REFINANCING AFTER USING A HARD MONEY LENDER

5 Replies

Hi all, 

Quick question if I purchased a MF property using a hard money lender and decided to refinance to a conventional loan 6months to a year later would I need to have  W2 income ? I'm ready to quit my job and invest into real estate primarily. I'm wondering if I should wait. 

Hey @Justine Veal , it depends on your personal financial situation but chances are you will need your W2 income.  It wouldn't hurt to talk to a lender now even if you are 6-12 months away from repositing.  

How many units?

There are loans where you can use the rental income to qualify, instead of personal income. They are called DSCR loans (sometimes DCR). Interest rate is a little higher, but not horrible.

So if you are looking to refinance into a conventional loan they will require some sort of verifiable income. With you being new into investing they will likely not be able to use all or any of your rental income as qualifying income as they typically like to see a 2 year history of rental income before they will allow that to be counted. You can look into a non conventional lender, one that offers commercial loans such as a DSCR loan. This will allow you to refinance the property based on your credit and the properties ability to generate enough rental incoem to cover the expenses (mortgage, taxes, insurance, etc.) as opposed to basing it on your ability to pay for it like a convnetional lender would.

I hope this helps. 

@Justine Veal Good question. I think personally many people quit their jobs a little too early. Best in my opinion to leverage that W2 income one last time to get the best rates possible. Now if you are making far more money investing than at your job I would at that point refinance the hard money into a low qualification loan option in the 5%-6% range to speed up your goals.

Best of Luck!

@Justine Veal

You need a 2 year work history as either W2 or Self-employed. Not a mix... unless you can prove you did both at the same time for 2 years.

If you are planning on being a "Self-employed" landlord, you'll need 2 years reporting on tax returns. You might qualify with 1 year, but I wouldn't chance it.

Certainly, less than 1 year quitting W2 and going Self-employed, would mean you will have almost an impossible time getting a traditional loan.

So, I'd recommend not quitting.