Loan Approval! - How?

Question

The property in question is $55k, and I recently did NOT get approved for a loan and was really really surprised. I was looking for a quote with 20% down as an investment property, and they shot me down despite having a decent salary ~50k and credit in the upper 700's.

The reason was is because I currently rent an apartment for 1,000/month and I plan to still live there after I purchase this property.

So the view of the mortgage company - my expenses are (per month):

$1000 (rent) +

$400 (property taxes) +

$200 (HOA fee) +

$250 (mortgage)

= $1750 (too much to give me a loan)

They couldnt take it to consideration my bonuses from work or rental income because I dont have a 2+ year history in either.

How do I get a loan?

The mortgage guy said basically I have to lie and say I'm going to live there. My net worth would allow me to purchase this house cash but there's no point because it would be a huge part of my liquid cash.

Any suggestions would be great!!

Mark Redmann · Answer

did you find this in Philly? what part?

Kyle M. · Answer

Median Rent: 1400

So property rents for 2.5% of value.

More precise numbers are:

Mortgage: 290

HOA: 190

Taxes: 380

- I factored in the HOA fees into maintenance expenses because I dont have to take care of exterior/landscaping etc.

So I'm coming in with +30 cash flow a month on this property. Plus 55k is list price, I'm going to go in with a lower offer. This is a condo btw.

Ciprian L. · Answer

$400/mo taxes + $200/mo HOA on a 55k property? How much is the rent?

Probably if you find another property with less expenses it will be easier to qualify.

Clay Manship · Answer

Hey @Kyle M...

I recently got approved for a mortgage on a property I am purchasing for $24,000. I am 23 and make a little over $50,000, for what it is worth. I am buying the home in Indianapolis, Indiana.

That being said, mortgage financing has been a HUGE pain in the behind. I will do every deal with cash moving forward. Keep shopping around--for whatever reason, apparently certain banks are easier to work with. Build a relationship and make things happen. Given your financial situation you provided, I can't see things staying at a "stalemate" forever. Best of luck.

C

Kyle M. · Answer

got approved by another lender! sub 5 interest rate and able to put 20% down. I have never purchased a property before and the mortgage guy seems to want to steer me towards buying this property as my private property, which I am against because I do not want to live in it.

He said it will give me more options in the future, obviously it would give me the option to do an FHA. But I clearly stated that I do not want to live in this property and seems to keep pushing it (saying we will talk about it in person). What angle is he playing?

I also clearly stated that the decision to purchase this property as an investment is a lifestyle decision (because I do not want to live in this area). I see how it makes financial sense though.

My guess is that he gets extra commission on FHA because of the PMI involved on it. Also, he has the ability to sell two mortgages if I live in this one and find a different investment property. But I am just a newbie and this could be wrong, thoughts?

Michael Seeker · Answer

Most lenders will not consider any income that hasn't been on your tax returns for at least 2 years. That being the case, your ~$50K equates to ~$3K in monthly take home pay. You're telling the bank that with this new loan (you left out insurance BTW which is also a factor they add in) your monthly expenses are going to be ~$1800 which is over half of your monthly income.

The underwriter looking at this loan is going to question whether you can perform if the house remains vacant or needs major out of pocket repairs.

My suggestion would be to shop around for local lenders or ask this lender if they would be able to do the loan at a lower LTV (meaning you need more $ into the deal).

Charles Morgan · Answer

@Dawn Anastasi is right, do not lie. I had a similar problem, had to get a hard money loan to purchase the home. It sounds like you may be able to up the down payment to 30% or so and make the qualification. Or purchase cash and refi to get cash out.

Dawn Anastasi · Answer

That "mortgage guy" is giving you very, very bad advice. If you lie you could be brought down on charges of mortgage fraud. You ideally would want to talk to that person's supervisor and let them know what kind of advice they are handing out.

Loan Approval! - How?

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