Any suggestions on finding lenders in Michigan?

Question

Hi everyone,

I’m new to Bigger Pockets, but am preparing to jump in with my first BRRR soon and would like to get something lined up with a lender or two before I take any further steps. I’m in the metro Detroit area - does anyone have any suggestions/recommendations?

The 6-month seasoning period is a little bit of an issue for me, as I don’t have enough capital to do more than one deal at a time before getting a refi, but seeing as it’s my first attempt I may just take it slow and not try anything too complicated. With that said, I still might be interested in a non-conventional loan if everything goes successfully and I want to pull my cash out and repeat!

I’m also not sure about my income verifications. I have a mortgage on my house currently, but my work is not regular and I get 1099’s, so I don’t think I’ll qualify for another conventional mortgage as easily as the first. So I’d be interested to hear suggestions about lenders and options given that challenge as well. I’d like to avoid getting a co-signer, like from a parent or someone, if possible.

Thanks for any advice!

Stewart Battle · Answer

Great, thanks for the advice

Drew Sygit · Answer

Traditional lenders will want to use your income from your last 2 tax returns. They always average DOWN, meaning if your income is rising they take the two year average which effectively lowers the income they will use. If your income goes down, they will use the lower, more recent, number.

Lenders will NOT just use your 1099 income - they will use your TAXABLE income after expenses. They do add back depreciation and some will even add back auto and home office expenses, but not much else.

If you are going to be a successful investor you need to invest some time in learning about lending - so you make better investing decisions.

Currently, if you have a family member willing to lend you cash, why don't you ask them if they are willing to be your cosigner if you don't qualify for a loan in 6 months?

FYI there are asset based lenders, but they typically require documentable experience or will only lend 65% of a property's value.

Stewart Battle · Answer

@Caroline Gerardo Will do! I’ll give you a call tomorrow, thanks

Caroline Gerardo · Answer

No @Stewart Battle  you are mixing together issues. Give me a call. Have your IRS taxes 2019 2020 in front of you, what is the 1099 total for 2021 and 2020,  know how much $ liquid you have, talk about 2 different proposed purchases with the property type, condition, price, location and I would be happy to help clarify your layers of questions.

Chad S. · Answer

@Stewart Battle

I have used Huntington Bank for my last purchase of a fourplex and refinanced all my other properties with them.

Stewart Battle · Answer

@Julio Gonzalez yes, it’s been immensely helpful. Thank you.

Julio Gonzalez · Answer

Hi Stewart, welcome to BiggerPockets! You came to the right place for information!

Hope you find what you're looking for here!

Stewart Battle · Answer

@Caroline Gerardo Thank you for the advice. I don’t have anything yet, but am getting ready and had heard getting pre-approved for the refinance was a good idea. It seems like you’re saying that if rental income is 125% of PITI then some lenders will approve that? I imagine I would need to have that in hand as opposed to a pre-approval letter in this case? Thanks

Caroline Gerardo · Answer

What is the rental income on the IRS return? Does it cover PITI plus a 25% haircut for expenses?  (conventional rule)

Other ways: appraiser says rents cover subject/ you use 12 or 24 months bank deposits as income into ONLY one bank account/ hard money and you wait until you have a w-2 job?

Not knowing what advice you got from whom... can't guess without a phone call as to what you can or can't do. Meanwhile do not use more than one bank account

Stewart Battle · Answer

@Caroline Gerardo Yes, between savings and a loan from a family member I am planning to buy with cash at a reduced price, rehab it, then go for a refi after renting it, all of which I can cover but obviously would like to try and pull the cash back out at the end.

As for my income, without going into all the numbers, I do get 1099’s, and unfortunately did write off a lot during 2020 (might be better for this last year, but I would need to check). When I spoke to my previous lender a while back about a second mortgage he thought we would be pushing it too much with our current income.

So I guess my questions would be: does this change much when you account for rental income (increasing your income) to qualify for a new conventional mortgage? And if not, what other ways around having too small a verifiable income are there, say with non-convential loans?