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The other day someone called me. They said they were referred by a friend. They had found a home they wanted but when they went to the bank they were denied. They were denied due to lack of income. The reason they did not show enough income was that one of buyers was self employed. Supposedly he did quite well. However he had not filed any tax returns in the last couple of years.

Now I look their information over and review the credit and I also tell them that they do not qualify. However I make two suggestions. I ask if they have someone who can co-sign. FHA allows for non-occupant co-signors with no adjustment to rate. The other suggestion I make is to have the one party go back file his tax returns. They will have to pay the taxes but then they could use the income.

Now here is the kicker. They tell me yes their grandfather will co-sign. Then they ask. Well if we are going to use a co-signor shouldn't we go back to the bank? I ask why? They assume they will get a better deal at the bank.

I asked them if the bank made any of these suggestions. They said “no, they just denied us.”

Usually the person at the bank is not a mortgage specialist they handle a number of jobs. Also usually the mortgage broker can beat the bank as far as rates go, especially on FHA. Why because we are buying the money wholesale. We also have more investors to choose from. I knew the bank they went to. It was a no brainer that we would be a better deal. However the client’s perception was that if you do not need special financing you should always go to a bank.