Author Topic: How to qualify for a loan in FIRE?  (Read 525 times)

wageslave23

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How to qualify for a loan in FIRE?
« on: June 21, 2019, 02:11:41 PM »
I'm thinking about FIRE'ing in the next year or so.  The only thing is that I would want the ability to still leverage new rental properties with a mortgage.  Is there anyway to get around the income requirement in financing a new house?  Anybody have any experience doing this?  Could I just get a job for 6 mo and qualify?

chasesfish

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Re: How to qualify for a loan in FIRE?
« Reply #1 on: June 21, 2019, 08:04:55 PM »
I'll kick in.  How many rental properties do you have?

To get regular residential mortgages?  Its probably not happening.

To get an in-house bank/commercial loan?  Sure.  Once you have four plus properties, it starts looking like a business.  Lower LTVs, quicker repayments.

This is my experience, both as a FIREy person right now who just quit my job and explored a mortgage and as a former business lender for fifteen years

Jon Bon

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Re: How to qualify for a loan in FIRE?
« Reply #2 on: June 22, 2019, 07:33:24 PM »
So I am an expert at this because just spent amount a month fighting with the bank on it. The issue is going to be your Debt/Income ratio.

So as long as you have income from your rental properties you should generally be ok. Banks usually like to keep D/I around 40% anything higher they will deny financing.

The rules are as such.

1. Income properties need 2 years tax returns filed.
2. Net income plus deprecation is used in the D/I formula
3. Loans for rental properties are not counted in D/I after #1
4. Target house is allowed to use 70% of current rents.




                      Rent   Mortgage   Net Income   Deprecation
Rental 1              1800      950   850                    300
Rental 2              2500      1500   1000                  400
Rental 3 (target)   1750      800   950                  
Primary Home                      1500      
Job            5000   
            
            
            
            
                                                    Income(yr)      Debt(yr)   
Rental Net Income (add back dep)    30600            Primary Home   18000   
Target  Rental Revenue @70%            14700            Target Rental   9600   
Job Income                                    60000         
            
D/I Without Job Income         61%   
D/I With Job Income                 26%   

No idea what kind of money you are making on your properties but in this example you would need the job for six months. All the care about is the fact you have income (and credit score but based on the website your on, you are fine) Getting a job for 6 months would be a good call. *This has been my experience and what I have been told by bankers and underwriters, ymmv.

Cheers