Banks Recalling Loans

7 Replies

I'm looking to buy my first couple of residential properties. I have zero issue getting financing on them. I have zero debt and strong cash flow. My question is about banks calling notes. If I were to lose a significant portion of my cash-flow at some point a few months out (but still have more than enough to pay mortgages) is there any chance the bank would call the note?

@Justin W. my initial impulse is to say no. Even if your situation changes if you keep your end of the bargain by making all payments there is no breach for them to call your note, that being said I have seen some liquidity clauses that say for good cause they can call it even if you are not in default. I have only seen it happen once in a bankruptcy I worked on. Cattle prices dropped and bank used their option to call the note. Dumb move. I have never seen it happen with a mortgage on real property. I will notice @Bill Gulley as he will know for sure.

No, losing a job is not an event of default.

Depends on the type of loan, example; a HELOC could call it and on other issues as well such a credit changing. But not residential or standard commercial loans.

However, it sounds like you have expectations of losing the income, and now that you have posted it, not disclosing that could be mortgage fraud, giving false information to obtain a loan is a felony. If you say you have income, there must be the expectation of it continuing. Such income will be verified, before and can be after a loan is made. FYI :)

It's not that I have expectations of losing it, I'm thinking more along the lines if I decided to quit my day job to focus on this full time.

I suggest if you are asking for a loan, keep your job for a year, then change your mind. :)

Thanks for the advice.

Justin you should just be open and honest with your banker. If you are considering leaving your current job to work in real estate full time you should just be open and honest about it and also put it in writing.

Originally posted by @Stewart Beal:
Justin you should just be open and honest with your banker. If you are considering leaving your current job to work in real estate full time you should just be open and honest about it and also put it in writing.

I believe this would put the loan in question. I think the new qualified mortgage rules want to see some proof that you will be able to repay the loan, so I would think that means if you qualify with your current income, there would need to be a reasonable chance that income will continue from the same line of work if not the same employer.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here