Getting started - Have cash but cannot get a loan

13 Replies

I'm a homeowner that is interested in investing in a second house with the intention to rent it.  I know that I can pay off a new loan because I am getting $28,000 as a gift every year (Thanks Pop!).  The problem is that when I discussed how much of a loan I could get, the banker told me that even if I put $80K down on a $150K house, he couldn't approve a loan because I only make $50,000 a year at my job. He was not reassured by my claim that I will have over 2K a month to pay off a loan.  According to him, I could only afford $690 a month. 

I feel like I have to rent out a room of my house just to show a little more income, but surely new investors don't have to do that. Any advice on how I can use my gift money to invest when I cannot get a loan because I only make $50K? 

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Hello Timothy,

One option you may have is finding an investing partner. Someone who has experience, credit, and leverage. Message me back if you want to hear some additional thoughts on this subject

Start out with a cheaper house.  And check with other banks.

Honestly, I would check with other banks. Unless insurance or taxes in that area are unreal, I don't see how your mortgage(including escrow for taxes and insurance) would be more than $690/month on a $70k loan.

Another avenue to go would be to go for private money, and then refinance with a bank after you've had the place rented out for a year or two. Private lenders will charge you higher interest, but they're generally much more lenient on their lending terms.

How does one hook up with a private lender?

I haven't personally used it, so hopefully someone on here can direct you to a good one to work with starting out. I would hope that all the companies listed on Bigger Pockets are reputable, but you may be able to get some advice by heading over to the Private Lending & Conventional Mortgage Advice boards.

@Timothy Wright I will make two points:

1. Buying a property as a 2nd home with the intention of renting it is mortgage fraud. If you are going to rent it, then buy it as an investment property and put the 20% down.

2. If the $28K income can be documented, then I can potentially be used. Would depend on the paperwork. You saying it is not going to do it.

I understand point (2), and am not surprised. Your first point confuses me. You seem be saying buying a second property to rent is fraud, but continue in the next sentence to say that I can buy and rent as an investment.  What is the difference between the two things you just mentioned, and is there anything wrong with what I aim to do? Is the fact that I still owe money on my home something that is problematic(in terms of fraud)?

Hi John Sanderson, I think you hit it on the head. I was just making a preliminary call, and incorrectly estimated about  3000-4000  in taxes. When I started looking at Zillow, I soon realized that in Ypsi Twp, they tend to be closer to $2000 for homes in the range of $100-150K. 

@Timothy Wright , @Upen Patel is telling you that getting a home loan under the assumption you are going to be living in it verus getting a home loan for an investment property is a big no no. An owner occupied loan has better rates and some have easier ways to qualify, and different programs to help home ownership. A loan on an investment property usually has higher interest and a bigger down payment.  

There are stated income loan for investment properties available, you just have to be prepared to put down 25 to 30% and have decent credit.

Hi Upen Patel,

I don't believe I ever wrote that I would claim it as anything other than a rental investment. 

Probably  the best piece of advice someone could give me is to start by renting a room in my house (I have two bedrooms that I don't use).   That would give me a taste of what it is like to rent to people, with little risk, and maybe greater profit. It would also increase the income I could declare in a loan application.  

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