Financing Options When There Is Limited Employment History

7 Replies

Hi all,

I am curious to see what financing options I have. I recently graduated university, so I do not have much employment history. I currently have 1 property (this October will be 2 years) but am looking into getting another property. I have read about financing options and such on this website. I suppose I can contact community banks and see if they would be willing to give me a loan. I doubt any of the bigger banks (like a Chase) would give me a mortgage, right?

On a property between 50-70K, I can probably put around 20-30% down, if that makes a difference. In an ideal scenario, my rental income per month would be paying off my mortgage/loan as well. (I would have no other choice as I will be going to grad school and won't have steady income for a while). Hence, if I can have my property paying off the loan and maybe even cash flowing a bit each month, that would be perfect.

So any ideas? I realize hard money lenders would probably lend, but most likely it would be at very high rates. 

I don't know how common of a scenario this is, but looking to hear everyone's thoughts!

Thanks in advance! 

I did a mortgage and a rehab loan through two different banks and all they wanted was to see two paystubs. They didn't even care that the job was a temporary contract position. They counted my university education as "employment history" and listed it under "previous employment."

The irony of the situation was that my self-employment history, which had just celebrated its two-year anniversary and was more lucrative than the contract position, was not considered at all. Prior to getting the temp job, I was not qualified at all for a mortgage. I've seen firsthand how broken the underwriting system is.

If you do not have W-2 income, you're going to need at least a month's worth to do it this way. It doesn't matter what type it is--only that you're not hitting the upper limit of debt-to-income.

Thanks for the info! I do have self-employment history but it is mainly from before college (and during my teenage years). So I don't know whether or not that will have an effect.

I do have some pay stubs (w-2?) that I can show from an internship last summer. Plus, I am doing an 8 week internship this summer which will show pay stubs.

Fannie Mae and Freddie Mac have created a framework that defines what a legally funded mortgage backed security should resemble. This framework is called the Automated Underwriting System (AUS) and it generates a certificate every time a desktop review has been conducted on a mortgage file. The AUS is a hardcoded system that will initially put the file through the wringer, detecting any red-flags & criteria discrepancies that the borrower will have to be responsible for before receiving any credit. This template establishes a guide for all brokers and lenders, thus eliminating the taken chances and guessing games involved with submitting and processing a loan. The certificate gives a conditional approval and enumerates a set of stipulations that need to be satisfied in order for the file to reach full approval. Underwriters will interpret the AUS, waiving or demanding the conditions set forth by the system generated parameters. Employment is a very cert. driven condition and can be different from file to file. 

Rental income is a little different than income earned through regular wages or self employment. The two questions every underwriter wants answered is how long you've been in your current position and how many years you've been in the same line of work. Since the credit lending decision is made based on the borrower's capability to repay debt and not your tenant's, the bank will always take the conservative approach and take your gross adjusted income. This means after you write-off deprecation, insurance, interest etc on your rental property, the figure you're left with is what the underwriter will utilize as your earnings. 

To help alleviate some confusion as far as your rental income goes, its really simple. The bank's argument is that if your tenant loses their means to pay rent, it clearly automatically alters your capability to uphold the mortgage since you're solely relying on the collected rent to pay down your loan. After-all you're the one the bank has designated as the trustor and not your tenant. As far as regular income goes, wage earners who have been in their line of work for many consecutive years and just so happen to be in a new job can get away with only documenting two bank statements or only one year of W2s while a sole proprietor might have to provide personal & business returns for the past two years to prove that the earnings are in fact legitimate with a strong likelihood to continue for the years to come.

Unfortunately I'm not licensed in FL to discuss rates and payment with you on potential financing, probably will be very soon, however i would be more than happy to further clarify or answer any questions you might have. Cheers.

Private lenders. Find someone with money who will be your personal mortgagee. It's not simple, but it's not difficult either. I recently raised over a $150k at a McDonald's recently (initially it was $40k and that loan lead to two more, totaling over $150k) be knowledgeable about your market, know your numbers and strategy, pitch, and deliver the results you said you would. Good luck

Thank you everyone for replying. So would anyone say that I should not try contacting banks? I feel like some banks may be more lenient (like a comm bank) but I wouldn't be sure as to what is the best way to approach them.

Hey lance you seem to be in a situation very similar to one I found myself in when I first started investing. Without a w-2 or 9-5 job most big banks have little to no interest in lending to new real estate investors, regardless of there assets hard or otherwise. For example me and my partner had no debt aside from our mortgages on our homes we currently live in. We have no revolving credit card debt and over 150,000 cash. One bank offered to give us a 10k loan as if that would help us start!! One area we pursued and it is finally showing dividends is seller financing. Banks require a down payment of generally 25% on investment properties unless owner occupied. I found a seller who was only asking for 20k on a 125k purchase price for a six unit fully rented just in need of some tlc. The end result of this deal which we are currently signing papers for is a 3 building 10 unit deal. The total purchase price is 225k and we are only putting down 35k. That is about 15.5% which is lower than any bank and we don't have to worry about any income requirements. All ten units are currently rented and the previous seller has agreed to stay on as property manager for all three buildings! He is still investing in the area and is using this money as a down payment on a 16 unit. I hope some of this has helped!

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