Loan hacks to make qualifying for loans easier

[Shiloh Lundahl]

If you have ever learned something important by trial and error, then you can probably understand the frustration that you feel when you make a "rookie mistake" or a simple error that creates a big negative result. Like accidentally leaving the car light on in the car and having your car battery dead in the morning. A simple mistake with a big result. 

When it comes to getting loans, which is pretty important for real estate investors, simple "mistakes" can make it so that you either don't qualify or you may qualify but with a higher interest rate or higher loan fees. 

I have probably gotten between a hundred and two hundred loans within the past 8 years and I have learned some things along the way that make getting loans easier and harder. Here are some tips and tricks to make loans easier.

1. Don't disclose things that are unnecessary. For example, if the loan officer asks you what your monthly payments are and your mother-in-law moved in with you because she is struggling financially and you are paying her car payment, don't share that you are paying her car payment every month. You don't own the debt even though you are nice enough to pay it. The same goes with real estate. If the loan officer asks you about your debts, you can ask clarifying questions such as are you asking for personal debts or business debts? If the loan officer asks for just personal debts, then don't disclose any business debts including debts on real estate that if that debt was qualified for by the business.

2. If you are married, put the debt for the family house in only one person's name. My wife and I have business income and our accountant can divide the income according to what would be the best for reducing tax liability. If you are able to qualify for the house debt in only one person's name then do that. Our mortgage and HELOC are both in my wife's name. This makes it much easier for me to qualify for loans because I don't have to disclose the home debt that would effect my income to debt ratio. I am looked at by the loan officer as living in a situation rent free.

3. Lets say your accountant tries to write off as much as is legally possible when it comes to lowing your taxible income so that your tax burden is less and you pay less taxes. This can make it hard for you to get a loan because a loan officer will say that they can only go off of what the taxes say.  Your explanation of really making a million dollars a year even though your taxes only show a hundred thousand will only make you look shady. So don't do it. Instead, ask your accountant to write a letter of explanation for your finances that adds back depreciation and capital improvements rather than expenses. This can help your bank be able to qualify more income. Also, if you sell homes regularly each year, whether it's a few or more and you can show the bank that that is your business model and if you can show the bank consistency in that model, they can use your capital gains as regular income which can greatly help you qualify for a loan.

4. Let's say your accountant is like a magician because it's almost like he can make your income disappear on your taxes (legally of course). This can be good when it comes to avoiding taxes but bad when it comes to qualifying for a loan. Let's say you already used the tips above but you really want this nice yacht you've been looking at buying but you want to buy it with a loan and you only need to show $5000 more a month in income to buy it. You have the money, but you really want to buy it with a loan for some reason. So here's another hack. You can create a trust to pay you out $5000 a month for a 39 month period of time. Show the bank the first couple of transfers into your account and if the those transfers are expected to continue for at lease the next 3 years, the bank can use that $5000 as monthly income which can help you qualify for a loan to buy the yacht of your dreams. Happy sailing. 

For all the experienced investors out there, if you have found other legal loan hacks that have helped you qualify for loans which in turn has helped you grow your real estate portfolio, share some of them below.

If anything I have stated above is illegal then you can point that out too. We don't want to lead people astray. But make sure it is actually illegal and not just your opinion.