How can I get a loan with low income?

Question

I had a discouraging phone conversation with a lender out of state in Provo UT, a market I am focusing on for my first deal.

The “investor friendly” credit union representative told me it would be a challenge for me to get a loan based on my current situation, outlined below:

1) I am an out of state freelancer and my $40K income last year is a summation of 5 different W2s.

2) My rent expense is almost 40% of my income (I live out of state in LA)

I will not accept “no” as an answer because I know I am good for the loan and can generate the income needed to make my monthly mortgage payment once I move to UT. About me:

- 802 credit score

- $0 debt

- $100K in the bank (70% tied up in stocks)

- My goal for Deal #1 is to buy a duplex and house hack.

- I want to finance using an FHA loan.

This would require me to move from LA to Provo. I would no longer be using 40% of my income for rent. But technically my income in Utah is $0 because I don’t yet have a job there.

The following questions are for those seasoned investor who started with just a few dollars and had to be creative with financing and also for any creative, investor-friendly lenders who would be kind enough to offer advice...

1 - Am I out of luck getting an FHA loan until I secure a W2 job in UT and have proof of income there? Trying to avoid moving twice.

2 - My family owns a condo in UT I could potentially move into as a last resort (it is occupied with a spare room). Could I use this point as leverage in obtaining loan I.e. $0 rent expense?

3 - In any cases, is it possible to obtain an FHA loan without proof of income? In my case, I have proof of income but it is out of state income.

4 - I’m trying to think creatively. I have 100% confidence I can get a decent job in UT and I am actively searching. Should I put investing on the back burner and focus 100% of my effort on finding employment in UT?

Joshua Johnson · Answer

@Daniel Whitmore when my wife and I were applying to buy our first property we were unable to use her income because she didn't have what they were looking for with consistent income (working as a private nanny) so we qualified based on my income alone.

Have you looking into getting a partner who had the income qualification to get the loan? This would need to be someone who trusts you a lot like a family member, or very close friend.

David Mussaw · Answer

I suggest the same thing as @Joshua Johnson, find someone with cash or the income to get the loan needed to purchase the property.

Chris Sanchez · Answer

I’m a banker.... the real answer is no. And don’t listen to anybody about a credit union, they have same guidelines. You would have to get a hard money loan and the numbers on the deal would have to be good enough for them to loan, they are loaning on the deal not on you. Job, dti, and ndi are number one factors for a bank/credit union loan. This is not pre 2008.

Cody Ruff · Answer

@Daniel Whitmore one of the ways you can is go to a local bank or a credit union and you may be able to get a loan from a portfolio lender. Sometimes that is easier to get them a big conventional loan from a big bank.

Susie Lowe · Answer

@Daniel Whitmore House hacking is a great way to start.   Orem is also a great place to look for Duplexes.  UVU is there and the growth is expected to continue at the university.  Duplexes are hard to find but are out there.  If you can't find one, look at homes with separate entrances. I showed a house 2 weeks ago that was 299K and had a separate unit downstairs.  Look for those as well, they will be less in price than the duplex.

Stephanie P. · Answer

You're going for the wrong type loan.  To answer your main questions

• FHA won't work because of the job and income situation.  
• No, you can't get an FHA loan without proof of income and no, you don't have proof of income if you move to Provo because the income you were earning is done.

Just get a portfolio loan for the new property.  25% down and go.  No job necessary because it's a no income verification loan.

Shaun Weekes · Answer

What are the numbers on the duplex.  Value and rents.

Salvatore Lentini · Answer

@Daniel Whitmore - the lenders I use for my portfolio of properties should be able to lend based on the info you provided.  The toughest part would be that it is your first rental and you are out of state but there are ways around that.  Message me if you'd like to talk.

How can I get a loan with low income?

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