Validated Monthly Recurring Income: Do You Have Enough?

In this age of computer-driven underwriting, even the countries wealthiest are sometimes getting rejection letters for financing or refinancing real estate. Most notably, recently former Federal Reserve Chairman Ben S. Bernanke’s refinance rejection. Likely caused by his recent disruption in steady regular employment income due to retirement. Since his Fed retirement he has made over $250,000 and has lucrative ventures on the horizon, Brookings Institution fellow and a book contract.

Borrowers beware. Lenders are scrutinizing “validated income” with a new vigor. Especially important to the retired individuals and the self-employed, borrowers with good sums of liquid assets, high credit scores can be turned away for insufficient regular cash flow to meet debt to income ratios.

Lenders are looking for consistent, often at least monthly, draw downs of retirement accounts that they can project to continue for at least three years. This continued, consistent and regular draw down should occur ideally before a loan application.

If you are in a similar situation, please contact me and we can sit down and look at what your projected debt to loan ratio may be and plan ahead as to how to prepare your finances for an upcoming financing event. We will also work with skilled lenders of your choice to explore your options. This could be an upcoming situation for a parent, sibling, etc. with social security income, rental income, occasional retirement draw downs, etc. So please share this information with all that you know and love that may be affected.

If you have a similar story or situation and want to share, please post a comment.

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