Sounds like she’s looking for a stated income or no-doc loan, so it’s not too surprising that she couldn’t get funded. West Oakland or otherwise, you pretty much need to have an income to get a loan these days.

The problem with subprime loans wasn’t necessarily that people with low FICO scores were getting loans, it was that people without a demonstrated capacity to meet the financial terms were getting loans.

If I were a loan officer looking at an application from someone who already owned three properties, who did not have an income stream or $210K in liquidity, I would be thinking that person was pretty highly leveraged and would not be a good risk, regardless of FICO.

Ah! Toady, as always you are most insightful. I hadn’t thought about that. I believe stated income loans are often referred to as “liar’s loans,” yes? For those of you who don’t already know this (and many of you probably do), during the real estate boom, many stated income loans were made in which the borrower simply said how much he/she was making and this was accepted as the person’s income.

Since the whole magilla of getting pre-accepted for a loan involves PROVING you can afford the payments, by supplying copies of your last two paystubs, income tax returns and other documentation, “stated income” loans defeated the purpose. Not surprisingly, many of the incomes stated were inflated.

However, this reader is a smart cookie who probably was able to supply some proof of income, I’m guessing.

Your second point about owning so many properties is a good one. To me, the fact that a person made regular payments for 15 years makes them a good risk, but I do see your point. Kind of like how having too many credit cards might cause a potential lender to bow out, though it seems like a good thing at first.

In another article I read it said that many banks these days just don’t want to lend to anyone because they have enough problems to deal with. Also, like Toady said, it seems like this woman doesn’t have recent income and the article doesn’t say if she put down any downpayment. If it’s a 0-down stated income loan then I can see why they denied it right out.

Sorry to be blunt, but Fico scores don’t mean squat. There is nothing stopping this lady from taking helocs out on 1 or more of the properties to use for payments against outstanding loans, thereby keeping your FICO score in check. Its a death spiral that alot of these slackers used to help fuel the flame thats now about 90% contained.

She took time to finish a book in 2007? Well, her book better do well or else me thinks she’s going to lose all four properties in the very near future (if she doesn’t have atleast $210k in liquid assets).

I’m sure that the West Oakland address didn’t help her case, but bogue is is right about FICO. I know freelance graphic designer with a 783 and $140K sitting in a savings account who lost her pre-approval last January, and she was looking exclusively in Berkeley. And our neighbor, also looking in Berkeley/Albany is pre-approved up to $650K with 20% down, and his FICO is “mid- to low-600s.”

I just got a no doc fixed for double this amt. No problemo for me. I also have a high credit score.

mrbogue, her 3 other properties bought in the 90s are almost certainly cash flow positive.

That’s odd…I got a loan with 10% down in San Leandro (certainly a “declining market”–yep, stamped right here on the appraisal). My FICO (yeah, it’s useless) is 790.

Perhaps it’s a loan broker thing? Or more likely an income thing? I’m betting the bank coughed at seeing how many properties were owned off of a $60K income. I know my broker liked that my PITI payments were such a “low” percentage of my income, i.e., the traditional metrics (28% front, less than 36% back, as I have no other debt), so that overcame the 10% down (rest of money is going for improvements).

Michelle: The story Janis posted does not mention the properties were purchased in the 90s. Only that her first house was purchased in 1993.

Anyhow I am pretty sure if she had a sufficient debt/equity ratio in her investment properties,
or if they are certainly cash-flow positive, she should have built up a minimum liquidity
that will allow her to easily bag a 210k nodoc loan. Maybe its partially due to the location
of the property (West Oakland) like Toady says, however I suspect there are other red flags that lead to this loan denial.

For example, under some scoring models, loans from finance companies may negatively affect your credit score. Mortgage Loan

interest rates have gone up recently so that is causing some borrowers who were qualified for a loan before be unable to qualify now.

You guyz! This is so instructive, I really appreciate it! To provide more detail: This woman is living in a house with her partner and the two of them are paying on the mortgage. She owns three other properties, one of which was purchased in the 1990s, one in 2000 and one a year or so ago which is in Texas.

She does have regular income this year, though it is freelance.

David, C*O*N*G*R*A*T*S on your awesome 10 percent down loan! But you say your equally awesome FICO is useless, as do bogue and toady. If so, how did you get such a great loan?

And congrats to Michelle, too! Can I borrow some money?

Eh, just saying that high-FICO scoring loans the past few years have not performed well either, so the banks use ‘em sure, but I’m not sure that they’re the best correlates to future loan performance for them. But I don’t care, I got a good loan:)

Don’t even have escrow impounds. Take that, escrow man! I’ll make my 3% on my ING savings account for my prop tax payments, thank you for that.

I’m betting the “freelance” part is problematic, akin to self-employed, which will hurt an application these days, especially if she hasn’t been doing that for a long time (and you mentioned she “took time off,” meaning her tax return for last year probably displays little/no income).

Buh, I never heard of an escrow impound, although I own a house? Is this the same as earnest money? I googled but the articles I found made me more confused than when I started.

Whatever it’s called where your payments include a chunk for prop taxes and insurance. This is good for the servicer (who gets your cash to use for 6 months or so before paying the gov’t or insurer). If you get the chance to avoid it, you can deposit that money monthly into a high yielding (probably online) savings account and get yourself an “extra” couple hundred bucks a year.

Oh, I see, thanks! I didn’t have to do that either, luckily.

You say she made 60k in 06 and then presumably made much less in 07? Well that is killing her DTI ratio right there, which I believe it still used for investment properties and not just primary residence.

I don’t blame the bank for not lending, even though she may be getting a good deal in the long run for this house at 210k.

aha! Out of the blue of the Western sky comes … dg! Good to see you, brotha. In case you are new to the conversation, the wily dg, who appears in various guises, is referring to “debt-to-income” when he says DTI. The idea being (correct me if I’m wrong, dg) that you don’t want to have a high debt-to-income ratio cuz that means you are eating up too much of your income paying on your house, or actually can’t make the payments.

I believe 28/36 is the classic ratio, is that correct?

But shouldn’t her current income, i.e. in 2008, be the income the bank should go by? Because that’s up to par now, she says.