Author Topic: How hard is it to get a loan for your first property when you are FIRE?  (Read 1576 times)

moustacheverte

  • Stubble
  • **
  • Posts: 145
  • Age: 35
  • Location: Switzerland
Own no other property and not working anymore? Are banks nervous to give you a loan?

We don't plan on owning for quite some time, but we might want to buy once we are FI/RE.

How did it work out for those who did it? Did you take from your stache to buy and went back to work? Did you get a loan and paid it off with the "rent" portion of your withdrawals?

electriceagle

  • Pencil Stache
  • ****
  • Posts: 512
Re: How hard is it to get a loan for your first property when you are FIRE?
« Reply #1 on: February 01, 2016, 05:57:17 PM »
Are you in the US?

If so, the overwhelming majority of mortgage loans will be sold to the federal government. Those loans must meet federal standards, which means proof that your new monthly payment would be less than ~40-43% of your documented income. This goes for home equity loans and HELOCs as well.

In short, any property purchases must take place before you enter the low tax bracket life of FIRE, or be made in cash. No refinancing either.

oldfierm

  • 5 O'Clock Shadow
  • *
  • Posts: 47
  • Age: 40
Re: How hard is it to get a loan for your first property when you are FIRE?
« Reply #2 on: February 02, 2016, 06:32:52 AM »
Just anecdotal, but a friend of mine and her husband were in a bad car accident where the other driver was drunk and very well-insured.  They were looking at buying a home a few months later - the husband had a traumatic brain injury and couldn't work (he can now, thankfully) and the other had a job, but it was relatively low paying for how much house they wanted to buy.  Because of the insurance pay out, they were basically independently wealthy and could have afforded to pay for their house many times over, but wanted to get a loan so they could invest the money vice putting it in a house.  Just as electriceagle said, the mortgage was an absolute no go.  They ended up paying for the house in cash.