I'm really tired of hearing "no" from lenders. :(

45 Replies

I know your supposed to keep working and keep chugging forward but after 3 years of hearing "NO" from banks I am feeling really frustrated. How do you keep motivated to continue when continually getting denied. :(

What exactly are you asking Lenders for? Whats your credit? How much LTV are you looking for?

Three years? What do you want? Below is typical bank rules. But you probably know them by heart.

20% down for Fannie and Freddie rentals, and 25-30% down for non conforming type stuff. Need to be less than around 45 DTI. Flips will be tough for a bank to swallow but rentals over 75k they tend to like. Credit should be over low 600's. No bankruptcies.

Really curious about more details, but the number one thing that helps is income. Second jobs and side hustles for a bit to build your down payment money is always good advice.

Good luck.

I wouldn't know where to start without writing a book here.

Every time I apply and hear a NO I work on it, correct it, then apply again. Then I hear a new reason for a NO. I work on it, correct it, then I hear a new reason. Over and over again.....

I put together nice, bound proposals for every loan, include all of my numbers and figures etc. Very professional. It just seems like banks arent lending. This is ridiculous!

Im just wondering how people keep motivation. Who has had challenges getting loans? What worked for you to overcome the NOs?

Sounds like your asking for a banking product that does not exist.. at least for someone starting out.

I have lunch with my commercial banker at least once a month.  and the banks are not looking for real estate loans per se.. they only bank VERY experienced cashed up borrowers that they know well.. they simply are not looking for new clients. This for fix and flip loans or construction loans.

if you want to buy rentals.. the post above gave you the guidelines and you use a national lender for those.. I see many many folks get that financing every week.. VERY easy as long as you Actually qualify..

if you do not hit all those metrics IE credit score.. DTI income and LTV then there is plenty of money out there if you do not meet all of those at all times then your not bankable until you do.

I have a property that I currently own. Its 10 acres and had a single duplex on it when I purchased it about 4 years ago. My plan has been to build 4 more duplexes on it.

About 3 years ago I began seeking a construction loan for a second duplex. I wasn't able to get a loan because banks told me that they did not want to give me a loan and be in second position on the property. The construction loan was going to be larger than the existing loan on the property. I was acting as general contractor myself and a second bank said they would not approve the loan unless I hired a separate construction company and GC. I didnt want to waste the money so I didnt.

So then I tried to get a single large loan that would refinance the existing mortgage and include cash to build a second duplex. Denied, dont remember if there was a reason.

I spoke with another bank and even convinced the VP and the mortgage originator to come out, check out the property, look over my figures, review my building plans etc. They didnt believe in my concept and didnt think it would work. (I am building a sustainable, pet friendly housing community that includes passive solar duplexes) They didnt believe that the passive solar construction would work or that it was worth the investment even though its a tried and true method and has been around for decades. Loan denied

I think there was another denial in there but that was 3 years ago and I dont remember.

So then I sat down and opened 12 credit cards at the same time. I had an 800 credit score so I was approved for all of them and given very high limits. I used those and cash to finance the construction. My plan was to refinance the property once it was done because I would have plenty of equity.

I built the house. The passive solar features work excellent! Tenants utility bills are only about $100/month. For upstate NY, thats saying something. The property has been in very high demand. When units open I receive double digit applications. Each applicant must pay a $30 application fee so you can see how popular they are.

I have plenty of equity. The property is currently assessed at $500,000. The only loan on the property is a mortgage with a balance of $181,000. But now I was denied because my DTI was too high. It was round 45%. So I paid down my debt as fast as I could.

Over the last 2 years I have paid down the CC debt as fast as I could. I am currently around 38% with a credit score of around 675. I just applied for a HELOC at 2 different banks. Both denied me. I showed them that after using the HELOC to pay off my CC debt I would be at 33% but they still wouldnt consider it.

Sorry for spelling and grammar issues. I tried typing this as fast as I could. I have been a landlord for 14 years but I have always purchased existing properties. This is the first time I have attempted to develop anything. Maybe I am doing something wrong. I dont know. All I know is that I am really sick of hearing NO all the time.

well those are out of the box deals thats for sure.. you need a local banker that knows you and likes you. plus you need to have some good amount  of liquidity as opposed to debt. specialty property simply is not going to be as easy as vanilla rental property deals.. sounds like your going in the right direction though.

keep the faith though.. I talked my local commerical banker to give me a 100k line of credit to buy timber deeds.. thats out of the box... he has been my banker now 25 years.. and he now lends me over 10 million a year on deals.. but I started with that little 100k out of the box deal in 1992... 

Thank you for the input but how are they out of the box? I just need a simple HELOC or home equity loan and all of my problems would be solved.

For the past 2 years I have been going in to a large local credit union to pay other mortgages I have through them. I went in person rather than mailing in a check or paying online so I could cultivate the relationship. They are lovely women. We always chat. We have a great relationship. I thought for sure after putting in the time, paying down my debt and dotting all my i's that it would finally come together. But no, still denied.

My original post was more about how do people overcome the negativity and the NO's.

"I have not failed. I've just found 10,000 ways that won't work." - Thomas A. Edison

I wish he was around so I could ask him how he found the strength to keep going.

@James Klafehn that is significantly out of the box....and quite awesome. Might you be shooting yourself in the foot, though, by disclosing your grand plans? You are rightfully proud of the plans and the accomplishments, but it seems like you are in need of an angel investor more than a loan.

But a loan would suffice. So, put on an anonymous disguise that doesn't know about your awesome plans and start talking to brand new banks about the parcel that currently exists. You say the property is assessed at $500,000. How much will it appraise for? Is it one, 10-acre parcel with multiple units on it? Multiple parcels? How many units? Hopefully less than four units right now. How many units will the current zoning allow? Sounds like you want to put 8 units on it.

Don't talk about the passive solar, don't talk about the construction plans. You (hopefully) have a 1-4 unit property on a single parcel of land that appraises at $500k or higher. I can list three credit unions that will issue a line of credit for up to 80% LTV, but there's no guarantee they will lend on your property: Credit Union West, PenFed, and America First. Describe your property in as plain vanilla terms as possible. Nothing exciting. In fact, just do the online apps that don't require human interaction. I'm not suggesting this to be devious, but rather to try to save you from yourself and your - earned - desire to talk up accomplishments and plans.

If you can get the $215k or so, could you build everything you want to build? Would you be able to quickly refinance the completed project with a commercial loan? Do you know where you would go for that?

As for how to overcome "no"....if you are getting the same answer repeatedly, consider changing what you are doing. Hopefully this either helps a bit, or spurs other creative ideas to assist in getting the project funded and done. Good luck!

Banks like vanilla. Where you see potential they tend to see huge risk. 2 different worlds with points of view.

Maybe you could find a local investor to partner with who cares about environment etc. They might see a green component over just an investment.

@James Klafehn this post has made me feel a bit better for sure. I was denied earlier this week for a heloc through my credit union that I have a couple loans with that I always pay on time, due to having too high dti. I went to private college and have some student loan debt, I also took out a Lowe's and Home Depot card on my last real estate deal. I have plenty of equity in my primary residence and own an investment property free and clear. I was actually shocked to get denied. I have money coming in in Feb and can pay down some debt and get approved I'm guessing, but I sure did want to get my money now and keep it moving. Best of luck my friend.

@James Klafehn

Check this out. If you throw a ball at the wall and it doesn't stick what do you do?? Keep throwing the ball at the wall till it does? Heck no man. How about you take another approach? Private money. Not private money from a " Private HARD MONEY lender" Or from a bank. You got a truly great deal. Get partnering up with other investors. Look into creative financing. Create agreements with holders of large 401k's offer them favorable interest rates on their money. Join a bunch of Chamber of Commerce, REIA clubs, Rotary Clubs, get your name out there, make some connects. Hit up some Realtors in your area ask if they know any heavy hitters looking to partner up. I'm not saying everyone will help you. But hey..its all about your approach, presentation, and how you phrase it...give to get.Stop focusing on whats not working and try sitting and figuring out what could work? Figure out the problem then brainstorm solutions. Banks are saying no? So what. Ask yourself this question whenever you come across a speed bump while on your path as far as Investing goes .."In what ways might I...(Solve Your Problem)." Rephrase and say the problem in different ways.....figure out what your main goal is and explore other avenues of approach for solving it..in your case..I'm guessing achieving funding. So in your case don't ask...."In what ways might I get a bank to finance me on my deal" ask instead " In what ways MIGHT I ACHIEVE FINANCING FOR MY DEALS". Slow down...meditate....think on your problem then solve it. You have that power. All the answers we ever need are inside of us...you just have to learn how to sit down and pull them out. Hope this helps. lol

Stay Lit,

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have you considered sub diving the 10 acres into separate plots then trying to refi the one with the house on it? With refi proceeds pay off other parcels. This way all other parcels will free and clear and a new lender will be in the first position. Obviously it will need to be structured so the original house with now smaller lot appraises for a little more then your original loan amount so you can cover refi costs.

This way you will have all the new home lots free and clear. You will probably need to use portfolio lender and not coventional financing. 

Your other option is bringing in a partner or private lender. I am sure it's cheaper then credit card rates and payments.

Have you sought out mission-based community development lenders who are interested in green enterprises? I've worked with a couple but they only lend in the southeast. I could reach out to them to see if they have any counterparts in your area. PM me if interested.

Ive tried looking for a private lender. About 2 years ago I sat down and contacted 20+ lenders on the list here on this site. I heard no from all of them. They were either fully lended or they didnt lend in my area.

I found a local real estate investor who was very interested in what I was doing. He liked my sustainable business plan and we both have electric vehicles. I thought we got along really well. The topic of politics and the fact that I am a registered Republican came up and he said "I dont do business with Republicans". He closed the binder that gave him and I spent an hour trying to save the deal, I didnt.

As for subdividing, I have thought about it, a lot. It would make obtaining funds easier, however by keeping the parcel one I will get a slight discount on property taxes. If I subdivide I would be assessed at full value for each subdivision. I also would prefer to eventually have one large loan on the entire parcel rather than 5 or 6 individual loans.

Originally posted by @Ken Jernigan :

Have you sought out mission-based community development lenders who are interested in green enterprises? I've worked with a couple but they only lend in the southeast. I could reach out to them to see if they have any counterparts in your area. PM me if interested.

 I haven't heard of any.

Originally posted by @Roman M. :

have you considered sub diving the 10 acres into separate plots then trying to refi the one with the house on it? With refi proceeds pay off other parcels. This way all other parcels will free and clear and a new lender will be in the first position. Obviously it will need to be structured so the original house with now smaller lot appraises for a little more then your original loan amount so you can cover refi costs.

This way you will have all the new home lots free and clear. You will probably need to use portfolio lender and not coventional financing. 

Your other option is bringing in a partner or private lender. I am sure it's cheaper then credit card rates and payments.

 If you know of a private lender I am all ears.

Originally posted by @Jonathan Roper :

@James Klafehn this post has made me feel a bit better for sure. I was denied earlier this week for a heloc through my credit union that I have a couple loans with that I always pay on time, due to having too high dti. I went to private college and have some student loan debt, I also took out a Lowe's and Home Depot card on my last real estate deal. I have plenty of equity in my primary residence and own an investment property free and clear. I was actually shocked to get denied. I have money coming in in Feb and can pay down some debt and get approved I'm guessing, but I sure did want to get my money now and keep it moving. Best of luck my friend.

 Good luck. I hope you dont end up on my road. Its not a fun drive.

when I first started investing, I would usually have to call 30-40 banks/lenders before I got a maybe. I literally called local banks in other states, internet lenders, etc.

Most of them will have the same reason not to lend to you. (history, empty promises, DTI, credit, Reserves, Equity, etc)

Originally posted by @David Zheng :

when I first started investing, I would usually have to call 30-40 banks/lenders before I got a maybe. I literally called local banks in other states, internet lenders, etc.

Most of them will have the same reason not to lend to you. (history, empty promises, DTI, credit, Reserves, Equity, etc)

I am not a new investor. Ive been doing this for 15 years. DTI is manageable (would be completely fixed with a HELOC), credit history is nearly flawless but low score because of the CC debt, I have some reserves but that has never come up, and equity is plentiful. Banks just aren't lending.

@James Klafehn When I first read your post, the first thing that came to mind was not a lending issue, but rather an entitlement issue. It was not clear to me if you were structuring the deal as a PUD (planned urban development) or individual parcels and doing a subdivision. This is critical has to how a bank will look and underwrite the deal. I don't know the Freeville market, so I can't comment as to which loan type is more receptive. A few years ago it was hard to get conventional financing on speculative homes without a significant amount of cash equity behind the deal. However, it appears you are trying to structure it as a income single family development which until this past weekend in Oakland - I have not heard of such a product that was done intentionally. That is to say, it is not a common product for banks to understand how to underwrite the loan. On Friday prior to the Oakland conference, we met with the main underwriter and legal council for a major syndication firm. The underwriter was working on a large scale product that was unique to the market place. I asked him how did they underwrite it as there would not be any comps for that product. Their response, the investor has a rather significant cash portfolio backing him. Moral of the story - they look at the entire story, and the strength of everyone in your group. Also make sure you are telling your story clear and precise.

Stay positive - it is hard, but the reason Thomas Edison succeeded was he believed in himself.

James Klafehn Have you thought about crowdfunding through a site like FundRise? I would certainly invest in this project as an individual! Always keep your politics under wraps when working with investors, though. I, too, would be extremely reluctant to invest in a green project spearheaded by a Republican. I'm an Eisenhower Republican, but that gets confused with Trump Republicans and Romney Republicans, whose first name is mud these days. 

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