Hi everyone! I am newbie looking to turn real estate inventor.....I am about to leave a good solid/salaried position, have excellent credit, but NOTHING where I live is worth purchasing due to sky rocketing costs....looking to buy a rental property out of the area but feeling nervous.
I live in a small coastal town in northern california....looking at these areas for the past year:
Aberdeen, Wa
Klamath Falls, Or
Coos Bay, Or
Should I bite the bullet and get approved on a loan before leaving my job in 2 months? The clock is ticking!!!!
Or get a personal loan and buy as please without added time pressure - get loan now, buy over the summer?
Rental Property Investor · Washington State · Member since 2018 · 29 posts · 15 votes
5y
Welcome! I invest in Aberdeen and it is a great rental market. As for your question about getting a loan before leaving your job- you might want to investigate if that would be considered mortgage fraud. I'm 10+ years out of the mortgage business, but they underwrite to your ability to repay the loan- and if you're qualifying with a job you intend to quit... One way to find out is to bring it up with your loan officer. If you're hesitant to do that, it may be an indication that it's a bad idea.
Tucson, AZ · Member since 2018 · 66 posts · 43 votes
5y
Hi Jessica!
I don't know your situation, however the rates and borrowing costs would be much much less if you got a traditional mortgage compared to a personal loan. Cheaper loan = more cashflow and profit, so it is just something to keep in mind before you leave your company.
That being said, you will need to close and sign on the property BEFORE leaving your job. Lenders will verify that you are still working at your company up until signing day. So if you leave before signing there is a good chance that could blowup the deal and you would lose the property.
Run the numbers both ways and see how it shakes out for you, but 2 months isn't much time. Good luck!
Rental Property Investor · San Jose, CA · Member since 2021 · 13 posts · 4 votes
5y
Hi Jessica! Hope you are doing well! Are you planning on looking at single family homes or multi-family apartments for investment? I have watched some webinars regarding financing and it seems like, especially in the case of commercial loans (5 apartments or more) they may require recourse / personal guarantee if you don't have experience with multi-family (experience with larger multi-family is preferred vs smaller multi-family). And if you are planning on financing a single family home, I am not sure if the lender will solely look to the potential rental income (if not owner-occupied) or if they will also want a personal guarantee too. Seems like if the lenders require recourse / personal guarantee, I wonder if they may be looking more closely at your W-2 employment income, especially if you don't have significant assets (e.g., do you have enough assets to sustain 12 months of principal & interest - something I hear they are looking more closely at especially with restrictions on evictions due to COVID). I haven't done any deals myself, but this is something I am also going to be looking very closely at myself before I leave my W-2 "day" job.
Therefore, I suggest you call up lenders and start asking for what their criteria is to get approved so that you can make an informed decision about leaving your job. I am wondering what the answer is too, so if you find out anything please let me know!
Rental Property Investor · Washington State · Member since 2018 · 29 posts · 15 votes
5y
Welcome! I invest in Aberdeen and it is a great rental market. As for your question about getting a loan before leaving your job- you might want to investigate if that would be considered mortgage fraud. I'm 10+ years out of the mortgage business, but they underwrite to your ability to repay the loan- and if you're qualifying with a job you intend to quit... One way to find out is to bring it up with your loan officer. If you're hesitant to do that, it may be an indication that it's a bad idea.
@ Tyler Todhunter it's a shame mortgage qualification is looked at this way...I went into private practice, same profession, make more money but now self-employed. It's much better for quality of life than the school district job I left....