As a result of my poker success, I was able to qualify for a mortgage and purchase the house I currently live in, but not without some difficulty. Of all the prime lenders available in Canada, I was only able to find one (a small local community credit union) that would give me a mortgage, and only after extensive consideration. The bottom line is that banks do not like lending to poker players. After all, who wants to loan large amounts of money to a professional “gambler”? These large financial institutions simply do not have the ability to understand how a poker player can possibly sustain a mortgage. Indeed, very few poker players are able to succeed over time, and in poker you essentially “get fired” when your bankroll is wiped out. In addition to that, from the bank’s perspective, not only are you likely to stop winning money, but there seems to be a strong chance that you could actually lose what money you have (even though we know that that is actually impossible with proper bankroll management!). Unfortunately, because of this “high risk,” banks are reluctant to deal with poker players, and it makes getting a mortgage incredibly challenging. Prior to the financial crisis of 2007-2008, it was not as much of a concern because mortgages were readily available with weak underwriting policies (ie. stated income only). However, since that time, underwriting standards have become quite strict, and it is now incredibly difficult for the average person, let alone a poker player, to qualify. Keep in mind the loan underwriters will want a 2-3 year history of income using federal tax returns, and any lapse in income or even decreasing income may prevent you from qualifying for prime lending rates, or even qualifying at all. This is a huge handicap when compared with the average employee who typically has consistent yearly income.
A few recommendations for poker players going through the mortgage process:
1) Make sure that you start the process early (months not weeks) because banks move at a snail’s pace. In my experience it is often possible to find a prime lender that will underwrite your file (assuming you are strong financially) but it may take some time.If the average person needs to shop at five banks, you’ll need to shop at ten (and five credit unions… and five private lenders…) Don’t just go to your local bank and accept no as an answer.
2) Educate yourself on what the best mortgage rates are and what it takes to qualify for them. The more educated you, the less mortgage brokers will try to take advantage of you. You can monitor prime rates in Canada and the US easily with a google search. Push hard for prime, but be prepared to take a slightly sub-prime rate.
3) When you get approved, ask about pre-payment options, specifically if there will be any penalties. As a poker player you may win a big tournament and want to pay down your mortgage without incurring a big fee. If they have do have pre-payment fees and you end up needing to sell your house for any reason, it can cost you thousands of dollars (or tens of thousands, depending on the size of the mortgage and the interest rate differential at the time you pre-pay). Sometimes the best mortgage rates come with the worst terms, so you may want to choose a slightly higher rate if it means better terms.
4) Be aware of closing fees and make sure you ask the bank or the mortgage broker exactly what is going to get tacked on the closing statement. Because buying a house is such a large transaction, it is often assumed that banks can get away with slipping extra fees onto the closing statement. For example, recently a friend purchased a house and one of the conditions prior to releasing the money for funding was that they have a survey certificate. Well, the seller had given the buyer an official survey certificate from three years prior (as part of due diligence), but the bank insisted it be a maximum of two years old (and of course they wanted the buyer to pay for it). Push back on this kind of thing and see if you can get someone else to cover this bill. If the mortgage broker thinks the deal may die, they might be able to get the bank to pay for it or they may cover part or all of it themselves.
5) I would suggest simultaneously working with a mortgage broker and talking directly with some lenders. In theory, a mortgage broker should be able to check with all the lenders. The reality is that some mortgage brokers have really good relationships with certain lenders that they like to work with. Sometimes those lenders are able to offer favorable terms and sometimes they are not. Though it takes a little bit more effort, I have been able to find better deals speaking directly with lenders than what mortgage brokers have offered in some situations.
6) Do not trust your mortgage brokers….. When you are dealing with a non-standard mortgage deal many of them will end up giving bad information to you and in some cases overtly lie. By far the most common lies occur when discussing the time it will take and the ability they have to get you approved. Many mortgage brokers have not dealt extensively with non-standard deals (ie. with poker players) and may not be aware of the additional difficulties involved. The result is that they often give you misleading information, whether intentionally or not.
7) Get your pre-approval in writing from the lender as quickly as possible. If the mortgage broker is delaying, pressure the broker to get you something in writing confirming the lender will underwrite your file before placing offers. Having your hopes built up for ap articular home, and then dashed when the lending falls apart is not worth the emotional turmoil. Mortgage brokers will play you and make all sorts of promises to try to keep you on the hook. They generally don’t care if you get a good deal as long as the deal goes through them. If you get a conditional approval, make sure that you know what the conditions are. Something that happened to me is I had a “conditional approval” in writing with standard subjects, and a verbal from a mortgage broker at The Royal Bank of Canada that they would increase the amount lent by (x) dollars if I bought a house that had a basement rental suite. I went and got a contract on a house with a basement suite, subject to financing, and the deal collapsed because the Royal Bank refused to increase the loan amount. If I had been more aggressive and forced them to put in the “conditional approval” letter the amount they had agreed to increase my loan amount when I bought a house with a suite then I could have sued them. Liability is part of the reason that banks and mortgage brokers don’t like to write things down. Make them do so! If they refuse that is a major warning sign…
8) Once you have a deal, make sure you have final approval from the lender (not a conditional approval) before you take any subjects off and risk your earnest money deposit.
9) Be prepared to deal with a ton of paperwork. Because you won’t have the standard “pay stubs” that they like to see, the lender will probably want additional confirmation (over and above tax returns) of where your money is coming from.
Getting approved can be a stressful time. It is especially so when you don’t fit into the boxes the bank is used to checking off. Adequate information and preparation will hopefully make the process as smooth as possible. Good luck in your endeavors to get a mortgage and a home! Feel free to leave a comment if you have any further questions. Also, don’t forget to check out my new book Exploitive No Limit Holdem!
By Paul Ratchford (ThePokerCapitalist)