Note: Part 1 of this subject’s exploration appeared on August 20, 2023 on our blog page, as well as Facebook and LinkedIn.
This week’s submission may make more sense if you open last week’s in another tab or window.
When I left off, I had worked myself into a fine lather over the injustice of being treated like a child by the financial industry over my all-too-obvious demonstration of my and my wife’s joint ability to pay our debts like good citizens.
If you have ever felt this way, too, you are our brothers and sisters.
So…first of all, thank you so kindly for indulging me in my God-given keyboard warrior First Amendment right to spout off at the mouth freely in print.
And if you read all the way to the end, thank you, a thousand times thank you!
Next…
Is there something we can do about it?
The answer is yes, there most definitely is something you can do about it.
Proactively, before it bites you on the hiney and frustrates you to the point that your loved ones find themselves questioning your sanity.
They don’t teach this stuff in high school.
(Disclaimer: unless you go to a really good high school with advanced business preparatory curricula, which I suppose is always possible.)
The Owings LLC Guide to Proactive Financing Preparation
Here’s a comprehensive list of tips, learned mostly from bitter experience, to help you be well-prepared for their demands:
Pre-Application Documentation
Gather personal identification (e.g., driver’s license, passport). Take this seriously, they may actually push for multiple forms to be extra anal-retentive.
Collect recent pay stubs if you draw a salary. Usually the last 2-3 months.
Secure 2 years of tax returns and W-2s or 1099s. If you file an annual business return before your 1040, such as a Partnership 1065 or S Corporation 1120-S, you’ll want those, too.
Acquire 6 months of bank statements for all accounts. If you are taxed as an S Corporation you may find yourself having to qualify via bank statements rather than income verification, so this is common.
Provide a detailed list of all debts (e.g., credit cards, loans). Below is an example of a Schedule of Debts, which we provide for our year-round clients. If you have this to whip out when asked it will de-stress you and your spouse considerably.
Proof of Assets
Document all accounts, including checking, savings, stocks, and retirement funds.
If receiving a gift to help with the down payment, secure a gift letter. Yes, it’s not very nice to ask someone that’s already been benevolent to you to do one more thing for you, but you’ll be told this is necessary because it provides evidence of cash not obtained by normal employment or investment means.
Credit Score & History
Regularly review your credit report for inaccuracies.
Know your credit score. Many credit cards provide a score update as an additional benefit, and I know Experian will provide your score online when you sign up for a log-in to their site.
Pay down high credit card balances. This is so no-brainer it will get it’s own future blog subject. ALWAYS pay down your highest-interest debt first, even if you’re not obtaining financing!
Avoid opening new credit accounts shortly before applying.
Resolve any outstanding disputes on your report. You can online search the steps for doing this with any of the three major bureaus, Experian, Equfax, and Trans Union.
Employment (or Income) Verification
Secure recent employment verification letters, or at a minimum your most recent paystub. You should collect these up for the entire calendar year when beginning this process, anyway.
If self-employed, prepare financial statements, profit/loss statements, and business bank statements. Also, be prepared for the request for your personal bank statements, particularly for the account you deposit your income into. This is real, I had to do this one myself.
Down Payment
Clearly document the source of your down payment. Ensure funds are easily accessible when needed.
You’ll also want to be prepared for earnest money requests, which are pretty much standard.
Consider a Pre-Approval
Getting pre-approved can give you an idea of what you qualify for and may speed up the final approval process.
If your loan facilitator doesn’t know what this means, get a new loan facilitator.
Stay in Communication
Respond to lender or underwriter requests promptly. Keep open lines of communication with your loan officer or broker.
You will find this to be a much more confident process if you are fully prepared with the previous tips.
Stay Calm (as Possible) & Be Patient
Do you remember Lucien Wilbank’s response to Jake Brigance near the climax of the movie, “A Time to Kill?” “Don’t be ME…be better than me!”I suffer from an unofficial affliction I personally refer to as “Low Bullshit Tolerance,” or LBT. The struggle is real, and I know I’m feeling my people out there.
Hang in there. The financing process can be long and demanding. Understand that delays can happen, and remember that being prepared can help mitigate many challenges.
The knucklehead that calls you with a snotty and personal demand again and again “for the underwriters” is quite often an entry level employee, and venting on them gains you nothing.
Every chance you can, let them know you appreciate what they’re doing, and give them their “mad props” when something goes really well. It will help, I promise!
Avoid Major Purchases
Refrain from buying big-ticket items on credit during the application process. This happens enough that Realtors joke about it, in a dark way, in their Facebook groups. Yes, I see you!
Avoid making sudden large deposits to your bank accounts without a clear paper trail.
Organize your Documentation
Keep all your documents in one place as much as possible. Have one master folder for the inevitable paper you will receive, and create a master folder with clearly-labeled sub-folders on your computer’s hard drive or external drive for everything digital.
Create a checklist of required documents in that master digital folder, and make sure you make a column that tells you the location of each item for quick reference.
Understand the Process
Familiarize yourself with standard loan terminology and requirements. Consider consulting with a financial advisor or your accounting advisor beforehand.
Let me address this last point again, with a BULLHORN (if wishing made it so)!
If you already have accounting and tax representation for your business, as our well-beloved roster of clients do, you have a resource at your disposal that you really need to stop and consider seriously.
We at Owings LLC believe strongly that the whole purpose of maximizing cash flow and business wealth, and minimizing taxes is the obvious funnel effect this has on your personal life as well.
This is why we do the individual 1040 tax returns for every single one of our clients.
Because your business should be about doing good enough business to have a life!
In other words, if you’re in the stages of sitting down and talking to your significant honey about upgrading your home ownership situation, your next thought should be getting ahold of your friendly neighborhood accounting consultant.
There really is no reason not to. Right? Right??!?
There’s a point here. If you’re one of a handful of my clients I’m reminded of as I write this, I see you!
I love you and want you to be happy. Let me help. Please?
Now, if you’ve come this far, and you don’t work with us yet.
And you’d like to have this kind of relationship with your accountant. Guess what?
Reach out now through the social media you may be reading this on, or just click here and book a Work With Me conversation now.
If you have any questions about anything profit, cash flow, or tax-related, and especially if your business is scaling to new heights.
We empower property investors with an accounting-on-steroids approach.
We also empower business owners with the tools to lead their best lives outside of work. Including ensuring that your home ownership dreams become reality.
If it’s not clear by now, I LOVE going to battle with the underwriters of the world, and believe me…
In the end, we always prevail.
We are only accepting two new Advisory Services clients in September, so…
Let’s talk. Soon!