Refinancing hard money loans

9 Replies

I was recently laid off and lost my w2 job, and am moving into a commission based position. I was intending on buying an investment property, which I’ll now do with a hard money loan. It’s my understanding that I would want to refinance the hard money loan later to get out of the higher interest rates, but will I be able to refinance to an investment loan if I don’t have the w2?

Per Fannie Mae guidelines....

"A minimum history of 2 years of commission income is recommended; however, commission income that has been received for 12 to 24 months may be considered as acceptable income, as long as there are positive factors to reasonably offset the shorter income history."

Another factor that plays into this is what percentage of the income is commission?  If its 50% or more, then this above applies.  If its less than there may be another way.  Is it the same type of industry?

@Jaimie Abert

I'm not sure what you mean by "...later."  Hard money loans are by definition short term loans, generally 6-12 months.  They are also for unoccupied properties.  So, after you finish the rehab you refi into a conforming loan.

Correct, without W2 income it will be harder to qualify for a loan.  Without 2 years of 1099 income, its really hard.  As mentioned, there are other avenues to try to get a loan, but they get more difficult and potentially more expensive.

You really should just speak with a lender, or multiple lenders or types of lenders, to figure out a viable approach instead of a public forum, honestly.

Good luck, and sorry to hear about your job.

@Jaimie Abert yes, you can absolutely still refinance but not with a conventional loan. 

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.  These loans are based on YOU. Your income, your credit.  So if you don't have income these loans are out.

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money. Sometimes referred to as "commercial" loans. 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.  Usually these loans don't care about your personal income, just the income of the property - or the cash flow.

Anyway, I hope this makes a little more sense in what type of loan you would need.  I would highly recommend getting prequalified with a lender first so  you know what your terms will be on your loan but it is entirely possible to get a loan.  Thanks!

@Jaimie Abert You could opt for a commercial/portfolio DSCR based option. (debt service coverage ratio). These loans rely on the subject property's cash flow and you FICO rather than your personal debt to income ratio so you don't need to worry about having pay stubs or tax returns. Rates are a bit higher (in the 4s and 5s) but you can still secure a 30 year fixed rate. Hope this helps!