When you don't qualify for a mortgage

7 Replies

I am financially stable, but I went freelance about two years ago. The first 1.5 years I didn't make much money and took out from my savings to pay the mortgage on my primary residence. I've started making a good income doing freelance this year (6 mo worth) and I've been learning about REI for cash flow and was hoping to start this year. However, I live in an expensive city (Seattle) and although I can afford a downpayment on an investment property, I don't seem to qualify for a mortgage if I do bc banks take the average income of the last 24 months to determine ability to pay. Given I've only been making money for the last 6 months freelance, this isn't working in my favor. So, I'm in a weird situation where I can't get a mortgage and I don't qualify for things like FHA (at least, as far as I understand FHAs).

What are my options? It seems like hard money doesn't work as they are high interest and short term, and what I need is exactly the opposite. I DON'T have enough money buy a house here cash-in-full, so that's not an option either. Any thoughts? I feel like I'm stuck in this weird in-between so any ideas would be helpful.


You can look for a partner, or it depends what you want you can do Private Money Lenders, or a commercial loan. Those will look at other factors outside of your income. Check with some of your local lenders and see what they offer. 

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Hi everyone! Thanks for the insights. Looks like finding a partner or a portfolio lender is the way to move forward (or delay for a bit while my income steadies). Now to do research on portfolio lenders... Thanks! 

Most portfolio lenders still require 24 months worth of self employment.  The most common product for this scenario is a bank statement loan, where instead of using your net income to qualify, they will use your gross income.

A hard money/private loan could still work for you. The interest rates are higher. But you could keep the hard money loan just long enough to 1) continue making a good amount at your free lance position, and 2) have a history of making the investment property profitable.

When you have those two things, you can probably refi with a conventional lender with standard interest rates.

I do private lending and many of my loans pay off early when borrowers can get conventional financing.