Even the Wealthy Getting Rejected for Loans
August 13, 2013
Having millions of dollars in assets and a high credit score doesn’t necessarily guarantee you approval for a home loan, particularly if your income is still too low. Even the wealthy are reportedly having trouble qualifying for mortgages in this tight lending environment, U.S. News reports.
"People with a lot of resources are usually OK getting first mortgages, but they are finding they can't refinance or get funding for a second home," says Tyler Vernon, a loan specialist for Biltmore Capital Advisors in Princeton, N.J. "Of course, it's a nice, high-level problem to have. But it's a real problem for retirees in places like the Northeast."
Sales associate Jerry Love of Peabody & Smith Realty in Holderness, N.H., told U.S. News that homes in the New Hampshire Lakes Region often sell for $5 million to $10 million.
“We don't see deals sail through with the automatic approvals that we used to see," Love says. "And we are seeing plenty of wealthy people turned down on million-dollar loans who would easily have qualified a few years back."
Stringent income requirements are at the center of most of the problem, according to real estate agents. "Assessors are protecting themselves because banks have been suing them over mortgage failures that showed inflated values," Vernon says. Assessors may struggle to find comparable sales to estimate what mansions are really worth, Love says.
Still, wealthy buyers often find a way to purchase the properties, even though they may be rejected on their first try to secure a loan.
"The lenders want income statements. They want to check with employers directly on people's work record, and they want to see people who have been in jobs for awhile," Love says. "That's not something our wealthy buyers can always show."
Source: “Tight Mortgage Rules Are Putting Even the Rich in a Pinch,” U.S. News (Aug. 12, 2013)
Updated: November 23, 2020