<SPAN>Hey all,

Looking for some quick advice or color that anyone can share on accounting for poker income in the mortgage approval process.

We just committed to buy a new home and are beginning the mortgage process and I'm getting bombarded with questions about my "other income" and how it was earned. Now I'm really starting to get nervous on how they will view this and if it will effect my mortgage approval. Looking at my budget and from using all of the online calculators, it appears that our combined income (ex-poker) is enough (barely) to qualify for this mortgage but I feel comfortable because of poker-related income, savings, and other assets.

I'm just concerned that once this "other income" is disclosed as poker (or gambling, as they tend to call it) related, they will take a negative stance on it and not include it in the process, or even worse, view it as a risk and potential future liability.

Has anyone gone through this process recently and encountered any problems when they tried to reconcile bank statements, tax returns, etc?? Any feedback would be helpful because I don't want this to be any more stressful than it needs to be. </SPAN>

Thanks!

All of my poker income has been reported and will be evident once they look at the tax returns. I would be fine with using a "poker income" figure that is 1/2 of what I've reported over the last two years for mortgage purposes. The use of "consistent and reliable" is what worries me since I have been playing poker seriously and generating income for only 2 years, 2005 and 2006. The income is evident in those two years, but it will be interesting to see if they actually view it as a reliable income source. I know I do!

OR am I just getting to worked up over this and will be fine as long as there is no borrowed money or proceeds from my Columbian drug ring?? Anyone else??

That was exactly what I did. I went stated income and just told them how much I roughly make per year, a lot less hassle and I had to pay about an extra 1/2 point, not to mention I have excellent credit but that didn't matter to the lenders.

If you make regular deposits into your bank account, income can be verified by averaging out your deposits over 6 - 12 months. Generally, pricing off 12 months bank statements is about the same as going full doc.

If you're not depositing your money into the bank on a regular basis you can go stated. Stated income with verified employment (no verified income) is anywhere from 50 to 75 bps higher than full doc. Having 3+ months worth of mortgage payments saved somewhere (401(k), IRA, savings, checking, etc) will help with the pricing.

Honestly, income is not that big of a deal in getting you qualified. Your credit score is going to be more important.

Sounds like you're already working with someone but if you need a no bullshit deal pushed through I can get it done depending on what state you're in. PM me if you want.

<SPAN>Hawk -

The comments that have been posted so far are very useful. I am a mortgage banker and deal with similar loan applications all the time. It sounds like you have followed the right steps in declaring your gambling income on your taxes for '05 and '06. If you can qualify for a "full-doc" loan, using your W-2 income as well as your gambling income from your taxes, you will most likely get the best rates available.

The stated income loans were originally created for borrowers with strong credit that had income that was hard to document. Over time, they became "liar loans" that allowed people to inflate their income in order to obtain loan amounts that they would not qualify for with a traditional loan. The other posters are correct that the gov't, and most lenders, are starting to take a longer look at these stated income loans for possible fraud.

The three most important features of a mortgage application are credit, down payment, and income, in that order of importance. Assuming that you have good credit and at least 10% down, you should qualify for the best mortgage rates, regardless of the income documentation process that you opt for.

Talk to your lender about what loan programs they are looking at and also what lenders they are shopping your loan to. (Most mortgage lenders actually broker the loan to a larger company that will service the mortgage for the life of the loan - Wells Fargo, Countrywide, etc.). Each of the larger mortgage servicers have specific approval requirements that will determine your interest rate, fees, and loan amount.

Since I started my job in 2002, I have been amazed at how little information about the mortgage lending process has been made available to the general public. Considering that it is probably the largest financial transaction that one will ever undertake, the amount of information available to the borrower is severely limited. This has resulted in many unscrupulous lenders charging their borrowers erroneous fees and offering less-than-optimal rates so that they could make a few extra bucks.

PocketFives has been a very useful tool to me over the past year and I will gladly share my mortgage lending insight with all of you as a payback for the wealth of poker knowledge that you provide to the P5s community.

Good luck -
Shorty</SPAN><SPAN></SPAN>

Thanks everyone for the posts. Very, very helpful. The timing isn't ideal since I could wait a few months and be in a position to get myself a phat house with a jacuzzi, slushie machine, collector's edition Scarface dvd, my own Mr. Belvidere and all that good stuff you see on MTV cribs (yes---subtle brag post!). I just happened to find an ideal house / property at a great price! I've worked on a budget for weeks to make sure I can afford it (ex-poker and future winnings) but I guess my problem is like Shorty said above, I'm simply uninformed about the process and just need peace of mind that the approval process will be clean.

Well,

I've been in mortgage banking and real estate for going on 20 years now. I've seen a great many changes. Since I'm based in the largest and most flamboyant real estate market in the U.S. here in Los Angeles as well as doing business in most other states I've seen some things that bring new meaning to the term "creative financing". It isn't all good!

Originally with "Stated" income loans you needed 25% or more as a down payment. Things have changed greatly.

I'll disagree with one thing that Shorty said.

There is and has been tons of information on the lending practice available to the general public. So much so in the past 5 years especially that there is not much of a secret in how the business works. The disclosures of all fees is necessary upfront in order to be in accordance with the law. No states are exempt although some broker/bankers try to get away with murder.

A company called Ameriquest has been one of the biggest offenders

** There are some simple rules to follow and things to be aware of.

#1 be aware of your credit scores and "NEVER" run your credit online with and service. Remember that nothing is entirely free. Free credit report dot com is a joke.
You should have established credit for at least 2 years and hopefully longer. Things that will count on your credit are:
Car Loans
All revolving credit cards
Collection Accounts __NOT GOOD
Court Judgements and Leins NOT GOOD
Tax Leins NOT GOOD

** allowing your credit to be run for new credit cards, car dealers, multiple banks creates inquiry's that can negatively effect your credit score.

** balances on your credit cards can negatively effect your credit score if they are 50% or more of your high limit with that card. In some cases even less.
** Scores over 700 are best and now some of the magic numbers have been moved up to 730 and above for best case pricing on some loan programs. Scores that are lower are certainly doable. 850 is the max score.

#2 be aware of all costs in purchasing a property. How much will you pay in taxes, up keep , etc . in addition to the mortgage.

#3 in shoping for a loan. it should not be complicated. It is a simple straight forward process. Avoid lenders that won't disclose their fees.

#4 Don't be confused with APR (annual percentage rate disclosures) there is a bottom line to everything and what you get for what you pay for is it. There are a wide variety of loans and you want to deal in specifics. 30 year fixed, 10 year interest only, 5 year interest only , etc.

are you paying points and fees or not?
Rates will be and should be a bit higher for No Cost loans.
No Points loans means you pay all other lender and closing fees.
Paying a point should buy down the rate enough to make it worth your while.
You should look at it on paper and take your time in deciding well in advance of purchasing a property.

** is there a PREPAYMENT penalty? if so for how long. 1 Year, 3 years, 5 years?
Best advice I can give is to not have a prepayment penalty for over 1 year unless you are in a special circumstance. 1 year is usually fine. Also, what are the terms of that prepayment penalty?

There is plenty more but the main thing is to ask your lender questions and be straight forward with them and don't accept any B.S. from them.

Shorty, very well written post, glad to have you here!

Knish -

Thanks for the reply. I agree with you and I stand corrected. I should not have said that the information is not available, but instead should have said that the general public does not seem to be very well informed on the lending process (of course, I am generalizing here). I have assumed that this lack of knowledge is caused by two factors:

1) Most people only apply for a mortgage 4-8 times in their life so they don't keep up on the process until they suddenly find that they need a loan. (The recent refinance boom has skewed this number a but, as I see many clients that seem to want to refinance every six months.)
2) Mortgages are boring and don't make for interesting reading for most people. It is not the type of thing that is often highlighted on the cover of Us Weekly magazine.

Regardless, hopefully threads like this can at least help P5ers to get the best deal possible on a loan.

Thanks for the great advice that you posted. Good luck with your work in LA. I'll be up here in Montana grinding away in the mortgage business' equivalent of the $0.01/$0.02 NL game.

Shorty