Updated over 9 years ago on . Most recent reply
A little confused and need a strategy
I invested full time from 1999-2007, when the bottom fell out of the market. I always used hard money loans, stated income, and all based on the value of the property. I think my mortgage broker pulled my credit once, just to have it on file. I don't remember ever being asked for bank statements or tax returns, etc...
Well, a few days ago, I was perusing CL when I came across an ad for a hard money loan. I called the phone number and it turned out to be a guy working for a doctor who has $1M that he wants to put out on the street. We chatted a bit and terms seemed good... then he said that the lender wanted proof of income because he wanted to be sure I'd be able to pay the loan back...
Well, I'm currently separated from my husband and have no access to proof of his income from his job, and my own 'job' income is minimal. He said that the lender probably wouldn't approve me... and that the lender doesn't want to fund anything under $80K either.
Is stated income no longer done in the private/hard money arena? Am I going to face this with every private lender? If so, is there some other strategy I can use to secure funding for my deals?
With my husband gone, it's now more important to me than ever to get back in the game and buying rentals for long term passive income.
Most Popular Reply
A private lender lends however they want. Go to your local REI meeting and talk to hard money lenders. They all do it slightly differently. For the most part, they are going to lend some % of the ARV of whatever property you find and charge you some points and interest. Whether they care what your income is will vary based on their internal risk tolerances. Some do, some don't.
Be cautious though. You mentioned buying for long term passive income. If you're using expensive money to buy and rehab with low credit, you don't have a good exit strategy other than to sell since you will likely not qualify for long-term bank financing unless you capture a unicorn: long term private money with an affordable interest rate. You may have to flip so you can build enough money to hold. That means you need to be on top of your numbers and one failed flip could put you back out.