Am I screwed or can I get a loan?

Question

WANTED: $25,000 mortgage/loan over at least 10 years and preferably 15 years.

COLLATERAL: 3/3 duplex that is owned outright and is worth around $50,000.  Rent totals $1,200 per month.  Taxes and insurance are roughly $200 per month.

CASH RESERVES:  $7,000

PROBLEM:  Self-employed with a new business and I can't show a profit.  Credit score is around 640.  Credit card debt is around $3,000,  which I could pay off with cash reserves,  however,  I know the lender would like to see some emergency cash available.  I have no other debt,  live rent free and no car payments.

SOLUTION:  Is there anything available for me?  Ideally,  I would get a mortgage at a reasonable rate over 15 years. The rental income would easily cover anything reasonable......even at well over 10%

Chad Lubke · Answer

Key take away is as Nathan said meet with SENIOR lending officer, not the guy they give you when you walk through the front door.  We have had luck working with small, local banks who know our market and have been able to work through some challenging situations using their portfolio program.  If you establish a relationship with them, and have a good track record they may be able to stamp out a non conventional loan that works for you.

Stephen W. · Answer

Thanks Nathan.  I really appreciate the help.

Nathan Emmert · Answer

Also, your expected payment was about $100 off.  Per mortgagecalculator.org @ 7.5% for 15 years you'd be $230 a month.

Nathan Emmert · Answer

You don't know until you ask.  Given the amount of collateral, assuming you have experience managing it for a while, I have to believe someone will take a shot but expect a lot of no's before you get a yes.

You've got two challenges... the first is even finding a portfolio lender on NOO properties... the second is finding one of them that will work in a less than ideal situation.

Start calling every small town local bank and credit union you can.  If you find out they do portfolio loans on NOO investment properties, schedule a meeting with a Sr Loan Officer and bring in your business plan.  I wouldn't try to sell your situation over the phone.  Come in looking and acting professionally and you'll be a lot harder to say no to (though not impossible to) then a voice on the phone.

Stephen W. · Answer

Thank you all for the input.  Do you think I can get portfolio lending given my circumstances?  That seems to be my best option from what I can tell.  7 or 7.5% interest over 15 years would work really well for me.  That would make my mortgage payment from around $135 to $140,  which would be very easy to pay off.

If those rates aren't possible,  I would be able to pay off a much higher percentage provided the term is over 15 years.....I just need to find someone willing to do this.

Thanks again for your input.

Shanequa J. · Answer

Most mortgage companies want to see proof of income to be sure you can take on the new debt. Your duplex as collateral means more to you than the bank. Banks don't want any more property. They are being super cautious about who they lend money; they got burned in the past. You might have a hard time finding a bank that will lend for that purchase price.

Nathan Emmert · Answer

You aren't going to get a conventional loan under $50,000... you're stuck with portfolio lenders.  As such, anything is possible... the harder part will be finding lenders who do portfolio lending.  15 years fixed is probably possible but expect to pay 7 or 7.5% interest instead of 5.0% on a conventional loan.

Joel Owens · Answer

Why don't you get owner finance with a short term balloon in a few years??

New business can build up records over 2 to 3 years and then refi and cash out the seller.

When refi could even cash out most of the seller and then have them still hold a small second 10 to 15%.