I Can’t Believe My Client Has $1 Million In The Bank And Can’t Get A Loan!

I. We’re not AI… (Weekend coverage)

Our Team Manager, Madeline Malinovsky, was covering for JVM over the weekend, and apparently, she’s way too smooth on the phone, as she was accused of being AI by several borrowers.

This is a reminder of two things: (1) we are open every weekend to help agents and borrowers alike;  and (2) we’re actual humans, and not AI.

It’s amusing that we’re all already so used to getting AI phone responses, that we now sometimes suspect real humans are AI.

It’s also amusing that my Korean wife, who also covers weekends, never gets accused of being AI – so maybe a slight Korean accent is the key. 😊

II. I write these blogs and love feedback! (Please share them too)

I often get asked if I write these blogs myself, and I promise I do (there would be fewer bad-Dad-jokes and fewer errors if I did not).

A few quick things:

1. Feedback: I love direct feedback. Whether you agree or disagree, please just feel free to email me.
2. Sharing Blogs: We also love it when readers share my blogs – with an attribution link – so please feel free.

III. “My client has $1 million in the bank; I can’t believe he can’t get a loan!

We hear variants of that comment from agents all the time, and our response is always similar: “$1 million dollars usually ensures that a buyer will qualify for a loan, but it does not ensure that a buyer will qualify for any loan.”

We in fact get borrowers all the time who have substantial liquid assets but who cannot qualify for the lowest rate mortgage.

Here are a few of the reasons they don’t qualify:

1. No Job. We had a recently laid-off engineer from Silicon Valley apply for a cash-out loan. Despite having over $1 million in equity and over $2 million in liquid assets, he did not qualify for a competitive loan because he did not have a job.
2. Insufficient Income. Even if borrowers have a job and substantial assets, they often lack sufficient income to qualify.
3. This Ain’t The 1940s. The Bailey Brothers Building and Loan (from the movie “It’s A Wonderful Life”) might give somebody a great mortgage loan based on character and a lot of assets, but those days of “handshake,” “make sense,” “relationship,” and “good character” lending are long gone. Most mortgages are sliced, diced, securitized, and sold to investors nowadays. Loans simply have to meet all of the guidelines demanded by investors who buy loans. Lenders can’t simply add “explanations” to a file as to why a borrower with a lot of assets should qualify. Borrowers either check all of the boxes, or they don’t.
4. Asset Depletion Does Not Work. Asset depletion loans are a wonderful way for borrowers with substantial assets to qualify for excellent mortgages, as those loans allow lenders to amortize assets over a specific period to come up with an “income figure.” But, those loans require more assets than many people understand, and they only allow lenders to use the assets remaining, after the down payment and closing costs (leaving too few assets in many cases).
5. Insufficient Credit. Identity theft, a recent business BK (something we just saw), too much consumer debt, student loan delinquencies, too few credit accounts, etc. There are many reasons why someone with ample assets might also have inadequate credit.
6. $1 Million Today = $335,000 in 1985. My final reminder is that $1 million ain’t what it used to be (only $335,000 in 1985 dollars).

So, once again, we can almost always get a loan for a borrower with $1 million in the bank, just not always the best loan – unless they meet all of the other requirements (job, income, credit, etc.).