Bank financing and unemployment

[Teddy Kogan]

I was laid off from my construction management job a while back and I'm thinking of getting started in REI as it doesn't look like I'll be finding a job anytime soon. My credit score is in the 700 to 750 range and have 200K to start with. My question is how likely will the banks finance any income properties for me and what sort of a down payment and rate will they be asking for. I realize I can use this amount and go in all cash but I would like to leverage as much as I can. I'm not looking to partner up or invest in someone else's deal.

[J Scott]

It's very unlikely that any big bank that deals in conventional loans would loan to you without income. Most conventional loans are going to require at least two years of income tax returns for self-employed, and those two years would have to be in the same field you're currently in. So, you'll pretty much have to be in the RE business -- and successfully generating income -- for two years before you can go this route.

That said, there are smaller, local and regional banks who offer loans (called "portfolio loans") for investors without the same set of requirements. Good credit, cash-on-hand and experience will often make up for the lack of income. Since you don't yet have experience, you'll have to rely on your credit and cash to help convince them you're a safe bet (perhaps putting more money of your own into the deal than they'd normally require), but it's still very possible.

This is actually how I started with financing my rehabs/flips.

Outside of portfolio loans, your options basically are:

- Hard Money Loans
- Private Money Loans
- Partnering
- Using All Cash