Jim’s story, like the stories of so many other people who make their living in film and television, shows how little understanding there is in the mortgage industry of the unique characteristics of the entertainment business.
Jim is now an assistant director making a good living as a member of the Director’s Guild of America (DGA). But when he first started on his journey toward home ownership, he was a non-union production assistant working for minimum wage and trying to build up the resume and credentials to meet DGA’s stringent membership requirements. The hoops he had to jump through to obtain a mortgage might have deterred a less determined individual, but Jim knew what he wanted and wasn’t about to let anyone or anything stop him.
Jim’s journey began about five years ago, when Florida’s incentives for production companies were creating plenty of employment for people who work in front of and behind the camera. He was fortunate that his first job as a production assistant put him in contact with people who were in a position to recommend him for other jobs, so he was working fairly steadily. (In his field, most employment comes through personal connections and “word of mouth” recommendations.)
At that time, Jim was dating a real estate agent who advised him to buy and build equity rather than continue to rent and build a landlord’s equity. He had enough money saved to make a down payment, so the idea made a lot of sense to him. He put in an offer on a bank-owned condominium, and it was accepted, contingent upon Jim obtaining a mortgage approval. And that’s when things started to get interesting.
Jim submitted mortgage applications to several banks, including a local independent bank that was subsequently absorbed by a bigger bank. He showed that he was earning enough money to make monthly mortgage payments. He argued that he’d already be on the street if he weren’t capable of coming up with enough money every month to cover his rent. But the underwriters couldn’t get past their fear that they’d never be able to sell Jim’s mortgage if they were to approve him. (FYI: banks don’t usually keep the debt they issue in the form of mortgage loans. They sell it to a financial institution that bundles it with thousands or even millions of other mortgages and then sell shares of the bundle as mortgage backed securities that appeal to investors looking for a long-term source of steady income.)
Week after week passed, and the seller was getting nervous. When Jim learned that the bank that owned the condo was about to void his contract and relist the property, he found another solution. That local independent bank was willing to give him a five-year balloon loan, though for a lesser amount than he was seeking. He would have to make up the difference between the amount of the loan and the purchase price he had agreed to. He would also have to refinance the condo before the five-year loan term was up. But before the bank would approve the balloon loan, Jim had to jump through still more hoops.
For one thing, he had to create a profit and loss statement showing all of his income and all of his expenses for a period of two years. Some time earlier, he and a few friends had invested in a professional film camera that they rented out, so Jim was able to claim his share of the rental money as income. He was also entitled to a monthly stipend from his late father’s pension, and he was able to use what he’d saved up from that to cover the remainder of the down payment on the condo. Jim was approved for the balloon loan just in time to keep the condo from going back on the market, but he knew that he would have to have his finances in impeccable order to be able to refinance it before the balloon loan’s repayment date.
The best advice Jim received was to minimize his expense deductions on his income tax returns so that his pre-tax income was as high as possible, even though that meant he’d be paying more to the IRS.
Not long after he bought the condo in Florida, the film and television industry began to shift its focus from Florida to Georgia, which was offering even more attractive incentives for production companies. He was working more and more frequently in Georgia while still living in the condo in Florida. But he didn’t take the $2,000 deduction he was entitled to for his travel back and forth between the two states.
After two years, Jim had the condo re-appraised to reflect the improvements he’d made to it, and the higher appraised value enabled him to refinance the balloon loan as a traditional mortgage. He produced 20 paystubs showing his increasing income, and he created “form” letters for his accountant to sign attesting to his financial situation. He wrote to the underwriters again and again, explaining that he was not self-employed, as they seemed to believe, but rather the employee of multiple production companies during the course of a year. He also explained that he would continue to receive a monthly stipend from his late father’s pension for a few more years. He even sent the underwriters his college transcripts as evidence of his future earning potential.
Here’s an analogy Jim used to try to help the bank’s underwriters understand the way he is paid. He likened his situation to being hired to work in one of those strip mall Halloween stores that opens mid-summer and closes right after Halloween, when another company comes in and opens a Christmas store. The same employee who was formerly selling costumes and spooky Halloween décor goes to work for the next company selling Christmas lighting and decorations. That person is not self-employed. During a period of a few months from mid-summer to late December he or she works for two different companies and receives two separate W2 forms. Similarly, Jim is hired to work on a production for a finite period of time that could be anywhere from one day to a few months, and when that job is done, he goes to work on another project for another production company. And he receives a W2 form from each production company.
Through his letters and his analogies, Jim made a strong enough case to overcome the bank’s resistance to lend to someone whose multiple W2s create the appearance of a chronic job-hopper.
By the time the condo was refinanced, it was clear to Jim that he needed to relocate. He was already spending about half of the year in Georgia, where incentives for the film and television industry were attracting production companies and creating more job opportunities for him. He’d used some of the proceeds from refinancing the condo to pay the $6,000 fee to join the DGA, but he was still working as a production assistant. Under DGA rules, in order to work as an assistant director in Georgia, he would need to join a DGA local in Georgia, which meant he would have to be a Georgia resident.
Jim listed the condo for sale, and as soon as it was under contract he made a trip to Georgia after identifying some potential homes online and contacting a real estate agent there. He looked at 16 properties in two days, chose a house, and was under contract by the time he flew back to Florida on the second day. Needless to say, given what he went through in trying to get approved for a mortgage in Florida, he didn’t expect the process to be any easier in Georgia. But at least this time he knew what he was up against, and he was ready to do battle.
Jim’s goal was to close on the sale of his condo in Florida and use the proceeds to help pay for the house he’d chosen in Georgia. In the time he’d owned it, the condo had appreciated in value, and Jim could show a four-year history of on-time mortgage payments. As an entry level assistant director, he was also making more money, and he had already assembled all of the documents needed to substantiate his income. His credit rating had always been good, so at least he didn’t have that to worry about.
Jim’s real estate agent referred him to the Moore Team of Fairway Independent Mortgage Company, and he prepared himself to educate them about the unique challenges people working in film and television face in obtaining a mortgage. He was delighted to find that they needed no such education and had a successful track record of helping people in his industry become homeowners. He quickly realized that they knew what they were doing.
Jim made a profit of about $65,000 on the Florida condo—almost exactly what he needed to pull off the deal in Georgia. The Moore Team’s proactive approach gave him confidence that all of the pieces would fall into place in time to meet some rather scary deadlines. They even anticipated that the political climate in Georgia would soon cause interest rates to increase and contacted Jim in Florida so that he could call and lock in the rate on the mortgage for the house he was buying.
Timing was everything. On Monday, Jim had movers load everything from the Florida condo on a truck and head to Georgia. The condo sale was slated to close on Tuesday, and the closing on the house in Georgia was set for Thursday. However, the condo sale didn’t actually close until Wednesday. Immediately after the closing, Jim drove to Atlanta after wiring the $65,000 proceeds from the condo to Georgia. The purchase of the house did close on Thursday, as scheduled. The moving truck was unloaded within hours, and the internet installation took place on Friday.
Despite the tight schedule, Jim describes the process of purchasing his house in Georgia as “shockingly easy” compared to what he had gone through buying the Florida condo. Without the help of realtors who have experience helping people who work in the film and television industry, it’s all on the homebuyer’s shoulders.
“You have to really want a home,” Jim says. He likened his role in the process to holding down a part-time job given the number of hours it ate up.
Success is largely dependent on being extremely proactive and determined. When trying to get a mortgage on the Florida condo, there were many times when Jim took the initiative to do something himself rather than relying on someone else to do it. At one point, when an attorney was waiting for some records, Jim (who had just been in a car accident) drove to pick up the records in one location and drove to the attorney’s office to deliver them. He accomplished in one afternoon what it might have taken several days to get done if he’s relied on others to locate and mail the records.
There are three types of people, according to Jim. When confronted by a locked door:
- Some people admit defeat and sit on the front porch to see if someone will come and unlock the door.
- Some people aggressively try to kick the door down.
- And some people find another way to get in.
That’s the type of person someone working in film and television needs to be when trying to buy real estate-someone smart enough, creative enough, and determined enough to find an unlocked window or back door or some other way to get into the house. That’s the kind of person Jim is, and that’s what he found in the Moore Team.← Back to Stories Sound Familiar? Contact Us