Posted on: 08th Feb, 2011 05:18 pm
I feel like I must be doing something wrong. It seems to me that this is the best time I have ever seen to purchase residential rental investment property but can't seem to find a single lender that is willing to lend me money.
I was recently laid off from my job and thought it was perfect timing for me to get into investment real estate and also devote my full time and attention to two other businesses I had just started. I began analyzing properties, crunching numbers, and making sure any property that I was considering would amortize the mortgage and provide positive cash flow. I also made sure I would be able to afford the mortgage payments in the event I could not find a tenant.
Then I went to find loans and I have been shot down every time because apparently no doc loans don't exist anymore, or so I'm told. I cannot believe that. The properties that I have been looking at can afford to have a mortgage at 70% LTV at 10% interest and still provide me a 20% ROI cashflow based on low end rent rates.
The answer everyone has given me is the same: without verifiable income, nobody will issue a loan. I am told it doesn't matter that I have the liquid assets to buy the properties outright in cash or that my FICO is 769 or that I have no debt. But obviously I don't want to tie up all my assets in an investment property because the ROI wouldn't justify it.
What's the solution here? Is it really true that no one will issue a loan without income? I am told that my self employment income won't even count until I can show two years worth of income, but of course, investment real estate income was to be a big part of the self employment income. What a paradox.
I was recently laid off from my job and thought it was perfect timing for me to get into investment real estate and also devote my full time and attention to two other businesses I had just started. I began analyzing properties, crunching numbers, and making sure any property that I was considering would amortize the mortgage and provide positive cash flow. I also made sure I would be able to afford the mortgage payments in the event I could not find a tenant.
Then I went to find loans and I have been shot down every time because apparently no doc loans don't exist anymore, or so I'm told. I cannot believe that. The properties that I have been looking at can afford to have a mortgage at 70% LTV at 10% interest and still provide me a 20% ROI cashflow based on low end rent rates.
The answer everyone has given me is the same: without verifiable income, nobody will issue a loan. I am told it doesn't matter that I have the liquid assets to buy the properties outright in cash or that my FICO is 769 or that I have no debt. But obviously I don't want to tie up all my assets in an investment property because the ROI wouldn't justify it.
What's the solution here? Is it really true that no one will issue a loan without income? I am told that my self employment income won't even count until I can show two years worth of income, but of course, investment real estate income was to be a big part of the self employment income. What a paradox.
Hi Guest,
It is true that none of the lenders will be ready to offer you a loan if you don't have verifiable income. No doc loans are hardly available these days after the real estate crisis hit the market. Nevertheless, this community has a large number of lenders. You can seek a no obligation free mortgage quote from them and check out if they can help you in this matter.
Thanks
It is true that none of the lenders will be ready to offer you a loan if you don't have verifiable income. No doc loans are hardly available these days after the real estate crisis hit the market. Nevertheless, this community has a large number of lenders. You can seek a no obligation free mortgage quote from them and check out if they can help you in this matter.
Thanks
Hearty, if you were an institutional lender, you wouldn't see this as a paradox. No-documentation loans proved to be far less worthwhile than desired.
Any lender who would consider granting a loan to a borrower without verifiable income in these times is just plain stupid. History has proven right in that borrowers whose income can be verified are far better risks than those whose income cannot be verified.
It's long been a standard in the lending industry to require that a potential borrower demonstrate a 2-year history of earnings, particularly when someone is self-employed. Your situation, as you describe it, is that of a no longer employed person, but one who feels it an apt time to begin a new self employment venture. Either/both of those scenarios disqualifies you as a viable borrower.
Rental income has often been the downfall of investors as well. When times are tough, tenants often fall behind on their obligations. In turn, the landlords who rely on their rental income to service the mortgage debt often become unable to do just that, and said mortgage loans become delinquent in far too many instances.
Lenders are also beholden to secondary market guidelines. Holding mortgage loans in portfolio is too risky, so Fannie Mae and Freddie Mac end up purchasing the vast majority of new loans granted. They have specific standards by which the lenders must abide.
You have run up against standards that have been in place for many years, and without a track record of earnings; without a track record of owning and managing investment properties, you are not an acceptable risk to mortgage lenders.
Any lender who would consider granting a loan to a borrower without verifiable income in these times is just plain stupid. History has proven right in that borrowers whose income can be verified are far better risks than those whose income cannot be verified.
It's long been a standard in the lending industry to require that a potential borrower demonstrate a 2-year history of earnings, particularly when someone is self-employed. Your situation, as you describe it, is that of a no longer employed person, but one who feels it an apt time to begin a new self employment venture. Either/both of those scenarios disqualifies you as a viable borrower.
Rental income has often been the downfall of investors as well. When times are tough, tenants often fall behind on their obligations. In turn, the landlords who rely on their rental income to service the mortgage debt often become unable to do just that, and said mortgage loans become delinquent in far too many instances.
Lenders are also beholden to secondary market guidelines. Holding mortgage loans in portfolio is too risky, so Fannie Mae and Freddie Mac end up purchasing the vast majority of new loans granted. They have specific standards by which the lenders must abide.
You have run up against standards that have been in place for many years, and without a track record of earnings; without a track record of owning and managing investment properties, you are not an acceptable risk to mortgage lenders.
As others have said this is how it is now - Find new employment in the same line of work and you will probably be eligible given the other things you have shared. Also in case you are not aware you cannot count the rental incomes until you have a 2 year history of being a landlord. If you intend to fix and sale this will not be an issue. Again if going that route once you have a two year history and can show income doing this the banks can count that income (profit from flips) as well.
Brian, I've found guidelines more liberal than what you cited with rental income over the last few years - even in these times. I'm not lending right now, but I don't think Fannie has a specific timeframe in counting rents - most of it depends on whether or not the rental property appears on the most recent tax return.
I am commenting to a question from 8 months ago. Has the situation changed. Is it possible to get single family rental loans now?
You should contact your local mortgage lenders and apply for a single family rental loan. This will help you know whether or not you can get such a loan.