After buying my house in 2018, a number of my poker pro friends assumed that I paid cash for the house. They couldn’t manage to get a mortgage themselves, and when I told them I had a standard mortgage at a low rate, they wanted to learn how I did it. Getting a loan, whether for a car, a home, or anything else, is a real challenge for professional poker players and this is one of the biggest downsides of playing for a living.
Let’s start with my story. I know most of these things because I had to learn them to buy my house. It took months of paperwork and a lot of hunting around for a good mortgage broker.
In early 2017 my wife and I had decided that we wanted to live in Las Vegas long term. We weren’t married yet, but we knew that our relationship was strong and going to last for many years, hopefully for the rest of our lives. One of my best friends is a brilliant finance manager who frequently offers me financial advice, and he urged me to buy a home as soon as I knew that I wanted to live here for at least a few years.
“Real estate goes up over the long run,” he said. “If you’re paying rent you are buying someone else a house. Get on that escalator that will take your net worth up as the real estate market goes up. Mortgage rates right now are much lower than the average increase in real estate prices, so your loan will actually be an investment. Just do it as soon as you can and get started on your way up the escalator.”
I took that advice to heart and started researching what it would take to buy a home. It turned out to be an enormous challenge.
My credit was great. At the time I began my search, my credit rating was 815. I had $70,000 in cash in the bank. And when a mortgage company looked at my past three years of income, they would see the nice run where I won over $200,000 in the main event in 2017 and a solid long-term income. Buying a home should be a snap right?
Since the disaster of the 2008 real estate crash and the subprime mortgage market collapsing, it has become much tougher to get a mortgage, especially without a job. I even considered getting a job for a year just to get a better mortgage rate. The rate on your mortgage has a huge effect on your long term financial future.
That mortgage rate means way more than you think
If you are buying a $400,000 home, and taking out a mortgage for $350,000, then a single percentage point, the difference between 5% and 6%, is more than $200 a month on a 30 year mortgage. Over the life of the loan you will pay $75,000 in extra interest because of that single percentage point.
If you dumped that $200 into the stock market every month instead, and assume the historical return of the last thirty years, you end up with an incredible $415,000 in your investment account. That is a huge swing! Fight for that percentage point!
And fighting for that percentage point was exactly what I did. When I started to hunt for a mortgage, I was shocked to find that no one would offer me a standard mortgage. I had great credit, solid income, and money in the bank. But rather than the 5% that was standard at the time, lenders were offering 6.5% “bank statement” loans.
These bank statement loans are common for banks to offer entrepreneurs and freelancers. You show them that you have had enough income to pay the loan by showing your bank statements, and they offer you a loan at a much worse rate. They love to write these loans because the rake is much higher but borrowers don’t default that much more often so the house makes more money on them.
I turned down these bank statement loans and kept hunting for a lender who could help me. Most mortgage brokers would lose interest as soon as I told them that I didn’t want a high interest loan and that I didn’t have a typical job. They love the low hanging fruit of a family with a consistent job or two that will be approved immediately. The broker gets their commission without spending too much time on these loans and their hourly rate is great.
Finding a lender who is hungry enough, and wants to fight for you, is tough. I called dozens of people, had meetings with nearly a dozen, and was ready to go get a job and wait a year to get a better loan rate, when I finally found someone who was able to get me a standard rate.
For reasons that I will never understand, they wanted me to pay off my car loan, put the rest of my money toward a down payment, and have essentially zero debt before I could get the loan. Apparently they know nothing about being a poker pro and don’t understand that a poker pro without a bankroll isn’t going to be able to pay their mortgage. After failing in my attempts to make them understand this idea that a business needs money to work with, I went ahead and spent most of my available cash to get the loan.
I also worked carefully with my accountant to make sure that I was claiming as much income as possible for the year that I was currently filing. I may have paid more taxes than necessary, but it saved me money in the long run. Many thanks to Kondler And Associates for their help with this. They don’t pay me for my endorsement, I just really love working with them.
I even borrowed $20,000 in cash from a friend to have more money in the bank for a few months before the loan was signed because the lenders like to see a high bank balance.
So, given my experience, and some consulting with a skilled mortgage officer, I have a checklist of things to do if you want to get a good mortgage rate as a poker pro. Many thanks to Amy Firstman for her help in putting this together. I highly recommend her if you need a mortgage in Nevada. Again, I’m not paid for this endorsement, I just want to send you to people who I know will do the right things for you and reward the people who fight for their clients.
Your credit rating must be good, and it’s easier than you think
I use Credit Karma, which is free and can be a big help. Just seeing what you should be working on and watching your credit rating increase over time, can be a huge help. They will tell you which things are important and how to increase your credit fairly quickly. Start this now if you are going to buy a house anytime soon, because it can take time.
You should have an account and you need to talk to them right now
A good accountant can help you structure your write-offs to make things look better to a lender. You may even pay a few more dollars in taxes by skipping a write-off or changing your filing in other ways that will make a difference in your mortgage rate a year or two from now. Tell your tax person that you are looking to buy a house and if they don’t know how to help you with that, get a better accountant.
Keep your bankroll in the bank
If you are in the habit of keeping a big chunk of your bankroll in your pocket, in a safe, under your mattress, or in a box at your local card room, you need to change that and start keeping your cash in the bank. This doesn’t cost you anything, and it will make a difference when you apply for a loan, so it’s a no-brainer.
Have your spouse work on these things too
If you are going to buy the house with a partner, their credit will be important too. Show them this list and work together on all these things. With two of you, especially if one of you has a job, getting a good rate is much easier.
Buy as soon as you can, even if it means buying a smaller house
That escalator that you jump on when you buy a house runs all the time. The sooner you are on it, the better. Don’t buy a house that you plan to sell in a year or two, the fees for selling will eat up any money you pile up in real estate gains, but if you are going to be in the house at least a few years, buy it as soon as possible. When it’s time to upgrade to a better home, getting that bigger mortgage will be easier with a payment history and the extra cash you get from selling your current home.
Hunt for that good loan officer now
The sooner you find someone who can help you, and is willing to actually work for you, the sooner you will get on that escalator and start building up equity. It may take some time to find the right person, so start every conversation with “I have good credit but I’m self-employed as a professional poker player and don’t want to pay more than the prime rate.” This will filter out people who are just waiting for the easy loans and don’t want to help someone like you.
Finding a good mortgage as a poker pro can be frustrating, but it’s worth it
I know that we claim to support small businesses in America and encourage the entrepreneurial spirit, when in fact every law and every policy seems to favor those who work for someone else. It drove me crazy to hear about how people couldn’t help me over and over, simply because I didn’t want to work to build someone else’s dream or spend my days making shareholders rich while I burned precious hours of my life in a cubicle. That’s the tradeoff for working your own hours and doing what you love. Keep fighting and don’t take a bad loan. Good luck!