Author Topic: Please help - mortgage question  (Read 2067 times)

Orin!

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Please help - mortgage question
« on: July 28, 2018, 03:00:22 PM »
I have a good credit score with plenty of credit cards, high limit ones as well.

I have little experience with loans, but the experience that I have they usually ask for evidence of income whereas credit cards donít. Credit cards go more on just your credit history and score. My oldest card is over 15 yers old and I have perfect payment history. I also got a couple of secured loans to diversify my credit portfolio. I also got a loan for a motorcycle and then paid it off after six months. The motorcycle loan did not ask for evidence of income.

Anyways - I am trying to find out how I could get a mortgage on a first house property. I would do this for the low interest rate available on mortgages and then I would rent the house out.

But to be honest - my proveable income is low. But my credit report history is excellent. So that is why I am wondering how to get a mortgage without them asking for evidence of income.

I would not actually be living in this house as I have a separate place I live for free.

Seems like a good investment to get a 150k house @4% interest, rent out for $1,200 a mo. $6000 interest a year. $700 property tax. Take 14.4k in rental income - net about 7k a year.

MDM

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Re: Please help - mortgage question
« Reply #1 on: July 28, 2018, 04:48:28 PM »
But to be honest - my proveable income is low.
Put yourself in the lenders' shoes: would you loan a large amount of money to a stranger with little "guaranteed" income for repayment?

Having said that, perhaps the best thing for you to do is start with the bank holding your primary checking/savings account, and ask the loan department about their procedures.  Then try some other lenders, both local and national, for comparison.

Orin!

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Re: Please help - mortgage question
« Reply #2 on: July 28, 2018, 04:57:10 PM »
But to be honest - my proveable income is low.
Put yourself in the lenders' shoes: would you loan a large amount of money to a stranger with little "guaranteed" income for repayment?

Having said that, perhaps the best thing for you to do is start with the bank holding your primary checking/savings account, and ask the loan department about their procedures.  Then try some other lenders, both local and national, for comparison.
I have over 200k in credit card limits - so they seem to be okay on it. Based on my credit history. This is just a different type of borrowing procedure.

Thank you for the tip in regards to starting where I already bank. My longest banking history is with Bank of America - had an account with them since 2000. Not a ton of money flowing through there, but they have given me 4 credit cards with a total of 65k+ of limits. Anyone know their procedure for mortgages? I am suspecting they are more wanting extra documents. I heard briefly of no-doc mortgages but do not know much of them other than you need good credit score and at least a 20% down payment and to expect higher interest rates which would make this pointless (the higher rates).

tralfamadorian

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Re: Please help - mortgage question
« Reply #3 on: July 28, 2018, 04:59:32 PM »
But to be honest - my proveable income is low. But my credit report history is excellent. So that is why I am wondering how to get a mortgage without them asking for evidence of income.

For a loan with no income verification, your options are 1) hard/private money, 2) portfolio loans, or 3) seller financing. 

For hard money or private money the interest starts at 8% plus origination points; these loans are meant to be short term. For someone will no experience, interest can be significantly higher (12%+). Some banks will do portfolio loans that are only based off the property income but they are looking for people with experience in the industry.

Seller financing may be your only option at this point; the vast majority of sellers will not be interested and interest rates are higher than conventional mortgages but usually lower than hard/private money. Amortization and payment terms can vary widely.

Regarding the sample property, you left out a few things.

Rent: $1,200

Costs: /mo
P&I (25% down, 4.75%): $587
T&I (guess $700/yr insurance): $116
Repairs (10% rent): $120
Vacancy (10%): $120
CapEx (10%) $120
Management (10% even if it's you): $120

Net: $17/mo

sokoloff

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Re: Please help - mortgage question
« Reply #4 on: July 28, 2018, 05:01:19 PM »
Self employed people and small business owners go through this all the time. Some underwriters will use income as reflected on your last two tax returns.

I have a vague feeling that this might not help you either...

tralfamadorian

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Re: Please help - mortgage question
« Reply #5 on: July 28, 2018, 06:16:21 PM »
Self employed people and small business owners go through this all the time. Some underwriters will use income as reflected on your last two tax returns.

I am self employed and have gone through this several times. More questions, sometimes they ask for a P&L but I've never had a problem getting a loan with income sourced via K-1 or Sch. C instead of a W-2. YMMV.

affordablehousing

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Re: Please help - mortgage question
« Reply #6 on: July 28, 2018, 11:17:29 PM »
OP you sound like a troll.

Orin!

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Re: Please help - mortgage question
« Reply #7 on: July 29, 2018, 03:20:43 AM »
OP you sound like a troll.
Sorry if it came across that way to you.

Otherwise - thank you to the rest who provided some good data, especially the math on breakdown of expenses. I was not thinking of the cost for repairs and insurance. Or the built in managing cost even if I am doing it myself and that would be earned doing the same functions elsewhere. I see it is a field requiring know-how just like any other and isnít as simple as I first thought.

JetBlast

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Re: Please help - mortgage question
« Reply #8 on: July 29, 2018, 08:56:00 PM »
Thereís an extensive real estate forum on this site. Take some time to read through a bunch of threads to get a better understanding of real estate investing. Iíd also spend some time at biggerpockets.com since thatís an entire community of real estate investors.

If you still want to do it, ask around on both for recommendations on the type of loan you are seeking.

joonifloofeefloo

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Re: Please help - mortgage question
« Reply #9 on: July 29, 2018, 11:42:43 PM »
1. I would talk with a mortgage broker, not a bank. Just ask them your questions: What's required for me to qualify for a mortgage? What papers will I need to present? How much of a mortgage can I get?

2. I was in your situation when I bought. Key for me was a letter saying my [new, not yet reflected on return] income was stable and -moreso- the rental income on the house. The broker was allowed to consider half of the upcoming rental income as mine, in the calculations.

ender

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Re: Please help - mortgage question
« Reply #10 on: July 30, 2018, 06:57:33 AM »
Something worth pointing out is that you might need a lot less income than you think to get a regular mortgage. Banks throw money at people.

But given that it's an investment property that might be more difficult unless you forget to tell them (or lie, I guess) you plan on turning it into a rental....

Plugging $50k into a few calculators online suggest you could get upwards of a $300k mortgage (!) so you might be able to qualify for a mortgage even if they want income, depending on what your actual income is. Without more details though it's not really possible to give more meaningful advice.

boarder42

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Re: Please help - mortgage question
« Reply #11 on: July 30, 2018, 07:13:27 AM »
your best bet is to find a local bank for a mortgage - they typically will give more leaway to you on less income provability, you will get a higher rate typically b/c the risk is higher.

In general mortgage brokers arent going to want to mess with you,  too much work for their low margin business. Most prefer ideal candidates.

partgypsy

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Re: Please help - mortgage question
« Reply #12 on: July 30, 2018, 07:34:14 AM »
https://themortgagereports.com/18303/mortgage-self-employed-1099-business-get-approved

if you don't qualify with automatic underwriting, you might be able to qualify say at a credit union or your personal bank. In addition to residency information, information about income (W-2 statements and federal tax returns) and also anything that can be used as collateral, and what are your monthly debt obligations, and credit history. Basically what they would want to know, are you able to pay back the mortgage with somewhat regular income? They may be open to calculating what is considered income from freelance, personal business, etc, as long as you are able to prove it is regular.  Or, if you have some kind of collateral.

It's crazy, but I had a friend who even though she had the amount of the house in the bank, could not get a mortgage for that amount because she wasn't working at the time. She ended up having to take out a complicated mortgage where she still had access to that money, so she would have cash flow until she got a job.   

eta I know NOTHING about any of these programs. But might be worth some research
https://mymortgageinsider.com/low-income-home-loans-and-mortgage-programs/
« Last Edit: July 30, 2018, 07:39:00 AM by partgypsy »

joonifloofeefloo

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Re: Please help - mortgage question
« Reply #13 on: July 30, 2018, 10:09:09 AM »
In general mortgage brokers arent going to want to mess with you,  too much work for their low margin business. Most prefer ideal candidates.

I had the opposite experience. No bank or credit union -including my long term one- would look at me, despite savings, zero debt, perfect credit rating, etc. Only the mortgage broker made it happen.

boarder42

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Re: Please help - mortgage question
« Reply #14 on: July 30, 2018, 12:25:40 PM »
In general mortgage brokers arent going to want to mess with you,  too much work for their low margin business. Most prefer ideal candidates.

I had the opposite experience. No bank or credit union -including my long term one- would look at me, despite savings, zero debt, perfect credit rating, etc. Only the mortgage broker made it happen.

was this pre 2008?

joonifloofeefloo

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Re: Please help - mortgage question
« Reply #15 on: July 30, 2018, 12:29:59 PM »
Pre-2004 *and* 2017.

bacchi

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Re: Please help - mortgage question
« Reply #16 on: July 30, 2018, 01:15:32 PM »
In general mortgage brokers arent going to want to mess with you,  too much work for their low margin business. Most prefer ideal candidates.

I had the opposite experience. No bank or credit union -including my long term one- would look at me, despite savings, zero debt, perfect credit rating, etc. Only the mortgage broker made it happen.

Same. Self-employment was just too scary for my credit union and local banks (post 2008), despite 800+ credit and a shit-ton of money in investment accounts and >50% home equity.

A mortgage broker made it happen.

MommyCake

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Re: Please help - mortgage question
« Reply #17 on: July 31, 2018, 06:47:40 AM »
If you get a mortgage for a rental property, instead of a regular home loan, interest rates will be higher, but they will usually apply 75% of expected monthly rent to your income.  So in other words, your personal income would only need to be high enough to cover the remaining 25% of the monthly mortgage payment.  You would also need 6 months mortgage payments in savings. 

Car Jack

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Re: Please help - mortgage question
« Reply #18 on: July 31, 2018, 07:13:14 AM »
As others have said, you're not getting 4% for a rental purchase.  If you lie and say you're going to live there and then rent, the bank can call the loan immediately.  In like manner, if you insure the place as owner occupied and it's rented and it burns down and the insurance company investigates and finds that it was a rental, they'll immediately cut you a check for "go pound sand...zero".  Work your numbers again, with real insurance costs and real mortgage rates for a rental.  I doubt this will work.

boarder42

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Re: Please help - mortgage question
« Reply #19 on: July 31, 2018, 08:16:23 AM »
As others have said, you're not getting 4% for a rental purchase.  If you lie and say you're going to live there and then rent, the bank can call the loan immediately.  In like manner, if you insure the place as owner occupied and it's rented and it burns down and the insurance company investigates and finds that it was a rental, they'll immediately cut you a check for "go pound sand...zero".  Work your numbers again, with real insurance costs and real mortgage rates for a rental.  I doubt this will work.

you're not getting 4% on a home you're going to live in at this point - rates are up around 4.625-4.875.

Finances_With_Purpose

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Re: Please help - mortgage question
« Reply #20 on: July 31, 2018, 08:59:55 PM »
OP you sound like a troll.

Come on, op can't admit that he's running illegal drugs, loan sharking, or massively cheating the feds on taxes...