** This is part five of a longer story. If you want to understand what’s going on I recommend starting with PART ONE (which is packed full of intensely awesome action), but if understanding isn’t a priority… by all means… read on!**
“You need to prove that you have 100,000 dollars in assets”
That’s what the email that woke us up this morning said.
Now… we’ve had some strange emails come down the pipes over the last week, but this one took the cake. I still laugh whenever I open my email and see the subject line “100,000”
Like… what do you say to that?
….
Seriously?
How did we get here?
After the lender that we had been hoping for fell through, our mortgage agent had 5 days to find another lender that might consider our property, and US….
The reason why it was difficult is hard to explain. And I don’t mean because it’s crazy complicated… it’s hard because I don’t fully understand it. I do know that part of it had to do with the property we were trying to buy.
It’s a small condo (like less than 500 square feet small) and there are some lenders that won’t even consider something that size. And others… well… they might have considered them in the past, but until they have the specs in front of them… they won’t know if they want to consider that one.
Remember, they’re the ones with all the power. We can’t do it without access to their big bucks, so they can pick and choose the properties that they really want to invest in. And it IS an investment for them. And just like any investment portfolio they want to make sure that they’re not only investing in small condos, or giant mansions. See, even the pros diversify.
But all of that is over my pay grade, and the effects on us were that even from the beginning we were shopping in a smaller pool of lenders that would even consider giving us a mortgage.
It’s a lender’s world and we’re just living in it
I always knew that qualifying for a mortgage might be tricky, but turns out I really had no idea WHY it would be tricky.
One of the main things I’m realizing now is that there are different rules for every different lender. Different bonuses and perks too, but mainly different things they want from you before they’ll consider forking over the dough.
Like proving you have 100,000 in capital to ‘support’ your mortgage (and let me add… that 100,000 couldn’t include the money you were using for the downpayment… so let’s call it 150,000).
Look, I get it, they’re just trying to minimize risk, but from the perspective of two self-employed artists who have worked their asses off to save and put themselves in a good financial position… it’s pretty dang frustrating.
It’s frustrating to jump through hoops only to see more hoops in front of you. It’s frustrating that it seems so difficult for us to build wealth.
Let the record also show that I realize that some of the reasons this was more complicated was that we were looking to buy a rental property instead of a primary residence. I’m by no means saying the real estate is out of the reach of artists so you shouldn’t even try. Lots of artists own real estate, even rental properties. Lots of artists build wealth in this way.
But these two artists were pretty … well… frustrated.
The straw that broke the camel’s back
I thought the 100,000 dollars would be the most ridiculous lender request… but BOTH of the new lender options came back with a fun one …
They would only lend to us if we had a signed year lease from a tenant 10 days before closing. So we would have a signed deal with the seller, we would then waive our financing clause (the one that allowed us to walk away if we didn’t get financing), and HOPE that we could find a tenant in the next month.
Umm… WHAT?
Apparently it’s a pretty standard ask for a lender (and yes, I understand why they would ask it), but in this case it just seemed impossible.
What we were looking to buy is a really cool space, but it’s got niche appeal. There was some work that would probably need to be done before it was completely attractive for a renter, and even then it just might take awhile to find the right tenant.
As new landlords, it really wasn’t a process that we wanted to rush. There are so many horror stories of bad tenants that landlords had to deal with.
The whole situation just seemed… profoundly demoralizing.
We honestly didn’t know what to do.
Next time on The Mortgage Files: the dramatic conclusion. Don’t miss: THE LESSONS YOU LEARN
***Just for the record let me make clear that this is a story of OUR experiences with ONE MORTGAGE SITUATION. If there’s anything that I’ve learned about this crazy world is that every person and property brings up a whole new set of circumstances. If you have questions talk to a broker (I know a great one). ***
