Can’t get a loan cause I’m under the 2 year rule for banks!

24 Replies

Hi! So I’ve been listening to the podcast and interested in investing real estate for a few years now. My problem for so long has been the lack of income, I took some chances and struggled for a bit but after changing jobs a few times I landed a good sales job where I can typically make 1.5k-5K a week after taxes. I reached out to about 3 banks so far and it’s the same problem every time. Since I don’t have at least 2 years at the same type of job I would have to wait. So now my problem is the opposite from before, I can raise capital to put money down for a rental property but I don’t got the time anymore. I would really like to not have to wait another two years before getting my first investment property, does anyone have any recommendations as to what I can do? Appreciate any feedback!!

If you are stuck and cant get a loan, but make the money needed you may think about partnering with someone who needs the down payment money and can get a loan. You bring the money, they bring the ability to get loan.  

@Eshmield Ruberté Get hard money or talk to a mortgage broker who may be able to figure something out. If you can put 20% or more down you may be able to get a loan. Talk to a good mortgage broker and find out how many months of consistent income you need. If you can show that your current job is similar to the previous job and write it out in a letter the underwriter may accept that. 

@Eshmield Ruberté the posts above are hitting the concepts right but I wanted to provide a little more clarity just in case. Generally speaking there are 2 main types of loans for investors: “Conventional” and “Portfolio”

Conventional - I'll define these as loans that come from Fannie Mae and Freddie Mac (if you recognize those names). These loans are all 30 year fixed rate loans. They have the lowest rates we can find and since they are 30 year fixed...they allow us to cash flow better...which helps us qualify for other loans later. The draw back to these loans is that they are more paperwork heavy than the other "portfolio" types of loans....but if you have ever received a loan on your primary home, it's likely that you will go through the same type of paperwork here with conventional lending. Fannie/Freddie money = Fannie/Freddie rules. NOT the bank's own money.

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money. Sometimes referred to as "commercial" loans. Sometimes called "bank statement" loans. Sometimes called "DSCR" loans. The concept here is that it is there own money...whatever they want to call it. These loans are a lot more flexible than "conventional" loans. Bank's money = Bank's rules. If they like you, then maybe they will lend to you. But since there is a limit to how much money the bank has access to....their rate will be higher...and usually a shorter term. The most common portfolio style loan in Texas is a 20 year adjustable rate loan. These loans are easier to get but the terms are different.

The Fannie/Freddie loans go off of your income.  The portfolio style loans do not.  Just seek out a portfolio lender.  If you want to read a post on how to do that then read this post HERE.

@Eshmield Ruberté - I am a multifamily lender and @Will Stewart is spot on.  Commercial financing (generally prohibit owner occupancy) is based on the fact that the property is a revenue generator where its expenses and debt service are supported by its own cash flow.  Because of this, commercial lenders look at your net worth and liquid reserves as well as relevant business and real estate experience...not your Debt-To-Income or your employment situation.

@Thomas Corley thank you for the reply! I have heard on many occasions that credit unions are the way to start. So you ask these credit unions and regular banks about their "commercial" loan options? Do these small/normal banks often loan commercially on small multi family properties that may also need rehabbing?