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How a Trust Account Can Create Documented Monthly Income to Qualify for a Home Loan
A couple of months ago I got a call from a realtor that I worked with and her daughter had just recently become widowed. This is obviously an unplanned event and the daughter, Molly, had to make some changes in her life, drastic changes - uprooting her and her son moving to a new home, a new location - and needed to find a house.
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Well, she had gone to a couple of other lenders who turned her down because she had no income. She hadn't been working, she hadn't needed to in her certain circumstance and we needed to figure out a way to help her buy a house.
Now most of the time, people would look at her assets and say, "Hey, Molly can buy this house 100% cash and not have to worry about anything." But she doesn't want to do that. She doesn't want to put all her eggs in one basket that way; and you would think that any bank, knowing that you can buy the house cash, would give you a loan on that.
But unfortunately that's not the way it works. In lending, we have so many guidelines, so many regulations that have to be followed in order to give a loan out. One of those is the ability to repay that loan and not ever having to work regardless of the amount of assets that you have in the bank account, you still can't get a loan because you don't have an income to repay it.
So she had gone to a couple other lenders like I said, and they had tried to annualize her assets in order to create an income - that's a thing that we do in the mortgage business. But unfortunately, there weren't enough assets to create a large enough income to afford the house that she needed.
What we ended up doing when she came to me was through our conversations, I found out that she had a trust account and this was a trust that was established prior to her husband passing away. But it had been sitting there dormant. We ended up taking her assets, a chunk of her brokerage account, and putting that into the trust account and creating a monthly distribution which gave her enough income to afford the house that she wanted to buy.
And by creating this income out of everything that was already there but putting it into the trust, this allowed her to move forward, find and buy and move into the house that she was looking for, and be close to her mom and her son had a grandma to be close to as well.
They were able to move forward because we thought outside of the box; because we took that extra step, listened deeply to Molly in her situation, and the pros and cons of her situation; and we got her there. We got her into her new house by creating something out of nothing.
So if this scenario sounds familiar or you or someone you know has a very asset heavy portfolio but no income, give me a call. Let's talk about your situation and figure out a solution.
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