Are there loans that do not show up on credit report

31 Replies

I am trying to purchase a property but do not have enough for the down payment yet as I just purchased another property recently. It is a smoking deal with tons of cash flow potential so I am about to lock it up in a five month lease purchase to give myself time to come up with the down payment. I am trying to use a large conventional lender because of the 30 year fixed rates they are offering, but don't think I will be able to come up with the entire down payment, closing and reserve without borrowing a small sum of money (which they prohibit). They have a two month look back period for my bank accounts, so I would need to get they money in my account two months before close. Has anyone else been in this situation? Any ideas are greatly appreciated. 

Moderators: I am not soliciting a loan, I am soliciting ADVICE on types of loans/creative financing. There is nothing in the forum rules that prohibit this post. Please stop removing this thread. 

Brian Cowan, Texas Sell House Fast | [email protected] | 512‑632‑8409

You realize that the loan application will ask whether you have any debts not indicated on your credit report, and require you to attest that the money in your accounts was not loan proceeds?

So by asking for loans that they won't see, you are asking for advice on how to commit mortgage fraud.  It is possible that that is why your posts are being removed.

@Brian Cowan I believe some hard money lenders do not report to credit bureaus... No this isn't 'mortgage fraud'

It might be in your interest to call small local banks and credit unions in your area and ask about a portfolio loan. Typically they lend to a business entity like an LLC with a DCR of 1.25>, and an ARV of between 60-75%. Many portfolio levers do not report loan to your personal credit report.

You might also consider a commercial loan even though this may or may not be 5 units > as banks will also lend with the same parameters as above.

Thanks @Nick Britton and @Ashley Pimsner . Good advice. 

@Richard C.  To address the mortgage fraud topic, my loan officer made it a point to stress that they only look back two months when checking funds for seasoning and that any money in the accounts before the lookback period would not be questioned. I am not sure if the unreported loan option is my favorite, but she was definitely trying to steer me in that direction. I appreciate you bringing that point into the conversation though. 

Brian Cowan, Texas Sell House Fast | [email protected] | 512‑632‑8409

Originally posted by @Nick Britton :

@Brian Cowan I believe some hard money lenders do not report to credit bureaus... No this isn't 'mortgage fraud'

 Signing a mortgage application attesting that you have no debts that do not appear on your credit report is, in fact, fraud.

What exactly is the basis of your claim that it is not?

Before giving advice that could very well get someone into a whole lot of trouble, it behooves one to have some idea what one is talking about.

Originally posted by @Brian Cowan :

Thanks @Nick Britton and @Ashley Pimsner . Good advice. 

@Richard C.  To address the mortgage fraud topic, my loan officer made it a point to stress that they only look back two months when checking funds for seasoning and that any money in the accounts before the lookback period would not be questioned. I am not sure if the unreported loan option is my favorite, but she was definitely trying to steer me in that direction. I appreciate you bringing that point into the conversation though. 

 So she is telling you that probably no one will look closely enough to determine that you are lying on your application.

The problem there is that while all she wants to do is close a loan and make some money, there are compliance people above her at your bank that DO care.  And if you should get caught, it isn't her signature on that attestation, it's yours.

What about a personal loan from a family member or a friend? Alternatively, if it won't increase your DTI too much perhaps a cash out refinance on a vehicle? Or even a loan against your retirement funds? A loan against your own retirement funds typically doesn't get included in the DTI ratio because it is secured by your own assets!

Hopefully this is the creative answer you were looking for.  : )

It's great when I get to you my experience as a mortgage lender in this manner.

A loan that does not report on your credit is still a liability that needs to be listed and disclosed on your Loan Application.  Your Schedule of Real Estate on the 1003 asks for mortgage balance of properties owned.  Failure to supply that information IS Mortgage Fraud.

Medium rei short colorCharlie Fitzgerald, REI Investor Funds, LLC | [email protected] | (913) 904‑8090 | http://www.REIInvestorfunds.com

Originally posted by @Charlie Fitzgerald :

A loan that does not report on your credit is still a liability that needs to be listed and disclosed on your Loan Application.  Your Schedule of Real Estate on the 1003 asks for mortgage balance of properties owned.  Failure to supply that information IS Mortgage Fraud.

 Exactly right, thank you.

Originally posted by @Ashley Wishinski :

What about a personal loan from a family member or a friend? Alternatively, if it won't increase your DTI too much perhaps a cash out refinance on a vehicle? Or loleven a loan against your retirement funds? A loan against your own retirement funds typically doesn't get included in the DTI ratio because it is secured by your own assets!

Hopefully this is the creative answer you were looking for.  : )

It's great when I get to you my experience as a mortgage lender in this manner.

Loans from any source that have a payment required of more than 10 months (generally) ARE calculated against DTI. Not disclosing them on the 1003 simply because they dont report on the credit report is mortgage fraud.

Medium rei short colorCharlie Fitzgerald, REI Investor Funds, LLC | [email protected] | (913) 904‑8090 | http://www.REIInvestorfunds.com

Originally posted by @Charlie Fitzgerald :
Originally posted by @Ashley Wishinski:

What about a personal loan from a family member or a friend? Alternatively, if it won't increase your DTI too much perhaps a cash out refinance on a vehicle? Or loleven a loan against your retirement funds? A loan against your own retirement funds typically doesn't get included in the DTI ratio because it is secured by your own assets!

Hopefully this is the creative answer you were looking for.  : )

It's great when I get to you my experience as a mortgage lender in this manner.

Loans from any source that have a payment required of more than 10 months (generally) ARE calculated against DTI. Not disclosing them on the 1003 simply because they dont report on the credit report is mortgage fraud.

Right. A lender may or may not choose to include a particular obligation in their DTI calculation. The borrower is still require to disclose all obligations.

And anyway, the OP isn't concerned about DTI so much. He wants to borrow money for a down payment without disclosing that the money was from a loan.

Originally posted by @Richard C. :
And anyway, the OP isn't concerned about DTI so much.  He wants to borrow money for a down payment without disclosing that the money was from a loan.

 OP here. As a new buy/hold investor, this has been a very enlightening discussion! Although my loan officer is steering me into getting a non-reported loan (as stated above, she just wants to close the mortgage loan), I think the potential downfalls and questionable ethics makes that option a no go for me. After a year of looking at hundreds of properties, i have not found anything that can beat the cashflow on the one i am trying to buy, so I definitely want to find a way to lock it up. Right now I see my options as, local bank portfolio lender, or hard money for a year and then refi into a 30 year loan. There seem to be some very knowledgeable people on this thread, I am curious what you think about the hard money loan for a year. Is that asking for trouble or is it a viable option? Do you guys know of any other creative (but ethical) financing options that might work? Ideas are greatly appreciated as I am still very new to the financing side of things. 

Brian Cowan, Texas Sell House Fast | [email protected] | 512‑632‑8409

@Charlie Fitzgerald

Hi Charlie,

I believe that @Brian Cowan was trying to ask for creative thinking to help make this happen without causing mortgage fraud.  So, what if he gets a private loan from a friend or family member that is paid off within 10 months. Or what if that money is a gift and no repayment is required?

Retirement loan paybacks are not included per FNMA guidelines. So that is a way to use those funds without having them impact DTI.

I thought this community was about helping each other not trying to shut down conversations that are designed and intended to help one another.

Ashley

Brian,

I am a Private Money Lender and with that disclosure out of the way. I can tell you that of all the options, a HML to acquire tge property makes more sense. I'd be happy to assist of yiu go in that direction. We've got great programs, rates, fees and,we're blazing fast as we control the entire lending process internally from origination to funding and close. 4-7 days is average for us onc we receive your package from you. You can visit my site below for more information. Reach out if l can help.

Medium rei short colorCharlie Fitzgerald, REI Investor Funds, LLC | [email protected] | (913) 904‑8090 | http://www.REIInvestorfunds.com

Originally posted by @Ashley Wishinski :

@Charlie Fitzgerald

Hi Charlie,

I believe that @Brian Cowan was trying to ask for creative thinking to help make this happen without causing mortgage fraud.  So, what if he gets a private loan from a friend or family member that is paid off within 10 months. Or what if that money is a gift and no repayment is required?

Retirement loan paybacks are not included per FNMA guidelines. So that is a way to use those funds without having them impact DTI.

I thought this community was about helping each other not trying to shut down conversations that are designed and intended to help one another.

Ashley

 The issue is not FNMA guidelines, it is investor/lender overlays.  Setting that aside, giving succinct advice relative to not falsifying a loan application to a person seeking help, is in my opinion, the best "help" one can give here on BP.   Creative financing, does not in my opinion, mean distorting facts, or leaving pertinent and required to disclose information off of a 1003.  In terms of the hypothetical sources for gift funds/friend loans you ask about, it does not appear that this applies to Brian's situation.  In my 25 years of banking and Finance experience "gift funds" are rarely that, and this is especially true with regard to acquisition of investment properties.

I'm sorry you felt that my comments were "shutting down communication." They were intended to shutdown advice to someone looking for help to commit federal and state mortgage fraud only.

Respectfully,

Medium rei short colorCharlie Fitzgerald, REI Investor Funds, LLC | [email protected] | (913) 904‑8090 | http://www.REIInvestorfunds.com

So do you have any credit cards - in order to take a cash advance of sufficient amount ahead of the time window you need? Of course, this would show up on your credit report, and the increased payments would affect your DTI - but you can calculate some of that impact ahead of time to see if this is feasible.

Originally posted by @Brian Cowan :

Thanks @Nick Britton and @Ashley Pimsner . Good advice. 

@Richard C.  To address the mortgage fraud topic, my loan officer made it a point to stress that they only look back two months when checking funds for seasoning and that any money in the accounts before the lookback period would not be questioned. I am not sure if the unreported loan option is my favorite, but she was definitely trying to steer me in that direction. I appreciate you bringing that point into the conversation though. 

I'll see if I can make it crystal clear.

If your loan originator is suggesting that and not disclosing borrowed funds and suggesting how to beat the system then she is getting into mortgage fraud as well.  

Borrowing funds for a down payment can be done, that is not an issue but it does become mortgage fraud if you do not disclose other loans or sources of your down payment!

On a standard 1003 loan application there are several questions under the borrower's personal information. Point blank they must ask you, is any part of the down payment borrowed from other sources? If the loan officer lies they are committing mortgage fraud right along with you.  Additionally, you are asked if you have sought other financing in connection with your purchase, that doesn't say in the past 2 months, it includes forever!

There is also a liability section, outstanding debts, omission of information relied upon in a loan application is bank/mortgage fraud, this type of fraud does not require any loss of money, no loan needs to be approved, intent is automatically presumed in financial fraud it does not need to be shown as in other cases of fraud. Conventional loans or any bank loan is a federally insured arena, the penalty can be a fine of $100,000 and/or 10 years in a federal prison. 

You sign several authorizations for the lender to obtain and verify information. Those can be used as long as that loan is outstanding, if fraud is suspected, beyond that! Again, the statute of limitations for financial fraud begins upon the discovery of fraud, not when you did the deed.

Now, how do you think financial examiners catch loan officers who act fraudulently? They audit and re-verify loans. There is no 2 month look back in a loan audit, that's for origination and often, it can be 3 months, that is at the discretion of the underwriter, not the commissioned hottie red lips or sly studley trying to make loans! 

If an auditor or examiner goes through a loan file, they can look back as far as they like, bank statements, income, tax records, assets, liabilities and how you use money. 

A good examiner can know more about a borrower than their mother knows! They see your bar bill, your grocery bill, where you get gas, where you had your car fixed, how much you paid for tires, they know you eat pizza every Friday at Pizza Inn, they see how you use your money pulling out ATM amounts. They also see balances being reduced or increased, loans being paid, interest being deducted, what your income is.......I think you get the picture. 

Mortgages are audited several times over the life of a loan, right after it's made and randomly thereafter. If a loan officer is suspect, all their loans can be pulled for review, they don't even know they are reviewed!

Same with any borrower, there are several techniques to identify financial fraud. If the FBI gets notified of suspected fraud, it's no holds barred in investigating even your grandmother if that's where the trail leads an examiner. 

I've said before, prisons are full of smart people. 

I also suggest you get with an honest loan officer who isn't inclined to suggest ways to circumvent rules. Why, because they can get caught and that will lead back to you!

About 3 weeks ago, we had a local business man and his son who were caught through audits with bank fraud on a loan. Since funds were wired, the got wire fraud, since the mail was used, they got mail fraud. All in all, the father is looking at over 40 years in a federal prison, his son about 10, the father will die there at his age.

My advice, don't screw around with mortgages with federal strings attached, better too, don't screw around with any mortgage loan. You might get lucky, but you can't out smart the financial system! 

Rant of the day :)   

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Simply put, just don't lie on your loan application. Tell it like it is. So the only option that can be done here is to tell a relative your predicament. My friend told his story to his brother, and out of the blue, his brother gave him access to his HELOC that no one knew he had just sitting there un-used! It was a gift to his bro. It was like giving him a kidney. Some families are like this, some aren't.

Sounds like a good RE deal, but if it's not possible, just let it go and don't stress.  More deals will come.  But have faith.

PM if you want solutions. 

@Brian Cowan   Richards point is signing a mortgage application with any false info on it is mortgage fraud end of discussion.

there are many many RMLO sitting in prison right now for helping their borrowers doctor their finance's  keep that in mind.

Now my commercial loans at my commercial bank do not show on my credit.. but they are construction loans... custom LOC's for buying distressed assets.. Unsecured LOC etc etc.

When I get a government backed loan and I just got one last year first one in 8 years for my personal resi.. they handle all my non reported debt by showing it on my extended personal financial statement that I sign and handed in with the 1003. Plus my tax returns that are several hundred pages long with my 20 some LLC's and all the appropriate K 1's etc etc.. then you let your mortgage broker earn their keep... But you disclose it all not disclosing your finance's on a government backed loan can get you in some pretty deep trouble.

@Richard C.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

THANK YOU everyone for giving such great advice and options! I have  a lot to go on now. This is why I LOVE Bigger Pockets.  

Brian Cowan, Texas Sell House Fast | [email protected] | 512‑632‑8409

Originally posted by @Brian Cowan :

I am trying to purchase a property but do not have enough for the down payment yet as I just purchased another property recently. It is a smoking deal with tons of cash flow potential so I am about to lock it up in a five month lease purchase to give myself time to come up with the down payment. I am trying to use a large conventional lender because of the 30 year fixed rates they are offering, but don't think I will be able to come up with the entire down payment, closing and reserve without borrowing a small sum of money (which they prohibit). They have a two month look back period for my bank accounts, so I would need to get they money in my account two months before close. Has anyone else been in this situation? Any ideas are greatly appreciated. 

Moderators: I am not soliciting a loan, I am soliciting ADVICE on types of loans/creative financing. There is nothing in the forum rules that prohibit this post. Please stop removing this thread. 

Hi Brian,

I knew that I'd heard of gifting cash for down payments before and found a couple links to share with you. Hope it helps. 

 http://themortgagereports.com/2669/downpayment-gif...

http://realestate.findlaw.com/mortgages-equity-loa...

http://mymortgageinsider.com/first-time-home-buyer...

Kudos,

Mary

Brian, if you can't get the funds and the deal is that good, why not just do a joint venture with someone.  A fast nickel is most times better than a slow dime.  Don't drop a good deal when there are so many investors looking for the right numbers.  I wish you all the best.  

No company avatar mediumCharlie DiLisio, Island Dreamers L.L.C. | [email protected] | 561‑231‑4995

I guess I'm late to this conversation, but hopefully someone reads it and replies.

I'm in an interesting situation, I want to buy a home for $200,000 in Houston, TX.  I currently have a home in California in escrow and should receive about $72,000 in net proceeds.  I also will have about $8000 in savings after paying for the repairs the buyer wants.  So once escrow closes I should have about $80,000 towards my $200,000 home.  Sounds like all I need is a $120,000, right?

Not exactly, it seems that even though I have been in the same industry for over 5 years and have worked 60 hours a week at each job, I can't take credit for my overtime because all my prior employers have paid with somewhat different pay structures.  One was simply straight time, even though it was 60 hours a week on average.  The next paid by the day and again 60 hours a week.  The next was 60 hours a week and paid overtime, but they also included a productivity bonus which caused my hourly rate to bounce all over the place.  Finally my current employer pays traditional 40 hour regular time and overtime for all hours over that.  I average 60 hours a week and the employer has verified this.  

So based upon my current acceptable income, I can only show 40 hours, which gives me $748 a week, instead of the actual $1300 I make. Because of that, my DTI is too high with my car payment of $467 a month, $12,000 and 2 years owed. The answer, pay off the car and keep $68,000. Then I can have a mortgage for $135,000. That's close, but only takes me to $203,000. From figures I'm seeing, I think I need to be at about $206,000 to pay the closing costs and buy the home for $200,000. So I'm off by about $3000.

If I ask Dad to pay $3000 to Nissan, I can keep $3000 more. Is this mortgage fraud since I am getting my down payment only from my house sale and savings? I don't think anybody would know. I'm not lying, Dad isn't providing me with the down payment, he is only helping me pay off my car. Is $3000 small enough the lender will overlook it and no longer count it towards my DTI anyway. $3000 left divided by the principal payment of 437 (with interest 467) is 6.86 (7) months. Even if Dad and I make an agreement, I'm not signing anything so it would be unlikely enforceable. Granted it might make for an awkward Thanksgiving dinner, but I'm sure Dad would rather see his granddaughter in a house, than living on the street to get 3 grand from me.

For the financial responsibility lecture, save it.  I make twice what the bank will approve me for.  I'm just one of those people who works in the Trucking industry and gets used in more ways than one.  I should be qualified for a $2200 mortgage which I can pay.  I have to do what is needed to make a loan work that is far less than I can handle because this industry has somehow managed to convince the government that avoiding all the legal payroll rules everyone else has to follow shouldn't apply to those carrying the nations goods.  I could go on, but why.  It's ludicrous, but it's how it is.