What would you do at 19 years old?

[Max Bellino]

Hey everyone, 

Any advice for a 19-year-old with lacking employment over the past two years to get approved for bank lending? I have great credit and a great deal on a property. The only thing holding me back is showing stable income over the last two years with taxes, is what my mortgage broker told me. I would rather stay out of private lending because of the higher rates. Any idea of getting around the bank's approval process, for example, I can use 75% of the rental income and a co-applicant to help. But is there anything else that could help my citation? Willing to share more about the deal if necessary. Thanks!

P.S. Seller finance is out of the picture... I need lending. 

[Kevin Von Storch]

@Max Bellino have you considered a family mortgage? Essentially, your family acts as the bank. The IRS sets the interest rates and they are much lower than the market rates, just above 4%. Not everyone can take advantage of this but if you are in a position to, I’d highly recommend it.

You can find out more info at https://www.nationalfamilymort...

[Mike Hern]

Quote from @Max Bellino:

Hey everyone, 

Any advice for a 19-year-old with lacking employment over the past two years to get approved for bank lending? I have great credit and a great deal on a property. The only thing holding me back is showing stable income over the last two years with taxes, is what my mortgage broker told me. I would rather stay out of private lending because of the higher rates. Any idea of getting around the bank's approval process, for example, I can use 75% of the rental income and a co-applicant to help. But is there anything else that could help my citation? Willing to share more about the deal if necessary. Thanks!

P.S. Seller finance is out of the picture... I need lending. 

Okay, you asked for advice, here ya go . . . 

For instance
Borrowing $200,000 at 7% through the mortgage broker is a payment of $1,330 month

Borrowing $200,000 at 12% through private money is a payment of $2,057 a month - A difference of $727 a month or $8,724 a year.

Let's project the property will go up 5% per year, so when you finally are able to get financing through your broker, you have lost two years of experience as an investor (that's unforgivable) and you are now paying $200,000 * 1.05% year one for $210,000 and for year 2 for $210,000 * 1.05% is $220,500. So, you are paying more, have lost opportunity and lost experience and have lost momentum.

How is that you are ahead waiting for conventional financing?

[Ted Almeida]

I would try several commercial lenders. Check with your local real estate club to find them. With a cash flowing property and 80% ltv or less, you should be able to get a loan. It's a learning process though, isn't it?

[Austin Fowler]

Private lending is not that bad --- when I raise capital privately I pay 8%, no points or other fees.

[Chris Seveney]

@Max Bellino

I recommend getting stable employment and saving money. Learn to be a responsible adult first before making a large commitment in real estate

[Josh Manfred]

Max I would watch some content from Cody Davis and Christian Osgood.  One of the things they say is that money comes from people, and that the story is more important then the real estate.  So if your deal is good, then figure out what your goals are and create a narrative to support that goal, then reach out to people that are friends/friendly to your network or are in your network. You never know, maybe one of them can take a loan against a 401k, or they have some sort of account they can use to loan to you at X% that works for you.  Then after you have some proven numbers you can refi out and pay back you investor.

[Jaron Walling]

@Mike Hern "you have lost two years of experience as an investor" - 100% agree with that statement. If a deal is really that good money should find you. I would prove it with numbers, a long term plan, and then hammer the private financing angle. 

Friends, family, and investors want to hear the story. If the numbers make sense with a strategy you have done 2/3 of the work. 

[Sasha Mohammed]

For consumer lending, the 2 years' consistent and stable income really only applies if you are self employed, or a part-timer. if you start a W2 job with either full time hours or a salary basis for pay, you should be able to use 100% of that base income for qualifying for a fannie/ freddie loan all day long. The catch to being able to use the 75% of the lease from the subject property is to document a "present housing expense" -- which doesn't necessarily need to be a mortgage. if you're paying rent, document that, and depending on the lender, you should be good to go (as long as your DTI is in line).

Most investors move away from this strategy, though, as its cumbersome to qualify; and to be frank, most investors wont qualify with the way their taxes are filed. 

For those, there is commercial lending. Looks at the property as a business (is it cash-flow positive after carrying costs) to qualify you, not YOU as a BORROWER. Yes, the rates are higher, and many lenders will want to see you own your primary first (not all, though).

...But as others have mentioned, getting your foot in the door with slightly lower returns is more beneficial than not getting your foot in the door.

[Jamie Jones]

I have closed conventional loans for 19 year old clients in the past couple of years. Just had to prove that their current income was stable/consistent, and then used their status as high school student to fulfill the 2 year requirement (client had to get me transcripts from his senior year of high school). It's the same thing we have to do for those just starting a new job after college. The issue will be if the income is not sufficient enough to repay the loan, or is considered variable and not consistent.