Sell the Cars – Buy a House!
OK this is my creative close we did last year. Client had lots of money but lots of debt. He wanted the house. Debt to Income Ratio was looking bad.
We are in contract and due to close in a couple of weeks when Loan Officer calls me. He tells me that the buyer had written off a lot of expenses on his auto usage that was not reimbursed by the company. Underwriters said the DTI did not work.
Now I am not sure of all the ins and outs of my clients relationship with his employer; but it seems quit tight and he has a lot of flexibility on his compensation and how he takes it. One issue that came up is at some point in the recent past my client had taken a job with another company; with the primary purpose of learning their market and strategies. Then went back to work for his original employer. One of the down sides of this is that the underwriters did not count all of the bonus money he was paid every year. (I think it had to do with the fact that some of it was structured as a recruiting bonus.)
Any way my client responds to this issue by saying and getting a letter from his employer stating that his duties had changed and he was no longer driving as much. This did not fly with the underwriters.
I kept bouncing ideas off the lender and then I hit one that he said might work. The Lender called the buyer and got him on board. The buyer talked to his employer:
Next step. They sold their cars. They had planned to pay them off when closing escrow to bring down the DTI. But they just went ahead and sold them. They sold his to his employer and he still got to use it. But this convinced the underwriters that he would no longer be taking the auto expenses he had claimed in the past.