I don't know whether to laugh or cry. I am currently trying to build an expensive new home in the Houston,Tx area. I got a call from the loan officer today explaining that my income is not steady enough since it consists largely of capital gains income so it can't be taken into account for the loan.

Ha, ha. I am retired and have my savings largely in IRAs but we saved enough money to live on for a couple years in taxable accounts. However since I took a lump sum retirement I don't have a monthly income from ExxonMobil like the guys who took a monthly annuity from them. In order to minimize my income taxes I've been collecting dividends in my IRAs and selling off low basis ExxonMobil stock in my taxable account bought many years ago for capital gains to generate living expenses. What is wrong you might ask? Apparently my financial strategy is too complicated for Fannie and Freddie to understand.

The current underwriting standards for home loans are written by goofballs at Fannie and Freddie.

If I were still working and older than 59 1/2 I could take my net worth/360 as a monthly income for the loan and qualify. But no!!! I am retired so it has to be dividends in a taxable account and can't include any income from IRAs although I can withdraw from the IRAs using 72T rules without a penalty. Ha, ha if I were 59 1/2 I could count the income from IRAs.

Current interest rates for 30 year loans are 3.25% and 15 year loans 2.75%. You know perhaps the interest rates are so low since the underwriting standards are so tight that people with enough money to pay back the loan can't get one due to arbitrary rules. No wonder the economy is so slow.

Here is what I got from the finance company today about what income qualifies to get a loan from which I find very entertaining due to it's arbitraryness:

Retirement, Government Annuity, and Pension Income
For 401(k) or IRA, SEP, Keogh retirement accounts the borrower must have unrestricted access without penalty to the accounts; and if the assets are in the form of stocks, bonds, or mutual funds, 70% of the value must be used to determine the number of distributions remaining to account for the volatile nature of these assets.

The red is not the case for me since I am 58 and you must be 59 1/2 for this to be true. I can however withdraw without penalty enough income to qualify for the loan but not an unlimited amount.


Employment-Related Assets as Qualifying Income
The above also applies

Net monthly income to qualify is net worth/360 (reduce any stock holdings by 30%)

Even more arbitrary that my wife has an 403b account which is like a 401k except for government employees. She has unlimited access to the money without penalty no matter what her age is. Nice that government employees don't have to pay a penalty to get money from their 403b but private employees do have to pay a penalty to get money from their 401ks(this is for distributions before age 59 1/2).

Also rather nice is the 59 1/2 age requirement for no penalty withdrawl when just about everyone I worked with is retiring at 55. But of course there is a loophole to get out of the penalty if you jump thru a few hoops.

OH, just something to keep me from getting any sleep tonight as I am posting this at 2am.

So I will submit to the finance company that I can get income from my IRA without penalty and see what they say(and not point out I don't have unlimited access without penalty.) Or perhaps I'll borrow against my stock in the taxable accounts or some combination of first mortgage and stock borrowing. We shall see!

Jeez,

If you could get a green card you might qualify.

I hope this works out for you. Luckily I am living where I will stay till I leave this planet. My finances are so close to meeting my retirement planning. Maybe later this year or the first of next year.

Good luck,

I went through the process of getting a mortgage for a "second" home in Tucson just under 2 years ago. I split my free time between Alaska and Arizona and work in Alaska. So Arizona is not my state of residence. The newer Arizona house was an upgrade from a house across town purchased about 8 years ago.

The loan process was pretty frustrating and the questions I had to answer were inane and in many cases had nothing to do with demonstrating my ability to pay back the loan. After about the fifth request for a signed statement about my intentions in Arizona, or the nature of my retirement investment accounts, or requests for multi-year P&L statements from a sideline hobby business, I told the loan broker I was strongly considering quitting the loan process and paying cash by taking out a loan on my 401k. Shazzam - no more hassles and final loan approval the next day. Maybe a coincidence, but it might work for you. Loan brokers work for commission: no loan = no commission. The loan broker I was working with was pretty clueless on the difference between retirement investment accounts and taxable investments (among other things), which I found pretty surprising. I'm not bashing Loan brokers, as I became aware that there are a whole slew of new and in many cases nonsensical requirements coming from the .gov .

What did you do for ExxonMobil ? I work for BP in Prudhoe Bay as a production/board operator on a partnership asset (with ExxonMobil and ConocoPhillips) and see Exxon guys occasionally come through to check up on operations.

loan salesman email:

"I just checked again to see if we had an answer on your IRA income structuring and we are now actually waiting for Fannie Mae to get back with us. Because this is such a unique way to try and “create” an income stream for your loan approval we have to make sure Fannie Mae will insure this loan after it closes.

My underwriter sent the request to Fannie Mae on Monday and is just waiting for a response."

My fate in the hands of a government bureaucrat.

Good news, loan approved!

So, your government bureaucrats are not so bad...

Always a fun process...congrats for getting through it!

Latest status on my home is that it is not yet started but I've picked the outside choices and am working on the inside ones.

Out of my $40,000 extra allowance, $28k has disappeared but the biggest chunk is for the pier type foundation. In the Houston area the soil is 100% clay. Best for a foundation is to drill holes 8 or 10 feet deep and bell shaped at the bottom. Then the cable tension foundation is put on top of the piers.

Our foundation will have 73 holes one foot in diameter and 10 feet deep which is taking up $18k of the $28k.

Last week I had yet another meeting on the outside selections. I've asked for several changes a couple times and they haven't shown up yet on the drawings. I'll keep trying!

Monday I go to finalize the inside selections. The design center describes the options, granite, carpet, wood floors, etc but then sends out to the purchasing agents to tell me the $$$.

So, do we have a house update? Love to see what it's going to look like, very exciting. And what an ordeal for the foundation, my gosh. Will you have a basement in the new house? How frequently do you deal with tornadoes? When we moved from California to Indiana, I will never forget the comment our realtor had to say about the house we ended up buying (remember now, I am born and raised in California). We were looking out the wall of windows in the family room that faced west. He commented, "You have a really great view to the west, that's great, that's very important." I'm thinking, "What's important about having a good view to the west?? Sunset, what??!!" So, I asked him. He looked at me and said, "Because, you have an unobstructed view of any tornadoes that might come your way." Ah, yea. Was real excited at that point about moving to Indiana.

With your money--sounds like you should just pay cash for it , save some $ that way. Thats what I will do next time