the best,

        • says

          Ah yes… the cold, hence the 80% discount to San Francisco property prices at least!

          I’m off to London this year for Wimbledon and I can’t wait. I’ve never been. Have you? I hope to be able to just queue up and get tickets the first week. I’ll be staying in a more grittier part of town about 5 blocks north of Canary Wharf. Up and coming they say.

      • Stewart J says

        Wimbledon is fantastic. I’ve been a few times. If you go in the first week and you aren’t fussed about getting into center court you should be fine queuing, in fact its all part of the experience. Personally I’ve never bothered with center court because there’s so many great matches to watch on the other courts. You’ll need to join the line early; between 6 and 6.30 am, but once you’re in the line you’ll queue past places to get coffee and breakfast, and on a good day you’ll be in the grounds by 10 am. The atmosphere both in the queue and in the grounds is excellent.

        The Wharf side of London is up and coming, but as you will see, it all looks the same. Lots of mid rise apartment blocks – far less character than central and west London.

        • says

          Sounds good mate. I would stay near Hyde Park, but got an offer to stay at a client’s corporate flat for 9 nights so I won’t pass that up!

          Do I really have to queue up at 6-6;30am? Will tickets be sold out if I get there at 9am? Surely I can just pay more from scalpers no? No need for center court. I love being close to the action!

          • Stewart J says

            Yes, unfortunately unless you buy a ticket through an agent, the only way to get in is to queue up. I joined the line at about 8 am once and didn’t get in. And that was in the first week. Turn out will be lower if the weather isn’t so good, but then you run the risk of the tennis being cancelled due to the rain. Ultimately, the earlier you get up the better! If you don’t fancy that much, there’s also a late entry option. Capacity within the ground increases in the late afternoon as some people head home, so they let more people in, but only at around 5pm, so you’ll only see about 3 hours of tennis.

            Let me know if you need any recommendations on other things to do or places to eat.

            • says

              Thanks Stewart! That sucks not getting in queuing up at 8am. OK, we will definitely be there no later than 6:30am. Can’t believe so many slackers aren’t going to work the first week :)

              I’m getting a steak dinner at Hawksmoor and a 50th b-day party at Sketch. Whatcha think? I hope to try many more fun restaurants while I’m there and not be as frugal as last time!

            • Stewart J says

              Haven’t tried Hawksmoor myself but have heard its good. It’s in a quite a lively part of town. Enjoy Wimbledon. I hope the weather will hot this year!

  38. says

    Great article! I think it’s crazy how mortgages have gone from:

    “need a mortgage? don’t have any money? Sold! Here ya go.”


    “need a mortgage? Oh you have 10%-15% down? We may be able to give you a loan…but we really don’t want to.”

    The banks made a lot of bad loans in the past and now they are paying for it. It’s been a while since my wife and I got our mortgage, but I know things have changed.

  39. Steve says

    I’m invited to a lavish cocktail party in a few weeks from the dude who handled my first and second refi — who just joined a new firm (I’m now on my third — 3.75% fixed). Lot o’ documentation and a lot of manual processes. E-signature capture? Not so much. For us, worth all the time. Our monthly mortgage payments are now 27% lower than they were when we first purchased our house nearly 11 years ago.

  40. darren says

    $#!? I can’t believe how difficult financing another mortgage is, even with a net worth as high as yours! I’m going to be retired from the military next year and am looking to buy another property to live in, fix up, and rent out after three to four years. I’m starting to see just how difficult it’s going to be to procure financing. I don’t want to tie up all my cash in purchasing my home outright, which is why I want to finance it. You would think having a high net worth and outstanding credit history would be enough…

    I do everything through USAA and I have a few accounts through decent credit unions. Looks like I’ll test them out and see how friendly they are. Informative post…especially all the comments!

    • says

      I’ve got to imagine that as an existing serviceman, USAA should be pretty good. I have 3 long term CDs with USAA and all my insurance with them. Their service really is the best.

      As for the mortgage, 2.5% jumbo ARM couldn’t be beat after searching around with a 0.375% credit so why not. It’s just a difficult experience that’s all. I believe I will make it through.

      Good luck with yours!

  41. says

    I went through a refinance about a year and a half ago and it was terrible. My loan officer kept asking me the same stuff multiple times, I had to remind him repeatedly that my house is a co-op so I already knew that certain types of loans I didn’t qualify for even though he kept telling me I would. Low and behold as the process got along further he said, “oh we don’t do that.”

    I think the most annoying part is that I already had the loan through them, I was just refinancing. When we were getting to the end of the process he asked me for a copy of my latest pay stubs. I told him that I had given him that during the first week so why did I need to do that again. Well, apparently it had been long enough since the process started that they needed more current ones.. I still don’t know why it took almost 6 months.

    Yes it’s complicated, but I feel like there was a lot of incompetence on my banks behalf.

    • says

      A 6 month refinance process is definitely painful. I’m glad you got through it. Look on the bright side, imagine how much pain a mortgage officer has to go through every day!

  42. says

    Hi Samurai,

    I just finished the loan application process on what will be my 2nd rental property set to close June 9th. My first loan app went super smooth. I felt like my second one was tougher that is until I read your post! Wow they really put you through the ringer!

    As someone who looks up to your advice what would you recommend to a young investor like myself who is just getting started and is looking for the smoothest loan application process even if it costs a bit more in the long run?

    Thanks in advance.

    -Davey Pockets

  43. andy says

    First lesson: do not ask big banks for money… you can have $500,000 on citi or chase or wells fargo.and they probably loan you $50k … crazy.. then you dont have a penny in a bank you never heard of and they loan you lots of money.

      • andy says

        Well, that lesson is just for me, what I have seen. Either way a good broker should help you find the best deal possible for them and for you.
        Lesson 2 : dont have one but, if had to add one.. pay cash. But, I also follow this guy mark Ferguson which makes sense… it depends how agressive you be.

  44. Damon says

    Being a 23 year old working as hard as I can to come out of the last of my debt, this article and the comments makes it seem I wont be able to be qualified for a mortgage for about the next 50 years. I wish I would have known more about how important my personal finances were before I jumped head first into 25k in debt by the time I was 22.

    I guess the bed I made is starting to get more comfortable being on the right track now.

    My plan was to save and pay 40k or less for a starter/fixer upper primary residence then use my VA home loan to buy a small rental property. Would a bank even think about looking at me with a horrible credit score due to missed payments, even if all debts are paid and I have a paid for property as an asset?

    Oh what I would give to go back a few years knowing what I know now.

  45. Gen says

    Thanks for sharing this info. We are currently trying to get financing for a home, but having zero luck. We went thru a foreclosure two years ago. Other than this one issue, everything else is squeaky clean. We have built up our credit, are willing to put 20% down and the SOBs still wont approve us just because of the foreclosure that happened years ago.. Any advice as to how we can get back into purchasing another home???

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