Refinance without full-time job

21 Replies

So I recently bought a property early March of this year with plans to refinance after six months using my rental income as proof of income for the refinance but my bank won't let me refinance out of my current loan with that income and I don't have a full time job.

I have the property fully renovated and should have around 60k of equity in the property after the appraisal and I am worried about the future of the real estate market so I am not sure I should wait a year or so to refinance in case the market goes down

Does anybody have any experiences that they have gone through like this and how did you overcome it? Any help would be greatly appreciated! Thank you in advance

Hi Cody. 

I'm in a similar situation at the moment. Seems without a regular W2 the hurdle to refinancing is a lot higher and the options scarce. 

A couple of hard money lenders that I've talked to here in Phoenix said they have access to conventional mortgage products with a bit higher rates (5%-7%), based on the ARV and cashflow for properties in this area. NOTE, I have not gone through the refi process yet though.

Perhaps a HML knows of a regional bank, credit union, or other options for a product in your area?

Best of luck!

Nils


@Cody Neumann - Most of the lenders I work with nationally don't require a W2.  They look mostly at the property cashflow and your credit score.  most don't require tax returns either.  Yes, the rate are a little higher than a bank but if the choice is being able to refi or not being able to.... it makes the decision easier.

@Salvatore Lentini I was considering the approach of moving my loan to another bank and looking into that. Right now I have a 30 year fixed at 5.25% interest on a $40k loan im not sure how much it would kill the investment by the loan increasing to around $90k. Im currently making $400 a month cash flow which is kind of where I am torn between it as well because of all the uncertainty in the market. Another idea I had was seeing if I could pull a HELOC on it if I can after an appraisal so that way I keep all the equity in the house and I have some money where I am able to buy a deal that I am looking in to. I would highly prefer not to over leverage myself right now.

@Nils Bunde I have heard of hard money loans frequently but I am not very familiar with terms as I have never used one. From what I have heard a lot of them use points and have very high interest rates. Typically investors will use them prior to getting the refinance when they are first trying to buy the deal. That is just what I have heard of them in my experience.

I have also found that it is possible to have a cosigner with a W2 to get your refi. However there comes a risk for the cosigner if you default on the loan they have to repay it so that is a sort of obstacle to look out for. I have great credit juyst no w2 income.

Thank you very much for your input and I wish you the best of the luck with your refi as well!

@Cody Neumann You want to look for a national or regional asset based lender or a broker that has connections with them. They are not hard to find, but you will pay more in terms of a rate and fees because they know programs like theirs are the only way you will be able to refi if you don't have a W2. 

The general rule of thumb is that bank loans, both conventional and commercial, tend to be cheaper, but move slower and can have more underwriting headaches. I do recommend that investors try reaching their conventional limit first, especially since we're seeing the lowest interest rates of all time right now. However, conventional loans get harder and harder the more properties you own and the more complicated your taxes get, especially if you don't have a W2 or strong/stable income.

Even though I can get conventional loans, I often try to go asset-based or commercial lending because I don't want to deal with tax returns (I always file at the end of my extensions) or worry about DTI, and I want to have loans to my LLC. It is a trade-off because conventional loans have 30-year terms (and so do asset-based loans but most commercial loans don't), lower rates, (almost) no prepayment penalties, and is better if you have high income or the property doesn't cashflow too well.

Commercial loans are best done through your local banks and credit unions, especially in more rural areas or lower price points (i.e. values below $100k) as national lenders tend to stay away from these areas, especially during COVID.  Long-term asset-based loans, which are loans that are primarily based on the subject property's cashflow and not your personal (or global) income (i.e. no tax returns, pay stubs, personal financial statements, etc.), usually come from hard money lenders, such as CoreVest, Civic, Lima One, LendingOne, LendingHome, Visio, and us (Certain Lending).  It's hard to hear that since we're used to associating hard money with short-term loans at double-digit interest rates, but these loans are actually underwritten not much differently than a hard money loan (again, because they are asset-based).

The rates on these 30-yr asset-based loans are often higher than a bank loan (although they are on a downward trend), currently averaging in the mid 6's, but again they are much more flexible and less headaches to deal with. I like to use "average rates" (i.e. the rates that the majority of borrowers actually get) because most of these lenders tend to advertise a low starting rate that 95% of borrowers can't actually get, i.e. "starting at 4.95%" and then they quote 7% for a loan. It's because that low rate is for a perfect borrower with 760+ credit who wants to put a loan on a $300k+ property at 50% LTV that cashflows 2x monthly expenses.

You may want to connect with alternate lenders who focus on the assets and stated income for the corporation, not individual. Reach out if you need more specific advise.

@Cody Neumann Feel free to email me (see my signature for email).

@Jim Fleck What makes you say Lima One Capital is not asset-based?  If you're in Chicago, I assume you're using Constructive or Renovo?

@Nghi Le

I’ve used Lima on last 6 fix n flips...Renovo has just been too much documentation up front, and my rates and leverage have been better than Renovo.

I’m just talking about their refis needing certain fico and income.

I've worked with a few dozen investor friendly lenders to grow my portfolio.  No W2s or tax returns.  Rates are higher but not crazy (for rental loans - 30 years).  I've also worked with hard money lenders for Fix & Flip or when repositioning a multi family or commercial deal (12-18 months).  Hard money loans are always a higher rate and points but they are meant to be short term.  If you need some names, feel free to message.  A lot of them don't advertise as they don't want to be inundated with tire kickers.