Another sad day for logic… Another real estate broker turned down for a home loan

Real Estate Broker/Owner with Respect Realty LLC 200311024

By Todd Clark (Broker/Sales Coach) 503-524-9494

I'm left scratching my headI was talking to a friend of mine who was trying to buy a home, but he said despite making five times what his wife does per year, he was turned down for a loan while his wife was granted a home loan with no problem. This is what has left me scratching my head and let me explain why.

Why was he turned down, despite having a 35% down payment and 742 credit score? According to the underwriter it is because he is commission based and there is no way to guarantee he would have a check every month.

So, what was my friend’s mortgage broker’s solution? Let’s try to get the loan in your wife’s name only. Well, the loan went right through and the underwriter issued the loan in the wife’s name for the full amount without question. All she wanted was her pay stubs from the past year and a copy of her taxes. (You know the ones that the husband is also on, since they file jointly?)

So, the house closes and I wasn’t going to question a thing if the underwriter wasn’t. So, why do I think this is such a sad day for logic on this loan? They wouldn’t give the husband the loan because he didn’t have a steady paycheck, he was commissioned based real estate broker. But, his wife got a regular check… FROM HIM! Yep, he is the one that wrote her the check, she was an employee of his. So, who cares if he couldn’t pay for the home, because clearly she would still be getting a check every month if he was bankrupt.

Do you understand the logic on this one? If so, please explain it to me?

Todd Clark - Broker / Sales Coach
All Brokers Real Estate
Phone: (503)524-9494
Fax: (503)622-8739

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©2010 Todd Clark - Originally posted at Another sad day for logic… Another real estate broker turned down for a home loan


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  1. Aaron Vaughn | Builder | Investor 04/05/2010 08:51 AM
Lending / Financial
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Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Todd, I can't decide whether this is just too funny or too sad.  Maybe a little of both.  Thanks for the post.

Apr 06, 2010 12:30 AM #67
Bernadine Hunter, SFR, ACRE
Keller Williams Greater Columbus Realty - Pickerington, OH
"Finding Solution to Your Real Estate Needs"

This is pretty senseless, but nothing really surprises me anymore in finance land.

Apr 06, 2010 12:49 AM #68
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Todd, there is no logic in this. People in business for themselves have always had a hard time borrowing money. Lenders will usually look at the last three years tax returns to see if the income is consistent and give a loan based in the returns. However, with the real estate market the way it is lenders might have a hands off approach to any one associated with the real estate industry.

Apr 06, 2010 12:57 AM #69
J. Philip Faranda
J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY - Briarcliff Manor, NY

Ridiculous. At the highest level of revenue, all businesses are straight commission. As the saying goes, "wealthy people cash large checks, super wealthy people write them."

Apr 06, 2010 01:39 AM #70

I am gonna call BS on this post.  There is more going on than what is being written about.  Realtors really need to learn more about the financing side of the equation.  Yes, underwriting can be mindnumbingly stupid at times, but most banks are still underwriting and approving commission and bonus income if it meets guidelines.  NewsFlash:  Most people aren't anywhere near as qualified as they think.  Just because you or your client get denied a loan does not mean the bank is nuts.  Sometimes the person simply isn't qualified.

Comission income needs at least a two year history and is averaged over 24 months.  Most Realtors are 1099'd so they are considered self employed.  What probably happened is that business fell off in '09 for this agent and the reported commissions are preventing him from qualifying when averaged over the past two years OR he has written off so much in expenses to avoid taxes that the reported income is lower than it actually is.  Banks are not going to use what you think you may be making in 2010...

I have closed a couple of loans for Realtors recently and all sailed through underwriting with no problem because these agents didn't see any significant drop in income as reported on their tax returns and everything could be thoroughly documented.

Apr 06, 2010 02:13 AM #71
Damon Gettier
Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA
Broker/Owner ABRM, GRI, CDPE

This is the problem with lending common sense.

Apr 06, 2010 02:47 AM #72
Dana Ash-McGinty
Ash McGinty & Co. - Washington, DC
Principal Broker

All I can is....WOW! But, for some reason, I'm not totally shocked. I don't believe banks are willing to any chances on commissioned sales people.  

Apr 06, 2010 03:22 AM #73
Christopher Currins
CBC Home Inspections - Godfrey, IL
Metro East Home Inspector - IL.

Regarding mortgage brokers; The more things change, the more they stay the same.

Apr 06, 2010 03:22 AM #74
Stephanie Stringer
First Choice Loan Services NMLS#210764 - San Antonio, TX
Mortgage Loan Originator

Fannie Mae is the one that wants the 4506T executed. This is the tax transcripts where the underwriters can see all the write offs being done on the taxes.  Yes, write offs are great so we don't pay much in on taxes however, when applying for a loan now a days, it hurts if you need the inocme.

Apr 06, 2010 04:07 AM #75
Duane Murphy
Expert Real Estate Partners LLC - Appleton, WI
Broker- Owner-Real Estate -


I may need to use that underwriter!! YIKES!

Apr 06, 2010 04:34 AM #76
Esko Kiuru
Bethesda, MD


It's sad to notice that the mortgage industry has swung from one extreme, the easy one, to the other. While it takes some time for things to settle down, in the meantime we'll see underwriting like this one and prolong the upcoming recovery.

Apr 06, 2010 05:10 AM #77
Dale Terry
Yadkinville, NC

Sounds like some disagree with the post.  The underwriter should not have granted the loan to the wife if the husband couldn't qualify because the income came from the husband.  So something is not right in underwriting land.

Apr 06, 2010 05:17 AM #78
Yolanda Hoversten
Berkshire Hathaway HomeServices Elite Properties - O'Fallon, IL
Broker - O Fallon, IL Real Estate

I'm not an underwriter and don't play one on TV.  What happens behind the scene is probably different from what you know, Todd.  :)

Apr 06, 2010 06:33 AM #79
Rene Fabre
First American Title - Seattle, WA
Marketing in the Digital Age

I know a few underwriters... and I certainly wouldn't want their job right now. It's not just that the rules changed, but what are the rules? Underwriters by decree are supposed to be unbiased and adhere to the guidelines. Yet, now they are as much under pressure (if not more) than ever. Regardless, this one defies logic to the point of absurd. Wow, sounds like someone drew the line, sadly a victim of 'new math' ;0)

What saddens me is the fact that 'the system' now interprets everything to the negative. They want guarantees that can't, and never could be... Just because you have a steady paycheck doesn't mean you will next month or next year. We certainly live in interesting times.

Apr 06, 2010 01:54 PM #80

Wow, that does seem crazy.  I must agree with Linda that it does show women have come a long way - and it was best for everyone!

Apr 07, 2010 06:58 AM #81
Troy Erickson
Diverse Solutions Realty - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Todd - Now that's a funny story, and what makes it even funnier is that it is a true story.  It just goes to show you that there is not a lot of logic in how loans get approved by lenders and underwriters.  The system was flawed before, and obviously still is.

Apr 07, 2010 11:00 AM #82
Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

Thanks everyone for stopping by, I see some of you want more information, but I just don't have it. I was the listing agent on this one and I have to go with what I was told. But, to me this is just another reason that owner financing is such a good option for so many people, including the banks if they would start to allow it again.

Apr 07, 2010 12:02 PM #83
Heather Fitzgerald
REALTY WORLD-Harbert Company, Inc. - Greenwood, IN
REALTOR Greenwood Indiana Real Estate

Todd, that is absolutely ridiculous.  Not surprising, but ridiculous.  If it wasn't so sad, you could almost laugh at the ignorance in this logic.

Apr 07, 2010 01:23 PM #84
Dinah Stallworth-Lewis
Priority Real Estate LLC - 800.978.4847 - Natchitoches, LA


This doesn't surprise me, it has happened to me.  It is harder to get a loan when you are self employed.  Our  income they feel is not steady, like people working full time jobs getting a pay check.  I think  more laws need to be changed to help the self- employed obtain loans.  I'm glad this story had a happy ending. 

Apr 08, 2010 01:33 AM #85
Tamara Camden Vacation Rental Agent
All Rentals 2 Remember, inc. - Key West, FL

It doesn't seem there was any logic involved here, but no surprise, due to the mortgage housing crisis our country has experienced these last couple of years.  Todd, I'm glad the end result worked out for you on your loan, although not the way it should have.

Apr 08, 2010 03:44 AM #86
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