Getting a Loan without a W-2 Job

10 Replies

I recently quit my W-2 Job an am now having difficulty being approved for even a small conventional loan and looking for advice or tips. 

The details: 

I own 4 rental homes that are fully rented and together they cash flow $840 a month (2 are on 15 year mortgages so don't cover themselves but the other rentals cover it and then some) and I have a loan with my boyfriend for our primary residence which we also house hack with 3 renters, each paying $575 a month. 

I also have over $200k in cash holdings/brokerage accounts. I am now being turned down for a cash out refi on a $65k duplex I just purchased in cash. 

Anybody else run into this problem? Isn't that our goal as real estate investors - to be able to make enough cash flow to quit our full time day jobs? Any and all help in how to still qualify for future small loans would be appreciated. 

Thanks,

Alison 

This is the business. Without a W2 you will not get conventional financing. Rental income should supplements your W2 not replace it until you are making more money than you can use. It is far wiser to not ever quit your day job. It is the easiest money you can make and is invaluable for acquiring financing.

I would suggest you find another job asap.

You can not transition from a W2 to self employed till your NOI is at least 25% higher than your W2 income.

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You didn't mention your credit score. If your score is at least 650 you should have no trouble getting approved for stated/NO income rental property loans. You may run into minimum value/loan amount issues but with your liquid assets you have lots of non-bank financing options.

@Alison Fountain a mortgage broker might be a good option for you.  A broker is someone who represents many different banks.  The reason I am saying this is that there are loans out there that will lend to you but you have to find them.  Since there are 15,000 banks in America...it might take a while to find one.  Also, you might want to post this in the Oregon forum (I'm assuming that's where the properties are) so you can get some local input on what banks might be good for this.

If you do want to call around yourself for a good bank try some very small banks that are located close to the properties in question.  You would be looking for a "commercial" or "portfolio" loan.  The rates and  terms will be different than a standard loan but those loan types have the ability to be flexible.  Let me know if there is any other questions you have.  Good luck!

@Alison Fountain Faced the exact same problem - banks happy to loan to you while you have the W-2 job, but when the job ends, the loans dry up. Try taking some local bankers out for a coffee or lunch and explain your situation. You won't get thirty year fixed terms, but you will find lenders. Rates are a bit higher (0.5-1.0%), amortization periods are shorter (20-25 years) and there is usually a balloon in 5-7 years. I'm a buy and hold guy, but I typically find that in less than 5-7 years I have enough equity that it makes sense to 1031 into something bigger and better. Good Luck!

@Alison Fountain , Yes, the goal of many if not most real estate investors is to be a full time real estate investor.  Unfortunately, once you leave your employment you also leave behind the low interest, easy to find, easy to qualify for conventional financing.

Some people have successfully transitioned to self employment, Sch C or S Corp income.  And although lenders are stricter with verification of self employment income, showing two years of tax returns with sufficient income does qualify.

Theoretically, passive income, rental income, dividends, interest income, etc. should enable you to qualify the same as self employment, i.e. as long as you can show 2 years sufficient income on tax returns.  However, I think what you are talking about is no longer having either your income from your job, or an equal amount of provable replacement income.  So, you will have to find lenders that have loan programs where income is not a requirement.

Private lenders, hard money lenders, and some portfolio lenders deal in this arena. depending on the LTV requested, your credit history, your real estate resume, and the desirability of the property being financed, you will pay a moderately higher interest rate to a much higher interest rate, with shorter term, more points and fees, and variable rate interest. All making profitable real estate investment that much harder. Many in your situation have moved to commercial real estate, where cash flow of the subject property is more important than your personal income. Good luck!

Originally posted by @Alison Fountain :

I recently quit my W-2 Job an am now having difficulty being approved for even a small conventional loan and looking for advice or tips. 

The details: 

I own 4 rental homes that are fully rented and together they cash flow $840 a month (2 are on 15 year mortgages so don't cover themselves but the other rentals cover it and then some) and I have a loan with my boyfriend for our primary residence which we also house hack with 3 renters, each paying $575 a month. 

I also have over $200k in cash holdings/brokerage accounts. I am now being turned down for a cash out refi on a $65k duplex I just purchased in cash. 

Anybody else run into this problem? Isn't that our goal as real estate investors - to be able to make enough cash flow to quit our full time day jobs? Any and all help in how to still qualify for future small loans would be appreciated. 

Thanks,

Alison 

 Does your BF make enough that he might be able to refinance your primary residence just into his name? There's basically a strategy we use sometimes to shove all the consumer debt into the name of the spouse with a day-job, which frees up the investor spouse's DTI for debt covered by cashflow.

Allison, I have a few great banking contacts here in Bend that are very flexible. Send me a DM and I'd be happy to put you in touch. You have a very strong application for non traditional lending.  

@Alison Fountain

Depending on credit score, you may qualify for a non-qm loan that focuses on asset dissipation or even uses bank statements for qualification.  PM me for further details.

Stephanie

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