Is it possible to qualify for FHA without Proof of Income?
I'm looking to do FHA 3.5% down on a duplex. Looking to House Hack, live in one unit, rent out the other. My only dilemma is I don't have any proof of income. I do however have close to $30,000 in savings, and am aiming at purchasing below market-value duplexes that I could fix up. That way I could raise the value of my property and charge a higher rent. I want positive cash flow.
How would I go about qualifying for this loan? My credit score is 667. Please help.
Thanks!
Probably not. I've had buyers with $500K to spend but no income so they couldn't qualify. We ended up putting the $500K in an annuity with $3,000/month draws. That way, they could show money still coming in every month. The bank won't lend without a proof of income because for all they know, you're going down to the casino to put your $30,000 on double zero just after you close on your new property. That's a big risk in the eyes of the lending institution.
Originally posted by @Waleed Abdulrab:I'm looking to do FHA 3.5% down on a duplex. Looking to House Hack, live in one unit, rent out the other. My only dilemma is I don't have any proof of income. I do however have close to $30,000 in savings, and am aiming at purchasing below market-value duplexes that I could fix up. That way I could raise the value of my property and charge a higher rent. I want positive cash flow. How would I go about qualifying for this loan? My credit score is 667. Please help.Thanks!
FHA wants to see that you have the willingness and the ability to repay. If you don't have income then you don't have the ability to pay and you aren't filing taxes. If you have income but aren't filing taxes that's a "no, no" and could wind you up in trouble. If you want me as the taxpayer to provide FHA loans (FHA backed loans are insured by tax paying citizens, my taxes get raised when people default) I want to know that you are playing by the rules. It is up to the bank to insure that those rules are being followed or they go to jail. It's pretty simple.
Try hard money or perhaps private money instead.
How do you plan on fixing up the property with no income? 30k will go quick and the holding costs/unforeseen expenses on a first purchase will be killers.
@Frank Geiger
$30K is more than enough for light cosmetic rehab and holding/closing costs. I live in Dearborn, MI.
@Waleed Abdulrab I'd work on getting another job to get a few months of proof of income. That's one of the first questions on every application. Or try a non-standard loan like HM (but interest and holding cost to REFI will be much higher).
@Frank Geiger That’s honestly what I’ve been thinking about doing. I’m close to hitting $30K, and once I hit that, I will get a traditional job.
Is a few months proof of income enough though?
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Your in Michigan bro , haven’t you heard of creative financing ?Don’t even use the bank if you have 30 grand . You don’t need to kiss their butt
@Dennis M.
But I has to kiss butt. Because FHA allows 3.5% down, which is what I want, because I don't wanna have too much cash tied up on a downpayment. I need reserves for rehab, and store the rest away in a savings account for cases of turnover/vacancy/repairs. HML have higher interest rates and capitalize on borrowers who can't get traditional loans.
Honestly, I just want to have a successful first house hack. A duplex with positive cash flow. And I'm sick and tired of people saying "Oh, don't get hung up on positive cash flow, there's nothing with house hacking and paying a few hundred bucks a month, then renting a place and paying a fortune". Listen, my goal is to COMPLETELY eliminate a housing expense. That's why I'm saving so much cash. So I can fix up the place on my own dime and charge more in rent so I could effectively cover the entire mortgage without HAVING to work. And if I do decide to work on my leisurely time (which I most likely will, just want options to stay home if I don't feel like working a certain day). FHA sounds like the closest thing to what I'm trying to do.
If that’s not possible, than I guess I’ll have to figure it out.
For FHA loans, you will need to show 2 years of W2 income or 2 years of Tax Returns that show income if you're a sole proprietor. If you are wanting to use FHA only, you might consider having a co-buyer and have the loan listed in their name and both of you guys on the title. Otherwise, I agree with the other comments that you should consider hard money or conventional loans. You could also try to buy with seller financing and make a offer that would be similar to a FHA loan.
@Brad Bellstedt that’s very interesting, thank you for sharing.
Forgive me as I am not that educated on how annuities work but once the money is in the annuity can you withdrawal any to use as a down payment or are you strictly putting that money into the annuity to provide proof of income via monthly pay-outs?
Thanks
Proof of income and payouts. You would want to keep your DP available. Annuities have 2 phases. The pay in phase and the pay out phase. Typically in predetermined amounts on a consistent timeline. (Monthly, bi-weekly, quarterly, etc.)
Hi BiggerPockets forums First time homebuyer
I need guidance on how to buy multi family on Nj area using a FHA program .
While working full time ,I am a resident manager assistant and a building technician as well, I’m a newbie on real estate I’ve been reading a lot and watching all this great educational from the BiggerPockets webinar and but I’m on the baby steps I just really need guidance.
How to buy , financing, manage , taxes, etc etc
Thanks
Ruben
@Brandon Owens
Does the 2 years of W2 income need to be recent?
I have 2 W2 tax forms for 2015 and 2016.
@Waleed Abdulrab Yes, it has to be the 2 most recent years
@Brandon Owens Ok could it be for just a few months out of the year?
Originally posted by @Waleed Abdulrab:@Brandon Owens Ok could it be for just a few months out of the year?
One method is to take you reported earned income for a year and divide by 12 months for a "monthly" income. Then they will allow about 1/3 of your "monthly" to be your payment. So, if you are an Alaska fisherman who works 3 months out of the year and earn $86,000 divide by 12 for $7,166 per month so about $2,365 for a payment. That would be a house worth $350,000 if you put 3.5 % down ($12,000) on an FHA loan. Talk to your mortgage broker for details.
@Waleed Abdulrab
What if you found a FSBO or a seller who owned a property outright to buy a lease option? You could fix up the property for 3-6 months while establish employment history. Then get an FHA loan on the property. You should be able to use 1 side of the duplex as part of your income and your new job. Plus you'll have instant equity since you just made the improvements and raised the value of the property.
@Dennis M. Hello Dennis,
Can you go into more about what is creative financing!
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Originally posted by @Account Closed:@Dennis M. Hello Dennis,
Can you go into more about what is creative financing!
Well that would be pretty exhausting to type but the idea is instead of going to the local bank and jumping through their hoops you get a loan directly from the president of the lending institution which is the seller . You get the seller to carry the financing via persuasion and negotiations instead of begging for loans at banks . It’s a powerful strategy that can get you a lot of doors very fast if you know what your doing
You are going to have to go creative financing to get a deal done for sure. If you were a bank would lend to someone who didn't have a documentable source of income and $30k? Probably not. Not the end of the world though, find someone that believes in you or the deal you bring them and you can maybe make something work.
@Michael Noto
What if I get a job like at an Amazon Warehouse for a few months making $15/hr. and use that to qualify for FHA? Do I need to produce an entire W2 form, or could I just use a few check stubs stating my income?
That won’t cut it in my experience. They typically look for 2-years W2 proof and current employment to my knowledge.
@Waleed Abdulrab
If you want to go FHA you will have to fit into their box. So you either need to get a steady job for 2 years and save more money.. Or partner with someone with a W2 job maybe get a 4plex? Or spend some money marketing for a property that someone will owner finance you. I suggest get a real estate based job, learn as you earn. A W2 job would be safest or you can become an agent, but honestly doesn't sound like you have the hustle for it. No offense I don't either ! This is not a quick easy route to riches it's long, it's hard and it takes a lot of time. You really have to have a passion for something or you will fail like so many do.
Originally posted by @Waleed Abdulrab:@Dennis M.
But I has to kiss butt. Because FHA allows 3.5% down, which is what I want, because I don't wanna have too much cash tied up on a downpayment. I need reserves for rehab, and store the rest away in a savings account for cases of turnover/vacancy/repairs. HML have higher interest rates and capitalize on borrowers who can't get traditional loans.
Honestly, I just want to have a successful first house hack. A duplex with positive cash flow. And I'm sick and tired of people saying "Oh, don't get hung up on positive cash flow, there's nothing with house hacking and paying a few hundred bucks a month, then renting a place and paying a fortune". Listen, my goal is to COMPLETELY eliminate a housing expense. That's why I'm saving so much cash. So I can fix up the place on my own dime and charge more in rent so I could effectively cover the entire mortgage without HAVING to work. And if I do decide to work on my leisurely time (which I most likely will, just want options to stay home if I don't feel like working a certain day). FHA sounds like the closest thing to what I'm trying to do.
If that’s not possible, than I guess I’ll have to figure it out.
What Dennis is trying to tell you is that there are other ways to finance a property.
FHA is just one of them. Given you don't have proof of income, look into seller financing.
I was able to acquire a 41-unit apartment building without qualifying for a mortgage and it's $0 down. That beats FHA isn't it? I got the building for $1.2 Million about 11 months ago and I got an offer on it right now for $2.1 Million.
Good thing I know owner financing.
Originally posted by @Brad Bellstedt:Probably not. I've had buyers with $500K to spend but no income so they couldn't qualify. We ended up putting the $500K in an annuity with $3,000/month draws. That way, they could show money still coming in every month. The bank won't lend without a proof of income because for all they know, you're going down to the casino to put your $30,000 on double zero just after you close on your new property. That's a big risk in the eyes of the lending institution.
So Roulette isn’t a legit proof of income!!! I don’t want to live on this planet anymore (Professor Farnsworth meme)