Should I just give up?

Opa Locka, FL · Member since 2013 · 7 posts · 0 votes

Hello everyone,

This is my first post, but my brother frequents this site so i'm around here from time to time. Anyways, I have been trying hard to secure my first loan, but I have been rejected by many of the top banks. I'm self employed with a good track record of 3 years of tax returns, but most of them say that it's hard for them to give out a loan to small business owners like me. Many people advise me to get a hard money loan, but I don't feel that a 10-14% interest is worthit..Should I just give up?

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Pat L.

Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes

12y

I once had the same problem so went the route of a mortgage broker, thinking I would get some form of high % private lending. But they secured a loan on a highly speculative investment property with a competing bank 2% higher than a conv. mtg ??

That property returned a very nice profit & in hindsight was well worth the aggravation & irritating fees to get it.

NEVER give up.....

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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
12y
Don't give up. If by "top banks" you mean big banks, then that might be your problem. Most of the big banks (i.e. Wells Fargo, BofA, etc) have more stringent loan requirements and very little flexibility. Try calling around to some of the smaller community banks. They are usually easier to work with.
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Roy N.Pro Member
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
12y
@Jason Luo

I would first go to where you bank your business as you have a history with them. If they will not entertain taking a mortgage from you, then as @Kyle J. recommends, start calling on the small local banks and credit unions.

When you find one that treats you well, be sure to move your business banking there, so that both your current and future bank are properly rewarded for their role.
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Xing Zhu
Durham, NC · Member since 2012 · 498 posts · 48 votes
12y
You certainly should try many more local banks and be quick, as the new implementation of Dodd-Frank will soon make it more difficult for you. Ask your local friends in similar situations to see where they got loans. You can also tell the bank that you are willing to put more money down (if you can). I assume you are buying for residency.
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John Moore
House Flipper · East Stroudsburg, PA · Member since 2013 · 1k+ posts · 205 votes
12y
Welcome to the BP family. It is always to early to quit. Learn from your rejection.As it was suggested try credit unions, mortgage brokers and smaller lending institutions. Find out why you are being turned down, is it for lack of previous credit, debt to income rations, credit scores, declared income or lack of reserves? Once you find out the reason, correct the problem and go on. If an first you don't succed, push on. Happy holidays and a successful next year.
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Jason Luo
OP
Opa Locka, FL · Member since 2013 · 7 posts · 0 votes
12y
Thank you everyone. Yes, I have been going to big banks such as bank of america, wells fargo. I have an establish history with wells fargo and i'm willing to downpay more for a loan but i'm getting rejected. I have a very good credit score as well. I've tried with a few smaller credit unions but they requested a lot more information such as my recurring clients information for my business etc.
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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
12y
As a self-employed person you're going to have to jump through some hoops to get a loan. Not much you can do other than that. As others have suggested, move away from the big banks and try small, local banks. You may have to call several dozen, but people are making loans.
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Andy Robison
Investor · Kansas City, MO · Member since 2013 · 465 posts · 170 votes
12y
Rejection sucks, It always does. Remember this. J.K. Rowling was rejected 12 times for Harry Potter. The Dirary of Ann Franke Rejected 4 times. Lord of the Flies rejected multiple times. Sylvester Stallone, he was broke, sold all his wife's jewlery and sold his dog for a $50 before he found someone to make Rocky. Now that story is one you should read. (the dog he runs with in the movie is the one he sold. He then spent over $15,000 to buy his dog back.)
It is always to early to quit trying for your goals.
When you talk with them what are the reasons they are rejecting you?
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
Jason the big banks are just selling off the paper and that's where they make the money.

Since the last real estate crash when paper was sold to Wall Street and loans defaulted there have been "buy back" provisions implemented on all loans that are sold off.

This is why large banks do not want to sell off non-conforming paper and just vanilla type stuff. I have seen very strong borrowers worth tens of millions being turned down by big banks they had had relationships with for decades. The loan just didn't fit the banks vanilla banking process.

This is why as mentioned you need to smaller local to regional banks who are more flexible to make non-conforming loans.
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Elizabeth Colegrove
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
12y
@Jason Luo

I would go to a small bank or a mortgage broker. If you have a real estate agent I would ask them who they recommend. I know my agent out in California has worked with so many clients she knows of many different mortgage brokers who can help different kinds of people.
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Jason Luo
OP
Opa Locka, FL · Member since 2013 · 7 posts · 0 votes
12y
I've put a lot of thought into it. Would it be a better option for me to cash pay for a house right now? Then I could use it to draw out an equity loan for future investment properties?
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Pat L.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
12y
I once had the same problem so went the route of a mortgage broker, thinking I would get some form of high % private lending. But they secured a loan on a highly speculative investment property with a competing bank 2% higher than a conv. mtg ??

That property returned a very nice profit & in hindsight was well worth the aggravation & irritating fees to get it.

NEVER give up.....
3 Reply
Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
12y
Another option is to buy properties with seller financing. This is a good fit for a seller who needs secure income higher than a 1-2% CD.

Only quit if you are going to pursue something better instead.
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Robert Leonard
Investor · Lafayette/Baton Rouge, LA · Member since 2013 · 1k+ posts · 915 votes
12y
Where there's a will, there's a way Jason Luo! You said your brother frequents this site - you should too! Read, listen to the podcasts, there's so much here waiting for you to absorb. If you are here, you are 3 feet from gold! Why refuse hard money if that's the only way you can get a deal done? It's still a way! HMLs are experienced pros who will only fund your deal if it has a high probability of success. I am talking about a flip, HM is not a solution if you want to buy/hold. If you have the cash to do an all cash deal, just use an HML for the rehab portion of your deal. You will get an "approval" of your deal by someone who's a pro at this and establish a relationship you will need sooner or later when you have more deals than money.
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Jason Luo
OP
Opa Locka, FL · Member since 2013 · 7 posts · 0 votes
12y
Originally posted by @Pat L.:
I once had the same problem so went the route of a mortgage broker, thinking I would get some form of high % private lending. But they secured a loan on a highly speculative investment property with a competing bank 2% higher than a conv. mtg ??

That property returned a very nice profit & in hindsight was well worth the aggravation & irritating fees to get it.

NEVER give up.....

Did the small bank request a lot of info? Tax clients etc. etc.?
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Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
12y
Jason, I am self employed and have other businesses, and the banks often want financials, tax returns, and detail on unrelated businesses. Get all your books in order and be ready to show them.
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Pat L.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
12y
.... exactly as Jon Klaus said.

Complete set of books etc & showing considerable income & no debt but the Bank 'kid' was not impressed. So I assumed the Mortgage broker comprehended the investment & knew how to present the same information.

However, we just hit the same wall recently with refinancing a free & clear investment property to finance another. The bank wanted $5,000 in fees etc, 60% LTV @ 4.5%. So we paid cash then flipped it CFD, as planned.

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Adam Miyata
Real Estate Investor · Irving, TX · Member since 2013 · 12 posts · 0 votes
12y
Hi Jason,

Just wanted to add two things:

1. Don't give up! You've done the hard part (identified an obstacle), now all you have to do is figure out an action plan and take steps to get past the obstacle.

2. As others have said, talk to small banks. The piece I'd like to add here is that you need to talk to a decision-maker at the bank… Ask around to see who will listen to you. If the bank is small enough, you may even be able to talk to the president.

Good luck!
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Account Closed
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
@Jason Luo,

You might want to get someone to co-sign for you. How long have you been in business? Let the banks know that you will personal guarantee the business loan.

Joe Gore

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Nicolas Gonzalez
Commercial Real Estate Broker · Winston Salem, NC · Member since 2013 · 38 posts · 9 votes
12y
If you have money readily available at 10%, there is nothing holding you back from being able to make a deal happen, period. Buy with hard money then go back to banks in a year. The momentum will build on itself.
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Jason Luo
OP
Opa Locka, FL · Member since 2013 · 7 posts · 0 votes
12y
Originally posted by @Nicolas Gonzalez:
If you have money readily available at 10%, there is nothing holding you back from being able to make a deal happen, period. Buy with hard money then go back to banks in a year. The momentum will build on itself.

I've asked around a lot today and quite a few people did recommend the same thing. They all said that I can get a hard money loan, then refinance down the line and hard money loan would allow me to avoid all the hassles with taxes, books, finance etc. Do you have any experience with doing this? Thanks
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Nicolas Gonzalez
Commercial Real Estate Broker · Winston Salem, NC · Member since 2013 · 38 posts · 9 votes
12y
Yes. Typically you will be waiting for 1 of 2 things - your next year's tax returns or 6 months of 'seasoning' (this can vary) for the bank to turn around and refinance the asset for you.
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Ben Leybovich
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
12y
Jason - it's called creative finance :)
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Derreck WellsPro Member
Specialist · Pelham, NH · Member since 2013 · 544 posts · 269 votes
12y
I'd call 2 or 3 mortgage brokers and tell them that you're talking to 2 or 3 brokers. Tell them that the best offer gets your loan (best rate, lowest points, etc). Competition is how a free market society works. I compete for work all the time, why can't the brokers?
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Nicolas Gonzalez
Commercial Real Estate Broker · Winston Salem, NC · Member since 2013 · 38 posts · 9 votes
12y
Derreck Wells because unless you are dealing with someone high up on the commercial lending side of a bank, the drive of your run-of-the-mill mortgage broker is very low- they are usually more focused on meeting their volume goals by snagging as much low hanging fruit as they can to get too worked up over someone they are going to have to compete over that is going to be more of a hassle to get through underwriting. Results may vary, but definitely at least stick to community banks who may be able to do more creative 'in house' financing.
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Dion DePaoliPro Member
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
12y
@Jason Luo

There is some information missing in this thread. What occupancy will the property be that you need a loan to purchase?

I have not seen where you mention this is an investment property, so I am assuming this is a primary residence. Bluntly, stop thinking of hard money loan. That is a stupid idea, IMO. Number one, it will be difficult to find a hard money lender for your primary home purchase. Number two, the same issues you are having right now with a conventional loan will occur when you attempt to refinance the hard money loan away. Take the idea, wade it up and throw it in the trash, it is not a good idea and it is not sound advice.

The post strikes a cord with everyone, nobody wants to see somebody give up. Nobody is going to tell you to give up. You mention you have reasonable income, although self employed and good credit. You mention you have enough cash to put down a 'larger' down payment, yet it is not defined. Curious, what in terms of a percent of the total purchase price of the property you want to buy would this down payment you can put down, be?

You mention one of the banks asked for additional underwriting material for your business and you. The exact denial for the loan is not in any of your posts. it is also not clear if you are unwilling deliver the required items to underwrite your file. Did you provide this and then were you turned down? Can I also ask, what type of business you are in? Can I also ask, are your year end tax returns all positive numbers or do you show losses? Can I also ask, over the last three years, has profitability gone up or down year or over year both top line revenue and bottom line profit? Can I also ask, did you only go to the large commercial banks such as Wells, BOA and such or did you also go to some small local community and regional banks and were denied for the same reason?

Just to rule out a couple other things, can you tell us generically what type of property you are trying to purchase is, such as a single family residence, duplex, condo, town-home, 10 acre farm with house or 50 unit apartment building, etc? If you have not specifically selected a property, what type of property are you trying to purchase?

I would like to help get you some commentary that actually works on trying to help you find the path to solve your problem while not making new ones. In order to do that we want to understand why you believe you are a good borrower but the banks can not prove you are a good borrower. That is why you are being denied the loan. Do not post specific personal information, but adding some more details to this would be more productive for the conversation than where it sits right now. Which is, you being frustrated and wanting to give up and everyone else being frustrated that you are frustrated but nobody wants you to give up. Meanwhile, we don't have enough information to help really.

I went back and italicized the questions that if you can answer those, the conversation might be able to be more productive on how to get you into a better spot to be a considered borrower by a lender. I know the knee jerk reaction is the banks tightened up their credit profiles and it is just "tough", however there is still a reason (underlying underwriting guideline) which functions as the core reason for turn down. Finding that reason and dealing with it will be the path to the solution.
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