Need a cash out refi that will count my rental income.

Private Lending & Conventional Mortgage Advice
9yFollow

Need a cash out refi that will count my rental income.

Matthew Ware
Investor · Danville, VT · Member since 2015 · 34 posts · 33 votes

Hello Bigger pockets. I'm attempting to tap into the equity in one of my investment homes in order to buy a primary residence. I'm looking for a 30 year fixed cashout refi on a property that is owned outright. My sole source of income is rents received while my co-borrower is on a W-2. The bank that I have talked to (Chase) will not count any of my income because I do not have a 2 year history of rental tax returns, so we have run into debt to income issues. The house I'm borrowing on is worth about 600k and I want to pull 300k out. Chase quoted me a rate of 4.75, for a 30 year fixed, because it's a rental property, but then brought up the income issue at the end of our long conversation. Grrr. Any help or suggestions would be appreciated. Thanks.  

0Reply
57 views

Most Popular Reply

Kevin FoxPro Member
Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
9y

Hey @Matthew Ware

@Jerry Padilla is who I would speak with about this. He is my go-to for all things residential investment loans. I am in San Diego as well, so please don't hesitate if there is anything I can do to help.

Either way, best of luck!

Kevin

1Reply
See this reply in the discussion

19 Replies

Jump to latestLatest
  • Janel F.
    Investor · Brooklyn, NY · Member since 2015 · 65 posts · 18 votes
    9y

    just sent you a PM

    0Reply
  • Nicholas Scatton
    Lansdale, PA · Member since 2017 · 174 posts · 77 votes
    9y

    Check with more local banks and credit unions. Most times those big banks will be very conservative on their lending, which means more red tape.

    That 2 year rule is an overlay, how is your DTI with the rental income (75%)?

    0Reply
  • Matthew Ware
    OP
    Investor · Danville, VT · Member since 2015 · 34 posts · 33 votes
    9y

    I think our DTI is just fine. My gross rental income with leases in place and over a year of rental history is 58K So 75% of that is 44K which is conservative. My domestic partner is at 62K with W2 income. We are both debt free save for a couple of car loans and a small mortgage on her home that combined is about $1500 a month. We are in Vermont and the rental property that is being borrowed against is in San Diego CA. Should I look to a local credit union in Vermont or California? Would a mortgage broker make sense? Talking to Chase we were off by about 500 bucks a month just based off of her income because they counted zero of my dollars, Quicken Loans was the same story.

    0Reply
  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    9y

    @Matthew Ware I would try a broker.  Chase is very conservative and Quicken might be even more conservative when in comes to Non Owner Occupied Properties.

    C2 Financial
    WebsiteView Page
    0Reply
  • Jeff StephensPro Member
    Rental Property Investor · Portland, OR · Member since 2017 · 94 posts · 78 votes
    9y
    This may be a good loan for a private individual as well. A 50% LTV loan with a deed of trust and 4-5% interest could be very attractive to certain people, especially those trying to create income streams from conservative investments (especially considering the rates currently paid on things like CD's).
    [email protected]
    0Reply
  • Matthew Ware
    OP
    Investor · Danville, VT · Member since 2015 · 34 posts · 33 votes
    9y

    Thanks all for the replies. This money game is confounding and doesn't seem to operate on common sense. Am I missing something? I'm astounded at the value they place on W2 income. Since I filed W2 last year, I could go get a job in my field and quit or get fired in a month after showing my pay stubs, but rental income which I am much more invested in maintaining because it's tied to my asset is counted as zero. If I don't pay back a 300k loan the bank gets a nice 600k property in San Diego. If I were issuing the loan I think I'd want me to default. It just seems silly to me. Can anyone suggest a mortgage broker or private individual who can help me navigate this? A local credit union appears willing to give me a conventional loan at a competitive rate on a purchase, but I'd rather not drain my savings to come up with 20 percent down and since my investment property is out of state they won't do a cash out refi on it. You folks who have mastered the lending end of things have my ultimate respect. Thanks again. 

    1Reply
  • Kevin FoxPro Member
    Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
    9y

    Hey @Matthew Ware

    @Jerry Padilla is who I would speak with about this. He is my go-to for all things residential investment loans. I am in San Diego as well, so please don't hesitate if there is anything I can do to help.

    Either way, best of luck!

    Kevin

    1Reply
  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    @Matthew Ware Talk to one of the experienced mortgage folks on BP.  I'd start with @Chris Mason - he operates out of CA and is most likely to give you the full scoop.

    On a related topic, I recall your earlier posts about this property - I see you decided to keep the place instead of selling it.  Now that you've made the decision, rock on executing the plan!

    0Reply
  • Harjeet BhattiPro Member
    Lender · Glenview IL- CDLP NMLS#230554 · Member since 2015 · 2k+ posts · 747 votes
    9y

    The lender will go with tax return rental income because you have Sch. E rental income.  You can get an exception on large  expense deduction if there is any.  In that case lender can calculate on 75% rental income basis. 

    0Reply
  • Irina Belkofer
    Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
    9y

    @Matthew Ware you have to understand the logic behind the game.

    They count your W-2 income if you had that income for 2+ years. 

    Same goes with your rental income but it can be off set with expenses, depreciation etc.

    W-2 is pretty much taxable, not much to deduct besides you personal exemption/deduction and/or if you have something to itemize.

    Instead of getting upset at the lenders, learn the rules and try to comply with them. 

    Mortgage brokers are not much different, they just searching among more choices but Fannie May guidelines are the same. In the order for the lenders to sell your loan on the secondary market, they have to follow these rules. Only credit unions may afford to keep your mortgage in their own portfolio.

    Instead of mortgage brokers it's better to try research local credit unions.

    Good luck!

    0Reply
  • Jerry Padilla
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    9y

    @Matthew Ware

    From what I am reading, you have no mortgage history, correct? If this is the case than you are subject to a 2 year rental history to count the income from a rental property. With financing as stated above as well, we do look at a 2 year history in the same line of work for any financing. 

    @Kevin Fox 

    Thanks for the mention!

    0Reply
  • John H.
    Massachusetts, MA · Member since 2009 · 144 posts · 31 votes
    9y

    Gotta love how a bank will lend to a fast food cashier before you, the guy who owns a 600k property outright and offers 1/2 of it as collateral.   I'd find a small local bank and meet with their commercial department.  

    0Reply
  • Matthew Ware
    OP
    Investor · Danville, VT · Member since 2015 · 34 posts · 33 votes
    9y

    Thanks all for the responses. I am an newbie to this process so I truly appreciate your patience. So it seems like I can choose to wait another year and a half with a big bank to access the equity in the properties because I'll then have two years of rental tax returns (boo), or find a local credit union who will issue me a loan because they do not have to sell the mortgage to Freddie/Fannie and thus have more leeway, or I can go with private money (much more expensive but fast?). The credit union piece is tough because my local ones here in Vermont are reluctant to loan on properties out of state, so I suppose that means looking to CA credit unions? How many credit unions should I go through the application process with in order to get an idea of a competitive offer? There are dozens and dozens of them. The first one I contacted quoted me 5% for 30 year fixed and when I mentioned the income piece they told me I'd have to apply to find out the answer because they review  each request on a case by case basis. This means an hour plus on the phone/computer for each application and a hard pull of credit. Do those of you who shop for loans apply for a whole bunch of loans and then choose? Is this why people use mortgage brokers? Thanks again for helping me along the learning curve. 

    0Reply
  • Jay Patel
    Investor · Leesburg, FL · Member since 2014 · 73 posts · 86 votes
    9y

    @Matthew Ware I suggest contacting some local investors (facebook, REI Groups, Bigger Pockets (local section) etc.) in the area that your rental is located in and see which small banks/credit unions they recommend.

    Honestly the way i approached "shopping around" for my first cash out refi was to pick a small local bank that I wanted to develop a long term relationship with instead of looking for the best rates/terms.

    The bank I chose has a great standing in the community, they work with many of the local investors in my area, they have been around my area for ages, their communication was great & they have awesome employees. Sure I may have paid a 1/2 point more than the going rate at first, but I think my relationship and continued business with them will pay off in the long run. I also have my rental accounts setup with them so that they are able to see how I run my rentals financially. 

    0Reply
  • Matthew Ware
    OP
    Investor · Danville, VT · Member since 2015 · 34 posts · 33 votes
    9y

    Thanks Jay. That's exactly what I am going to do. I've gotten some great referrals from this thread. I'm also learning that so much of this real estate game is about relationships and the sharing of local knowledge. As someone, who has come from an education background, I think I suffer from smart guy syndrome. I get to thinking that I can figure this out all by myself, (because I'm sooo freaking smart) only to get frustrated by the shear magnitude of choices and nuance that goes into each step. I'm starting to loosen up and trust others here as well as myself. Thanks again everyone.  

    1Reply
  • Marshall Hooper
    Investor · Houston, TX · Member since 2017 · 129 posts · 62 votes
    9y

    you could probably get a part-time job with Starbucks for 3 months and be able to qualify with Chase. 

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    9y

    RE is full of trust but verify.  Make sure that you verify and do not take everyone's post as gospel.

    Good luck

    0Reply
  • Jay Patel
    Investor · Leesburg, FL · Member since 2014 · 73 posts · 86 votes
    9y

    @Dan H. So true. I hate to say this, but there are a lot of people on here and other platforms for that matter that give advice when they have completed a whole of zero deals. Take everything with a grain of salt, and use your own judgement.

    0Reply
  • Matthew J.
    Consultant / commercial financing · East Greenwich, RI · Member since 2016 · 30 posts · 4 votes
    9y

    Matthew,

    Honestly this sounds like a job for a hard money or private lender to me.  It will be more expensive upfront, but on the flip side you could just take a year bridge loan to get your money out, then the bank will gladly do a refinance once you are seasoned.  The bank is always more interested in putting you into more debt and not giving you money out.  You will be amazed at how much faster and more lenient banks will be when you are just refinancing without cash out.  

    Matthew give me a holler if you are interested in a bridge loan regarding your investment property that you want to pull cash from.   I could run some numbers for you to at least see if the subject property would qualify under JVC's criteria.

    Cordially,

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free