What to do when the bank won't fund because no W-2 Income

Question

O.K.  You finally get to the point where you make enough "passive income" where can quit you J.O.B.  You find a great multi-family property, make an offer that gets accepted and it goes to contract.  You have a bunch of equity in your properties and want to do a cash-out re-fi on 3 properties to get the down payment for the multi.  You go through 3 months of grueling paperwork back-and-forth with the bank only to find out they won't finance the loan because you don't have traditional W-2 income.  True story.  Now what?  The clock is ticking.  What would you do?

Jeff B. · Answer

Seek commercial MFU 5+ loan (even if 1-4 units).  The property pencils in or it doesn't and there's no reference to your credit.

Steve S. · Answer

There are a lot of options to pull cash out of your properties and make this deal still happen. Working with private money or hard money lenders is increasing due to the crazy restrictions by traditional banks these days. I get calls like this all the time, everyday looking for answers and helping people in this same scenario.

You can definitely get this done still, Don't lose hope!

Brad T. · Answer

I would try to work with a good local mortgage broker for the cash out refi.  I agree that this might be difficult.  I have heard of several people struggle with this in my area also.

Is Wells Fargo good with your multifamily loan once you get the down payment figured out?  How long do you have to close on this deal?

Brad T. · Answer

Were you able to complete the cash out refi?  Just trying to figure out if you have 2 separate problems, or just the financing of the multifamily.

Joel Owens · Answer

Try credit unions. They are not as regulated as the regular banks are with being stuck in a box.

I have had many banks tell me they are getting pounded by regulators with tons of additional compliance controls. Nobody wants to put an exception through and the loan fails and then the bank gets in trouble for not following tight protocols and the worker loses their job.

I am not a bank expert by a long shot but these are just points that come up in phone conversations with bank VP's. Sometimes even though a bank might not do what you need  they have friends that are lenders with non bank products they can give you the contact info. They will say they can do things with loans we can't etc.

Many times I tell clients even if you can do not quit the job just yet. Get a couple of large properties where you look good with the high W-2 income. Banks like to know if the properties start losing cash flow you can feed them with your earnings and they have full unlimited recourse against you. As you build large amounts of cash flow the (global cash flow) from all sources should help take away the need for the W-2.

Banks want the world to protect their position and give crappy loan terms which is why I hardly ever use them.

Bill Manassero · Answer

Wells Fargo is still very interested in the multi-family and will hopefully give me a pre-approval this week.  I have about 60 days.

Jared Rine · Answer

@Bill Manassero

@Brad T....good points :-)...that's exactly what I asked in my above posting.

Jared Rine · Answer

@Bill Manassero

Upen gave some good advice.  You have a few options in my book.  You can find someone who will look at all your taxable income as said.

Or you can find a lender who will go stated income on a  longer term loan basis and not worry about any income except that of your property(ies).

Or you can get the cash quick private money, on and interest-only basis, to take down the multi family and then figure out the refi or pay off down the road, which can be worked on immediately.

Both latter options usually come with higher interest rates, but it sounds like you need to get the $$ and buy time.

I'd want to take a look at your situation.  How does Wells Fargo feel about the multifamily?  You have a term sheet and are they going to execute?  When's COE?

I'm assuming your properties are solid enough that leveraging yourself to go buy the multifamily property still lets you be in a good financial position.

Feel free to contact.

What to do when the bank won't fund because no W-2 Income

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