No Documentation = No Mortgage

By
Real Estate Broker/Owner with Crescent City Living LLC Licensed LA RE Commission

There was some interesting information in CityBusiness last week about how fishermen, shrimpers and others in the industry are being financially impacted by the oil spill in the Gulf of Mexico. Everyone is trying to determine how those who have effectively been put out of business or had their business adversely impacted should be paid.

However, according to the article, “sloppy and sometimes fraudulent histories of tax reporting among members of the fishing industry could deny many what they consider fair compensation”. Cash income that was never claimed, poor bookkeeping that doesn’t provide the necessary information…these things may come back to haunt some of the people making claims against BP.

These same practices can have an impact on individuals who are applying for a mortgage to purchase their New Orleans area home.

 

Qualifying for a mortgage in New Orleans

We are a city full of people who have the opportunity to make a good deal of money “on the side”. Just the fine dining restaurants alone support a large number of people (bartenders, wait staff, etc) and some of them are doing quite well financially even though they are skirting the law about reporting tips as income. The problem comes when they decide it’s time to make a large purchase such as a house.

No documentation = No mortgage

Gone are the days of stated income loans, where an applicant just told the lender how much they make and the loan was approved. In today’s world, documentation is the rule. W2s, bank statements and tax returns are required to prove income and it doesn’t matter what you say you make, it’s what your reported income is that determines your ability to qualify for a mortgage.

Here’s my 2 cents of advice: report all of your income. Yes, it means that you will likely pay more in taxes. But, besides being the law, it can make the difference between owning a home of your own or paying rent for years on end.

 

Originally published at West Bank Living

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Topic:
Lending / Financial
Location:
Louisiana Orleans Parish New Orleans
Groups:
1st Time Buyers
Louisiana Real Estate
Louisiana Lagniappe
Advice for Buyers
Tags:
home buying tips
west bank living
getting a home mortgage

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Rainmaker
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Patrick White
Home Driven Realty, Inc - Baldwin, NY
Driven to bring New Yorkers home

Hi Lisa,

 

Thanks for another great post. Great advice in regard to change to reporting income. Would this be regarded as a paradigm shift in how a substantial part of the market make home purchases ?

Jun 02, 2010 02:04 AM #1
Rainmaker
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Leslie Ebersole
Swanepoel T3 Group - Saint Charles, IL
I help brokers build businesses they love.

First, I feel bad for the folks in your area who are losing income and enduring other hardship. It does seem like one blow after another for New Orleans. Your post is a great reminder to everyone about record keeping -- it's after your purse was stolen or the flooded basement or the kitchen fire that you wish you had kept better records.

Jun 02, 2010 02:57 AM #2
Rainmaker
413,093
Lisa Heindel
Crescent City Living LLC - New Orleans, LA
New Orleans Real Estate Broker

Patrick, I'm not sure I understand your question. 

Leslie, record keeping is boring and most people don't want to do it or put it off.  The real problem comes up when attempting to purchase a home and they haven't claimed all of their income.  I've seen too many people who were making money under the table regret that decision later on.

Jun 02, 2010 03:06 AM #3
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Frank Rubi
Frank Rubi Real Estate, LLC - Metairie, LA
FrankRubiRealEstate.com

This is so true. I understand the thinking behind not wanting to show income but they need to. This is a time when the only proof you have is what you report.

Jun 02, 2010 05:51 AM #4
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Marilyn Boudreaux
Marilyn Boudreaux, Century 21 Bono Realty - Lake Charles, LA
Lake Charles LA Century 21 Realtor

Lisa thanks for posting this.  I just recently had a deal where the buyer was obtaining a rural development loan, because he did not turn in his retirement income it came out in the underwriting documents and he no longer qualified for the rural development loan.  It jeopordized the entire transaction.  Good loan officers will do their homework and catch that upfront before the loan is submitted to underwriting. Needless to say my buyer was so upset that he went to another lending source since the first loan officer dropped the ball. Several loan officers I work with have a checklist they go down asking the buyer for ALL sources of income during the pre qualification process.

Jun 02, 2010 11:24 AM #5
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Rainmaker
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Lisa Heindel

New Orleans Real Estate Broker
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