Author Topic: Mortgage for low income, NOT bad credit or no down payment  (Read 1551 times)

FIence!

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Mortgage for low income, NOT bad credit or no down payment
« on: July 01, 2017, 09:40:39 AM »
Short of the now-mythical "no doc" loan, can anyone tell me of any experiences they've had trying to get financing after having less/no w2 income? (Think Jacob from ERE income levels last year, but 30+% down payment and credit scores of well over 800, plus a track record of paying our current mortgage on said income).

After purposefully adjusting our amount of work to the income we need for our own purposes (call it early half-retirement...), we have a low-on-paper/low-to-society household income that is beyond meeting our needs. We pay our current mortgage no problem, do some investing, and travel. However, we are now attempting a permanent move to another city, which would mean a new mortgage.

When I search for lenders who are willing to work with low-income, I find that super low down payment and bad credit usually go hand-in-hand, and am pointed toward FHA or similar loans. (Kinda like trying to find a "tall" clothing store without "big" attached.) while we haven't officially applied for a mortgage, people I know in banking have implied that we would need to get our income up to even be considered. (If we're going to purposely jack up our work hours to pre-MMM levels just to please a bank, we'd just work more and save for a cash purchase since it sounds like a multi-year timeline either way...)



Laura Ingalls

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Re: Mortgage for low income, NOT bad credit or no down payment
« Reply #1 on: July 01, 2017, 10:14:48 AM »
We had a similar situation and just bought with cash.  The smaller the loan the more expensive (as a percentage) and inefficient the loan closing costs become.  We spent about $700 on closing costs with that purchase and a pretty big chunk of that were governmental fees. 

Kl285528

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Re: Mortgage for low income, NOT bad credit or no down payment
« Reply #2 on: July 01, 2017, 10:52:49 AM »
With a large enough down payment, private money lenders I would think would be interested. Look for hard money lenders, or at least call and ask them for a referral? I've considered offering this, to be one part of my investment portfolio. People who are a great credit risk, but don't fit neatly into conventional lending box. With 30 percent or more down payment, if you never make a payment I can foreclose and come out better than whole, I would think.
Maybe call smaller mortgage brokers in your market, and ask around. You may have to make a few calls. Or, ask some real estate brokers what they do for clients in this situation. They are bound to have seen this before.

nara

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Re: Mortgage for low income, NOT bad credit or no down payment
« Reply #3 on: July 01, 2017, 06:15:14 PM »
Could someone just get a W2 job for a few weeks? Back when we were mortgage shopping I believe you only needed to have a job for 2 weeks for that income to be considered.

Gronnie

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Re: Mortgage for low income, NOT bad credit or no down payment
« Reply #4 on: July 01, 2017, 06:24:19 PM »
A conventional mortgage approval will be based on meeting the minimum credit score and having an acceptable Debt to Income ratio. If the payment will be too large of a portion of your income, then you probably won't be able to get a conventional loan.

FIence!

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Re: Mortgage for low income, NOT bad credit or no down payment
« Reply #5 on: July 02, 2017, 09:48:47 AM »
We had a similar situation and just bought with cash.  The smaller the loan the more expensive (as a percentage) and inefficient the loan closing costs become.  We spent about $700 on closing costs with that purchase and a pretty big chunk of that were governmental fees.

I think (?) a lot of this depends on locality, I've previously bought two houses in two states, and the closings costs between the two didn't seem to jibe at all. There were various things in one state that simply didn't exist in the other. Good reminder to take that into
consideration.

With a large enough down payment, private money lenders I would think would be interested...
ask some real estate brokers what they do for clients in this situation. They are bound to have seen this before.

You know, I had only ever heard of hard money lenders from the flipping shows on tv, and their mentions of super-high interest charged by the day made me feel like this was only a short-term option. But after some googling, I see that there are in fact people willing to do smaller mortgages this way. Good idea since any loan we get we'd have paid off in a few years, so if we could get higher but still sane interest it might not cost *that* much more than a trad mortgage... and then it would function more like a cash purchase, saving on the closing as Laura mentioned. Good point about asking brokers as well.

Could someone just get a W2 job for a few weeks? Back when we were mortgage shopping I believe you only needed to have a job for 2 weeks for that income to be considered.

Huh, I wonder if this is still the case. As self-employed people, we've needed "at least" two years of back taxes and a ton of other docs. Is it really this much easier--even post-2008--to get a mortgage for W2 workers? My husband could easily get a 3-6 month contract w2 job in the industry he is in if that would solve everything! Will have to look into this for sure.

A conventional mortgage approval will be based on meeting the minimum credit score and having an acceptable Debt to Income ratio. If the payment will be too large of a portion of your income, then you probably won't be able to get a conventional loan.

We're not planning on getting a loan that is too large of a portion of our income. In fact, this is exactly what is frustrating. Since there is a human element to loan approval, it doesn't run like a calculator. Banks want larger loans with larger incomes, and often have mins. for amount they will lend. I have seen mortgage ads that come right out and say something like "$200k minimum loan amount." For our previous purchase, it was excruciatingly hard to find a bank willing to deal with a sub-100k mortgage.

Let's say it was an inhuman calculator making the decisions, with 30% allotted for housing. Then (just for easy math) a person making $1,000 a month could make a $300 mortgage payment, and so on. But a bank app that goes before a human will more likely get "You can't afford a house making only 1k a month because that's poverty level!" rather than giving a small loan with a $300 payment. A certain threshold seems to be necessary for a "mortgage," and below that a "personal loan" is usually suggested, which is functionally so different.

Another Reader

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Re: Mortgage for low income, NOT bad credit or no down payment
« Reply #6 on: July 02, 2017, 10:04:32 AM »
Try a purchase HELOC.  Those are not sold to Fannie/Freddie and the rules vary by bank, as they keep the loans in their portfolio.