Self-employed (CA) seeks mortgage loan for investment property

Ann Arbor, Michigan
Mortgage Brokers & Lenders
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Self-employed (CA) seeks mortgage loan for investment property

Karen Jou
Rental Property Investor · MI · Member since 2019 · 10 posts · 8 votes

Hi there,

I am currently self-employed almost 8 mos now which presents some problems in qualifying for a mortgage loan. I have the down payment. I have a property manager who has managed my other home for 5 years now. Just need a lender to help me get that second one. Advice or guidance would be appreciated.

PS I now live in CA but am looking in SE Michigan where my other property is.

Thanks

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Steven Goldman
Lender · PA · Member since 2019 · 535 posts · 461 votes
4y
Quote from @Karen Jou:

Hi there,

I am currently self-employed almost 8 mos now which presents some problems in qualifying for a mortgage loan. I have the down payment. I have a property manager who has managed my other home for 5 years now. Just need a lender to help me get that second one. Advice or guidance would be appreciated.

PS I now live in CA but am looking in SE Michigan where my other property is.

Thanks

Karen with self employment income the easiest way to finance a rental property is with a debt service coverage lender. You will need 20 percent down, fees and closing costs to qualify. If the monthly fair rental value exceeds the projected principal, interest, taxes and insurance, than you will qualify without considering your income. A minimum 650 credit score is required. The higher the score the better the LTV and rate. If you have a lower score, you will need more down money. These loans are 30 days to process and at the moment rates are rising. The rates are currently in the range of 6-7.5. I wish you luck.

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  • Steven Goldman
    Lender · PA · Member since 2019 · 535 posts · 461 votes
    4y
    Quote from @Karen Jou:

    Hi there,

    I am currently self-employed almost 8 mos now which presents some problems in qualifying for a mortgage loan. I have the down payment. I have a property manager who has managed my other home for 5 years now. Just need a lender to help me get that second one. Advice or guidance would be appreciated.

    PS I now live in CA but am looking in SE Michigan where my other property is.

    Thanks

    Karen with self employment income the easiest way to finance a rental property is with a debt service coverage lender. You will need 20 percent down, fees and closing costs to qualify. If the monthly fair rental value exceeds the projected principal, interest, taxes and insurance, than you will qualify without considering your income. A minimum 650 credit score is required. The higher the score the better the LTV and rate. If you have a lower score, you will need more down money. These loans are 30 days to process and at the moment rates are rising. The rates are currently in the range of 6-7.5. I wish you luck.

    2Reply
  • Karen Jou
    OP
    Rental Property Investor · MI · Member since 2019 · 10 posts · 8 votes
    4y

    Thank you for this! Everyone is telling me no but obviously I am asking the wrong people. Thank you!!

    1Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    4y

    @Karen Jou yeah, this is totally doable.  Just find the right lender to help you.  I wrote an entire post on how to find good lenders that you can read HERE.  Maybe that will help with your search.

    1Reply
  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    4y
    Quote from @Karen Jou:

    Thank you for this! Everyone is telling me no but obviously I am asking the wrong people. Thank you!!


    My guess is you're asking conventional lenders and you need to be looking for either local (to the property) portfolio lenders, commercial or alternative type lenders. There's a lot of info on those loans here on BP. Look for DSCR, alt-doc, bank statement phrases. There are some brokers that do these types of loans exclusively and they're here on BP as well.

    1Reply
  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    What are the total deposits of income into your bank statements past 12 and 3 months? (take out IRS refunds and any other oddities) we can use that to cover your housing payment and other liabilities (hopefully you don't have a large car payment and giant student loans) 

    Or DSCR The rental income that the appraiser says is market rents covers the principle interest tax and insurance (you need enough down payment for this to balance and no income is entered on the application)

    Either program works if your middle FICO is above 640 with 25% down or 680 up to 10% down but the rate is higher than conventional. Conventional loans for non owner are pretty expensive today as the GSE's aren't buying them. 

    Easy peasy in Michigan as prices are lower but rents are good.

    1Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    @Karen Jou You need a better Property Management Company that has lender connections and more - to help you grow your portfolio:)

    You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:

    https://www.biggerpockets.com/...

    [email protected]248-209-6824
    Logical Property Management4.9459 Reviews
    WebsiteView Page
    1Reply
  • Andrew Zamboroski
    Lender · Member since 2021 · 495 posts · 130 votes
    4y
    Quote from @Karen Jou:

    Hi there,

    I am currently self-employed almost 8 mos now which presents some problems in qualifying for a mortgage loan. I have the down payment. I have a property manager who has managed my other home for 5 years now. Just need a lender to help me get that second one. Advice or guidance would be appreciated.

    PS I now live in CA but am looking in SE Michigan where my other property is.

    Thanks


     Karen,

    As others here have mentioned, Debt Service Coverage Ratio (DSCR) products can be a great alternative to conventional loans. The flexibility in the product should work with your situation. A local broker or lender should be able to assist you in your search.


    good luck!

    1Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    4y

    Even though the direction is pointing towards a DSCR loan (mid 6's to 7's as of April 4th 2022), I would still prepare your self employment to be documented so you can get the more prime programs like conventional which are 1-2% lower in rates to keep your investing "lean and mean."

    1Reply
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