In a really tough spot - uncertain what to do - advice needed

70 Replies

Hey guys, so we have a closing scheduled for this coming Monday, and I need to wire $24,000 to the closing company for this house today (Friday) to have the funds reach on time for the closing. This will be my first home purchase and we are going to use the home for my mom to retire in. I am self-employed and show no income on my tax returns, so we had to go through private sources to get the funds. The first private lender (mom's friend) backed out a couple weeks ago, and just yesterday (Thursday) our other private lender (my dad) bailed on us. I don't know what to do now since both of our private lending sources bailed on us. We are very modest people and $24,000 is beyond our personal budgets at this time. Is there anything you guys can recommend? Is there anyone out there who knows a hard money lender who could work with us on this? I'm panicking because we really found the perfect place for my mom to finally be able to retire in peace, but now both of our private lenders bailed on us. Any advice on this would be hugely appreciated... we need to figure out what to do today (Friday, September 6th) and are nervous wrecks over this. Thank you for any replies. 

@Chris M. You need to delay closing. That’s the only realistic answer. Delay closing 2-3 weeks and figure out how to finance it.

You will also likely need to use an actual lender as your "private lenders" aren't really lenders and you'll likely have the same issue you've been having.

Find a no-doc lender, pay the higher interest rate and put 25-35 percent down.

Originally posted by @Caleb Heimsoth :

@Chris M. You need to delay closing. That’s the only realistic answer. Delay closing 2-3 weeks and figure out how to finance it.

You will also likely need to use an actual lender as your “private lenders” aren’t really lenders and you’ll likely have the same issue you’ve been having.

Find a no-doc lender, pay the higher interest rate and put 25-35 percent down.

Thanks so much for the reply! When you say a "no-doc lender" does that mean a hard money lender? Is there a company or individual that you could recommend? Really appreciate this info. 

 

I think @Caleb Heimsoth pretty much has it. Hard money lenders can work fast, but not that fast typically. There may be bridge lenders out there that could make it work, but I don't think they could even make it happen over the weekend. You need more time

Originally posted by @Chris M. :
Originally posted by @Caleb Heimsoth:

@Chris M. You need to delay closing. That’s the only realistic answer. Delay closing 2-3 weeks and figure out how to finance it.

You will also likely need to use an actual lender as your “private lenders” aren’t really lenders and you’ll likely have the same issue you’ve been having.

Find a no-doc lender, pay the higher interest rate and put 25-35 percent down.

Thanks so much for the reply! When you say a "no-doc lender" does that mean a hard money lender? Is there a company or individual that you could recommend? Really appreciate this info.

 

I don’t have any specific lenders in mind but you need one that lends to self employed people.  How long have you been self employed? 

Have you talked to a conventional lender about this? I'm guessing there's another reason besides self employed that you're having difficulties, such as DTI or credit score.

 

Originally posted by @Caleb Heimsoth :
Originally posted by @Chris M.:
Originally posted by @Caleb Heimsoth:

@Chris M. You need to delay closing. That’s the only realistic answer. Delay closing 2-3 weeks and figure out how to finance it.

You will also likely need to use an actual lender as your “private lenders” aren’t really lenders and you’ll likely have the same issue you’ve been having.

Find a no-doc lender, pay the higher interest rate and put 25-35 percent down.

Thanks so much for the reply! When you say a "no-doc lender" does that mean a hard money lender? Is there a company or individual that you could recommend? Really appreciate this info.

 

I don’t have any specific lenders in mind but you need one that lends to self employed people.  How long have you been self employed? 

Have you talked to a conventional lender about this? I'm guessing there's another reason besides self employed that you're having difficulties, such as DTI or credit score.

 

My original plan was to get a personal loan but the request was denied from a few online lenders due to my lack of proof of income on my tax returns since I write everything off. I have been self-employed for 7 years. My credit score is okay, a little over 700. Conventional lenders seem very hesitant to work with self-employed people that don't show income. 

 

Originally posted by @Chris M. :
Originally posted by @Caleb Heimsoth:
Originally posted by @Chris M.:
Originally posted by @Caleb Heimsoth:

@Chris M. You need to delay closing. That’s the only realistic answer. Delay closing 2-3 weeks and figure out how to finance it.

You will also likely need to use an actual lender as your “private lenders” aren’t really lenders and you’ll likely have the same issue you’ve been having.

Find a no-doc lender, pay the higher interest rate and put 25-35 percent down.

Thanks so much for the reply! When you say a "no-doc lender" does that mean a hard money lender? Is there a company or individual that you could recommend? Really appreciate this info.

 

I don’t have any specific lenders in mind but you need one that lends to self employed people.  How long have you been self employed? 

Have you talked to a conventional lender about this? I'm guessing there's another reason besides self employed that you're having difficulties, such as DTI or credit score.

 

My original plan was to get a personal loan but the request was denied from a few online lenders due to my lack of proof of income on my tax returns since I write everything off. I have been self-employed for 7 years. My credit score is okay, a little over 700. Conventional lenders seem very hesitant to work with self-employed people that don't show income.

 

Well it’s hard to have it both ways.  You write everything off to pay no taxes but then to most lenders you make no money. 

Some lenders will sift through the returns and add stuff back to your income that’s clearly living expenses or what not.  You just have to find them.

 

Originally posted by @Caleb Heimsoth :
Originally posted by @Chris M.:
Originally posted by @Caleb Heimsoth:
Originally posted by @Chris M.:
Originally posted by @Caleb Heimsoth:

@Chris M. You need to delay closing. That’s the only realistic answer. Delay closing 2-3 weeks and figure out how to finance it.

You will also likely need to use an actual lender as your “private lenders” aren’t really lenders and you’ll likely have the same issue you’ve been having.

Find a no-doc lender, pay the higher interest rate and put 25-35 percent down.

Thanks so much for the reply! When you say a "no-doc lender" does that mean a hard money lender? Is there a company or individual that you could recommend? Really appreciate this info.

 

I don’t have any specific lenders in mind but you need one that lends to self employed people.  How long have you been self employed? 

Have you talked to a conventional lender about this? I'm guessing there's another reason besides self employed that you're having difficulties, such as DTI or credit score.

 

My original plan was to get a personal loan but the request was denied from a few online lenders due to my lack of proof of income on my tax returns since I write everything off. I have been self-employed for 7 years. My credit score is okay, a little over 700. Conventional lenders seem very hesitant to work with self-employed people that don't show income.

 

Well it’s hard to have it both ways.  You write everything off to pay no taxes but then to most lenders you make no money. 

Some lenders will sift through the returns and add stuff back to your income that’s clearly living expenses or what not.  You just have to find them.

 

Thank you again for your information and advice. I am strongly considering asking to delay the closing, but am worried about putting the seller in a tough situation as well because we'll still have to find a way to get the funds. But this house is perfect for my mom's retirement, so I think it is worth the effort. Will reply to this thread with how it goes/what we decide to do.

 

for a normal lender this is mission impossible .. even with the time..  small loan  no assurance of repayment

this is a family and friends or cash deal all the way..  its 24k TOTAL for the property ?

Originally posted by @Chris M. :
Originally posted by @Caleb Heimsoth:
Originally posted by @Chris M.:
Originally posted by @Caleb Heimsoth:
Originally posted by @Chris M.:
Originally posted by @Caleb Heimsoth:

@Chris M. You need to delay closing. That’s the only realistic answer. Delay closing 2-3 weeks and figure out how to finance it.

You will also likely need to use an actual lender as your “private lenders” aren’t really lenders and you’ll likely have the same issue you’ve been having.

Find a no-doc lender, pay the higher interest rate and put 25-35 percent down.

Thanks so much for the reply! When you say a "no-doc lender" does that mean a hard money lender? Is there a company or individual that you could recommend? Really appreciate this info.

 

I don’t have any specific lenders in mind but you need one that lends to self employed people.  How long have you been self employed? 

Have you talked to a conventional lender about this? I'm guessing there's another reason besides self employed that you're having difficulties, such as DTI or credit score.

 

My original plan was to get a personal loan but the request was denied from a few online lenders due to my lack of proof of income on my tax returns since I write everything off. I have been self-employed for 7 years. My credit score is okay, a little over 700. Conventional lenders seem very hesitant to work with self-employed people that don't show income.

 

Well it’s hard to have it both ways.  You write everything off to pay no taxes but then to most lenders you make no money. 

Some lenders will sift through the returns and add stuff back to your income that’s clearly living expenses or what not.  You just have to find them.

 

Thank you again for your information and advice. I am strongly considering asking to delay the closing, but am worried about putting the seller in a tough situation as well because we'll still have to find a way to get the funds. But this house is perfect for my mom's retirement, so I think it is worth the effort. Will reply to this thread with how it goes/what we decide to do.

 

Yes it’s a bind for the seller but you don’t have any choice.  No lender will fund in a day.

 

I second what people are saying about finding a new lender. I'm self-employed too and while it's a huge pain in the butt providing proof of income with the dozens of documents and paperwork they request, it was a bigger pain in the butt finding a lender who will work with us. Keep looking, they're out there. 

Originally posted by @Jay Hinrichs :

for a normal lender this is mission impossible .. even with the time..  small loan  no assurance of repayment

this is a family and friends or cash deal all the way..  its 24k TOTAL for the property ?

Correct 24k total for the property, in a depressed area but in good enough shape that it will need mostly cosmetic work and will make for a perfect retirement home for my mom. It's not a lot of money but again we are of modest means and if I paid for it all myself it would put me in a very difficult situation. 

Originally posted by @Chris M. :
Originally posted by @Jay Hinrichs:

for a normal lender this is mission impossible .. even with the time..  small loan  no assurance of repayment

this is a family and friends or cash deal all the way..  its 24k TOTAL for the property ?

Correct 24k total for the property, in a depressed area but in good enough shape that it will need mostly cosmetic work and will make for a perfect retirement home for my mom. It's not a lot of money but again we are of modest means and if I paid for it all myself it would put me in a very difficult situation. 

Yup not going ot happen in the real world of lending.. this is family and friends deal without those there is no deal.  tough as it sounds. 

 

@Chris M.   I agree with @Caleb Heimsoth   If you are supposed to close today and don't have the money, you need to contact them immediately to delay closing or risk losing your deposit.  while you may not like asking family for money, you have a few choices: use your own money, get money from family and friends or get a loan.  You can also do a combination of them.  Maybe the two people who were originally going to lend you money can loan you some of it and when combined with your own money, you have it covered.

When you say, It would put you in a very difficult situation, do you mean you don't have it? Or can you do it but it would be difficult to maintain your business until you obtain other financing? Once it's yours, can't you list it as an asset to obtain a business or personal loan using it as collateral? If your bank won't do that, possibly talk to one of the private lenders and ask if, once you've purchased it, they'd give you a loan to cover x% of it (70% or so) along with a lien on the home to guarantee the loan. You'd risk them backing out then just like now, but they should feel more comfortable with a 70% loan versus 100%, especially if you're offering them a higher interest rate than they can obtain elsewhere. As far as an extension, most contracts have a standard extension period for title or loan issues, so most sellers will understand if a slight extension is needed to complete the settlement.

@Chris M. Just like @Caleb Heimsoth and @Jay Hinrichs mentioned this is a tough one to make happen in 72 hours, really. 

Try to find another source of funds to maybe add to any money you have to buy the home all cash for your Mum. With this timeline, it is very tight and you want to be upfront with the Seller and title company sooner or later about delaying the closing instead of waiting last minute or a no-show at the closing table.

Hope it all works out for you and your Mum. Goodluck!

Originally posted by @Lynn M.:

When you say, It would put you in a very difficult situation, do you mean you don't have it?  Or can you do it but it would be difficult to maintain your business until you obtain other financing?  Once it's yours, can't you list it as an asset to obtain a business or personal loan using it as collateral?  If your bank won't do that, possibly talk to one of the private lenders and ask if, once you've purchased it, they'd give you a loan to cover x% of it (70% or so) along with a lien on the home to guarantee the loan.  You'd risk them backing out then just like now, but they should feel more comfortable with a 70% loan versus 100%, especially if you're offering them a higher interest rate than they can obtain elsewhere.  As far as an extension, most contracts have a standard extension period for title or loan issues, so most sellers will understand if a slight extension is needed to complete the settlement.   

But doesn't a refinancing loan or HELOC require the same criteria such as income that a normal loan does? I thought about this idea too and appreciate any more insights you could give here.

I was thinking more of the business route, not a refi or HELOC. I know my family's business had loans using my parent's home as collateral. I believe it was a floating rate, and the bank could call it in annually, I believe, if they chose to, but they never did, just made us submit a business and personal financial statement each year. If it truly is your mom's best option, it may get you both through until you can figure out better financing.

Am I wrong in assuming your mother has some income coming in? IF she has a modest check each month, you might ask if she can rent the property until funds are available. Put down a large deposit and pay a few months rent in advance (if possible).

Work with your agent who may know some sources you haven't explored yet. Good luck!

PS what's up with your Dad bailing on you? Does he think you aren't good for it?

Small, local banks can be able to bend more than a bigger institution. I talked to one about a difficult property and while they would have made the loan it wasn't profitable for me. Another local bank also would make the loan on that property as a business loan to me with part of the payment being accounted for by the rent I would receive. Again, wasn't profitable but you don't need profit, you just need to break even. 

If your mom has income such as social security can she pay you rent? It will take time to find a bank etc but if you could purchase it as an investment with her as the tenant maybe someone would be willing to finance a part of it. It is a very small amount of money. 

You need to request a delay. It happens all the time. I have a deal I'm waiting to close, I'm on the third extension. First one because they hadn't gotten the appraisal back, then couldn't because because they were waiting on something else, now they say they have it all but can't get everything wrapped up in time. Original date was 9/3 then 9/9 and now 9/11 although they say they will be ready 9/10 but added the day for just in case. This is also a small dollar deal as it is a vacant building lot in a low cost area. While I had plans to reinvest the money I don't do things without having my ducks in a row so have only scheduled to look at some houses. Delays happen all the time and can be disappointing but not necessarily that bad.

Thank you to everyone for the replies this is very helpful. I sent the agent a request today to either a) let us delay the closing or b) if the seller is open to it let us put $5,000 down and pay the rest via owner financing. We had already proposed owner financing previously and the seller was not interested, but perhaps the $5,000 down offer will make it more appealing. Somehow I doubt it though, and I think the agent is probably pretty unhappy since the closing was scheduled on Monday.

@Lynn M. interesting I never thought of a business loan using the house as collateral. This sounds like something maybe a credit union or local bank would be more apt to do unless you knew some organizations specifically? I was looking at secured personal loans where I could use my car as collateral but the highest I could seem to prequalify for was 10k or less.

@Guy Yoes My mom makes a small amount from social security each month (around $650). When we first proposed owner financing to the seller we explained that the monthly payment would be covered by her social security, but the seller didn't seem interested. However, they had the house on the market for a few weeks and had already lowered the asking price once, perhaps they would be more open to it given the conditions of the market. In regards to my dad, my parents have been divorced since 1988 and my dad has always been distant (geographically and emotionally). He's a good guy at his core, but let's just say he has some issues.

@Sharon Rosendahl yeah I should probably spend more time contacting local credit unions. To be honest I was just hoping to do it with friends of the family or my dad but since that doesn't look like it's going to work out local banks/credit unions are probably the best bet. Today I requested a delay OR if we could put 5k down and owner finance the rest on the property (the seller wasn't interested in owner financing previously but perhaps the 5k down would make it more appealing). My mom makes about $650 per month in social security which would cover the monthly payment. I think my buyer's agent is getting pretty frustrated with me at this point though, this is my first home buying experience and we've had some back-and-forths, ups and downs to say the least. But I suppose if my agent gets pissed at me I could still work directly with the seller and her agent right? I mean my buyer's agent is the one who showed me the house so I'm grateful for that, but if he stops communicating with me I could theoretically still get the place?