Diary of a First-Time Buyer

What does it take to get a mortgage in this town?

By Elle Bee  | December 31, 2012 - 1:22PM

Having been rejected by my credit union for a mortgage, I turned with some trepidation to the Internet to look for a mortgage broker.

I had received numerous unsolicited mortgage offers via e-mail over the years, but arriving along with offers for weight loss supplements, discounted luxury watches and sex life enhancements, the whole industry seemed a little seedy to me. 

I hated the idea of putting a virtual finger down in a Google search and picking an unknown entity. But I was desperate.  I typed in “mortgage broker,” which yielded a list of generic-sounding brokerages; none resonated with me. I scrolled down and recognized a few names: Bank of America (was that one of the bailout banks?), Chase, Wells Fargo.

I remembered a song I learned in fifth grade from “The Music Man” about the Wells Fargo wagon. OK, that sounded good to me. I dialed the toll-free number.

A loan officer named Chad filled me in on the basic protocol. As long as I could satisfy the debt-to-income ratio and had a good credit score, likely I would qualify. I gave him permission to run a credit check over the phone.

When he drew a whistle (my scores ranged from 797 to 816), I exhaled a sigh of relief. We were in business! Chad listed the documents I needed to provide and promised to send the application form within the next few days. 

Because of my freelancer status, I didn't feel like I could shop around for the best interest rate: I was sort of desperate to get what I could. Chad started out with a 4.25% rate (which would eventually be renegotiated to 3.75%, as we sat there in contract and the going rates came down even further). 

Still angry with my credit union for declining me, my next order of business was closing my two checking and savings accounts. I opened the same set of accounts at my local Chase branch, and wrote checks that would withdraw most of my funds from the credit union.

Serge, the banker assisting me, raised an eyebrow at my deposit checks—nearly $100,000—and asked if I usually kept this much money in non-investment vehicles.

“No,” I admitted. “Normally I’d have about $26,000 more, but I just wrote an earnest money check for an apartment I’m buying.” 

Serge asked who was underwriting my mortgage and when I told him I was in discussion with Wells Fargo, he offered to match the terms—interest rate, closing costs, plus extend additional benefits available through relationship banking since I was already such a good customer.  Within five minutes of me saying, “why not?” I was introduced to Zoran, the loan officer now assigned to me. 

Zoran gave me an already familiar list of required documents: two years of tax returns, paycheck stubs (or in my case, W9s), all bank and other financial statements, my certificate of incorporation, all copies of employment contracts, a copy of my purchase contract, the engineering report on the apartment, a copy of the earnest money check and a coop questionnaire, which confirmed the status of the building, its ownership and financials.

When the application arrived from Wells Fargo a few days later, I called Chad and told him I was putting the application on hold. I proceeded with Chase, and three days later delivered a portfolio of neatly labeled document folders to Zoran.

He blanched at the large folder and stammered,  “That looks pretty intimidating.”

I, in turn, looked at him puzzled. “Well, this is what you asked for, and it’s perfectly organized.”

That should have been my clue. For the next three weeks my interactions with Zoran would be filled with missed messages, mislaid paperwork and misunderstood instructions. He didn’t understand how freelancers such as myself worked.

No matter how many Excel worksheets I created showing him my P&Ls or cash flow, he couldn’t get a handle on my income status. 

In the end, I was denied a loan because I had incorporated my business in December of 2010, and Zoran said the underwriters would credit me for only one month in 2010 of self-employment in addition to my full year of incorporation in 2011. Because I needed to demonstrate two full years of income, they considered me unqualified for 2010.

“But, I have freelanced consistently since 2006,” I told him. “The fact that I incorporated at the end of 2010 does not mean I didn’t exist and earn a living before that.”

My argument fell on deaf ears. 

A few days later I received a boilerplate denial letter from Chase, which listed the following:

Reason for denial: 

  • Length of employment
  • Too many recent credits inquiries/too much credit recently extended

Too many credit inquiries? Were they not aware that applying for a mortgage was nothing but one credit inquiry after another?

I hadn’t had the last word yet. I called Chase and asked for an explanation. I was told the credit issue involved the two credit cards—business and personal—I recently acquired. From Chase. The irony was lost on the loan officer. 

Three days later I delivered a full set of documents to Wells Fargo. The preliminary documents were approved by underwriting within three weeks, the good news delivered by Mary, a pleasant loan coordinator from the Midwest, who would prove to be my guardian angel.  Finally, I was in the home stretch. 

Or so I thought. 

Next: Meet the board 

Elle Bee is a lifelong renter currently in the process of buying a Brooklyn apartment, recounted in her bi-weekly column, Diary of a First-Time Buyer.

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A single guy reveals why he took the co-op plunge -- and how he basically lives for free

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To pass your co-op board interview, read this first

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