Closing and mortgage verification timing + mortgage w/o income

1 Reply

Hey Folks,

I'm looking to purchase my first investment property and I'm on a bit of a tight schedule because I'm looking to leave my current gig towards the end of July. I have plenty of wealth in investment accounts to cover the purchase, but I'm trying to maximize my passive income, so I'd like to leverage a mortgage using my current income to pay for as much of the property as a I can. I expect my rental income to cover mortgage payments of course, but I can also cover things as needed by pulling out or borrowing against my stock investments - so losing my active income source isn't a huge concern for me. The problem is, that this seems like the sort of thing that would be a huge concern for most lenders causing them to either give me worse rates or no mortgage at all...

So, I have 2 general questions:

1) Is it possible / practical to get a mortgage without an active income source? If so, how much would this effect my mortgage rate? Is there something other than a conventional mortgage I should be looking for in this case?

2) If I'm able to find a strong candidate property that I want to purchase, do I need to 'close' the property before my loan is completed? I'm concerned that if the closing happens after I leave my job, the mortgage legally would need to be re-evaluated and could be set at a much higher rate or not be approved at all. Of course, I don't want to break the law at all and my understanding is that if I left my job and didn't disclose it before the 'loan is complete', I'm at risk of committing loan fraud. Is there some standard way to expedite things so I can ensure the loan is in a state where I can leave my job without losing the loan?

@Gabe J Schwarz this is a super common question so a couple of things here.

There are plenty of very successful people who don't have a W2 type of job.  There are also plenty of successful people who have some type of W2 job that they enjoy, that may not pay as much, but still covers their bills.  And then there are also plenty of successful people who have jobs that they don't like but use it to make ends meet until they have enough properties to do what they want.  There is no right answer here but know there are other options too.

In theory, all a conventional mortgage (meaning Fannie/Freddie loan) needs is just your income to support your debts.  And the magic percentage is 50%.  So if your car payment, student loans, credit cards, current mortgage all add up to $500 (wouldn't that be nice!) then you would need to earn $1000.  50% is the key.  You should always qualify to purchase an investment property since the rent will counterbalance the mortgage (I hope that makes sense).  As long as you have your down payment you should be good!  Now this is assuming the lender will use the rent income to help you qualify.  Some won't so make sure you ask that question.  We only want to use banks that use that rental income IMMEDIATELY.  

Now to answer your questions directly:

1. Is it possible to get a loan without an active income source.  Yes!  But you will not be receiving the best terms and conditions that you can find.  Fannie/Freddie have those loans.  30 year fixed rate loans.  But there are plenty other loans but the terms will be different.  So it might be a higher rate.  It might be an adjustable rate.  It might only be a 15 year loan.  And it might be all three of those!  It doesn't mean you cannot be successful though.  And then there is this whole other world of private money and crowd sourced money.  TONS of options out there.  You would just need to look.

2. Closing and the Mortgage.  You can certainly buy the property with cash if you want to.  For a conventional loan (again, Fannie/Freddie) part of the loan process is to call your job to see if you are leaving.  So if your current job knows you are leaving, then that loan option will be out anyway.  But once your loan funds, it doesn't matter what you do.  The loan is funded.  So if you have your job, your loan closes, then you leave your job the next month there will not be an repercussions to you....as long as you make those payments on time as agreed.

I hope this wasn't too much information but feel free to tag me if you have any other questions.  Good luck!