Loan Preapproval for a College Student with No Income

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Loan Preapproval for a College Student with No Income

Jakob Claret
Rental Property Investor · Houston, TX · Member since 2019 · 10 posts · 4 votes

I'm a college student about to graduate, and I'm looking to buy a multifamily property rental or house hack. 

I'd like to get preapproved for a loan, but at the moment I have no job or stable income. I've got a mid 5 figure stock and bond investment portfolio, but I don't know if I should bother getting a hard credit pull for preapproval since lenders care more about income than savings.

Should I still go forward with the preapproval process or should I just try to get a job with stable income and help other investors wholesale while I gather enough funds?

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Greg M.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
5y

Sorry, but it sounds like you're not ready for buying a multifamily property. No job and only ~$50K in investments is not a stable position.

You didn't provide numbers, so I don't know what price range you're looking at and what type of rental income you're expecting, but it doesn't sound like you can swing the down payment and have enough reserves for any unexpected major expenses that pop up. Not to mention what happens if something comes along like a pandemic and your rental income stops for a year?

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    Talk to a lender (or several) to see what your options are. You are correct that they care about income, not what's in your account. I have a friend that was a rental investor for nearly 40 years. He sold all his rentals, had almost $1 million in the bank, and he couldn't get a loan because he no longer had the rent income. It's ridiculous, but that's how it works.

    You could investigate purchasing for cash and then refinancing later to get your cash out, but even then it probably has to meet certain criteria.

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    2Reply
  • Michael Dumler
    Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    @Jakob Claret income, credit score, DTI ratio, total assets/downpayment are all factors that a lender will dissect when determining if you qualify for a loan approval. Yes, majority of the underwriting is based on income, but one potential way around this caveat is by having a mortageg co-signer. In your case, the co-signer will be added to the mortgage and their income and credit score will be used as security against the loan.

    If you're fortunate to have this option, I would speak to as many lenders as possible to determine the best financing avenue for you and your potential co-signer. Don't screw over your co-signer, as they will be just as reliable if a payment is missed haha 

    3Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Jakob Claret:

    I'm a college student about to graduate, and I'm looking to buy a multifamily property rental or house hack. 

    I'd like to get preapproved for a loan, but at the moment I have no job or stable income. I've got a mid 5 figure stock and bond investment portfolio, but I don't know if I should bother getting a hard credit pull for preapproval since lenders care more about income than savings.

    Should I still go forward with the preapproval process or should I just try to get a job with stable income and help other investors wholesale while I gather enough funds?

     Get preapproved for 5 unit or more.  They look at the rental income 

    2Reply
  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    5y

    Sorry, but it sounds like you're not ready for buying a multifamily property. No job and only ~$50K in investments is not a stable position.

    You didn't provide numbers, so I don't know what price range you're looking at and what type of rental income you're expecting, but it doesn't sound like you can swing the down payment and have enough reserves for any unexpected major expenses that pop up. Not to mention what happens if something comes along like a pandemic and your rental income stops for a year?

    3Reply
  • Jakob Claret
    OP
    Rental Property Investor · Houston, TX · Member since 2019 · 10 posts · 4 votes
    5y

    I'm looking around in Houston and 2-4 unit properties go anywhere from about half a million to $1.5M depending on rehab needs and property size. 

    From what it sounds like, I definitely need a co-signer or to just wholesale the deal and put it towards my savings for my own property.

    I do have job offers in the $70-$120k range (engineering degree), but even then I would still need at least 6 months of living well below my means to save up enough for a down payment, closing costs, and reserves and would probably need to wait longer anyways to get approved for the loan since they usually want to see at least a year of stable income, right?

    @Michael Plante mentioned getting commercial property since they would value it as a business and not me as a lendee. That still would require a higher down payment which I would still need a third party to provide me with the funding. 

    I suppose if I could get seller financing I could potentially skip that hurdle altogether though. How often in your experience have you been able to get sellers to finance?

    1Reply
  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    5y

    Take the 120k/year job. Keep saving cash in the bank and keep contributing to your stocks and bonds accounts. You'll need cash in the bank and a steady income if you want to get any loans. I know everyone says that cash in a bank doesn't appreciate but its a great saftey net. 

    honestly I wouldn't spend 1.5mill on a MFH property while making 120k on a w2 with no other means of income. Id look for something cheaper even if its outside of your city. 

    where I'm at in NJ is way less developed then NYC or Philly areas so there's less appreciation but rents are still steady. Way less money out pocket. Less competition as far as other investors. Plus I'm at a sweet spot where both cities are still an hour away.

    2Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    5y

    @Jakob Claret

    Take the job, rent, minimize your expenses, and save.  

    Renting in the short term is a great deal.  No closing costs, no realtor fees.  When your lease is up, you move.

    This will put you in a much stronger position in the long term.

    1Reply
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