How to get financing with fluctuating income

Question

Good Day My Fellow R.E. Investors,

I posted this in general discussion but thought might need to post here....

I have been on the hunt for about 3 years getting things in order for a property to invest in.. I finally got my ideas narrowed down (multi-family), credit in great standings, financing approval and long term job history...   Find a property, make offer...   GREAT!!! Then  out of the blue.... I get canned!!!!

So now I have a dilemma...  I am back to work but my income is inconsistent, not in work but as in income..  The work is consistent because I am a nurse but I work through different companies all over the country..  I do have some money to work with but not a significant amount. My credit remains stable and I have moved in with family so I can travel freely for work and reduce housing cost.  (This is not going to last...LoL)

I would prefer not to go back to a permanent employer if at all possible, although it would look better for financing.  Any ideas or suggestions to assist me in my R.E. Investing goal?  How to get around my financing issues?

Jai Sookhakitch · Answer

@Danielle Price

I'm a hard money lender and typically as long as you can show strong reserves income rarely matters. For investor non owner occupant loans they mainly look at the deal, the cash reserves. Most REI investors don't have a W2 income.

Unless you're going to a bank or wanting to do conventional stuff you're fluctuation in income really doesn't matter.

If you have any future questions feel free to DM. good luck!

Chris Mason · Answer

If you want the best of both worlds, here in the bay area we do what are called "tech wizard specials" for computer science guys that are 5 minutes out of college and go from $0/yr to $250k/yr overnight. Locals (including local underwriters) are familiar with this Bay Area phenomenon and already know the relevant guidelines, so it's no extra hassle.

The way that would work in your case...

Basically you would continue doing your travelling nurse thing to scope out markets/areas, and lock down a boring/vanilla W2 job two weeks before you're ready to write offers. Steady w2 income, the "tech wizard special" is basically to preapprove and send you house-hunting based on a single paystub (or just an offer letter if we're really being aggressive) and your verbal assurances that you aren't going to be job-hopping until after you have the keys in your hand from your purchase. "Stop job hopping without talking to me first!" is what we have to sell the tech wizards on... they hate it, but it's necessary to keep things smooth/reliable. The snapshot in time of your credit/income/asset situation captured at preapproval needs to be substantively the same until keys are in your hand, or we need to capture a new financial snapshot when you get a new job.

Danielle Price · Answer

Somewhat...  My 2014/2013 were strictly w-2 from 1-2 employers...  Verifiable straight income.  2015 is mostly w-2 one employer but also a 1099.  Income for all years average the same total annual income amount.  It now is just spread among several companies that i contract through.  i usually have a choice of w2 vs 1099.  I try to stick with w-2 to keep up with tax deductions..

Chris Mason · Answer

When the underwriter's assistant calls your current w2 employer to verify employment, are they going to randomly volunteer for no reason that your job will end in 3 months?

Can you and/or your employer work such that for one month of paystubs, it just says 40+ hours a week, $y/hour? We don't want to see any 36 hour weeks on those paystubs.

Stereotype in the mortgage industry: medical/dental employers are horrible at verifying employment, they like to volunteer information that isn't requested or necessary, they can't do math, they want to tell convoluted stories compensation structure when all we want to hear is ">40 hours, $X/hour, yes she still works here, I'm done talking now, [click]" to check our Fannie Mae box in the simplest way possible, or even worse they have verifications of employment outsourced to some call center in India that turns your comp plan into the epic Hindu saga Ramayana, etc.

Dante Pirouz · Answer

A bank won't love your new inconsistent income but they will also look at your previous 2-3 tax returns (that will have the old income on it so that will help you), how much you have in your bank account as cash (to pay the down (you'll need probably 5-10% plus closing costs) and have some extra $ for reserves (usually the equivalent of 6 months of PITI)), how much you have in assets (any retirement or stock accounts?), and they will probably ask for a written explanation of your job change (just be honest about it and they may lend an understanding ear). But given that you are living with family, it makes total sense for you to start investing by finding a duplex, triplex, or quad and apply for an owner occupied loan, live in one of the units and have the other tenants help pay your mortgage and some CF. You will need a 2 year track record minimum before you will be able to apply for any commercial financing for 5+ units anyway so use your current needs/status to get you started and try to house hack a small multi unit. Take one step at a time!

Danielle Price · Answer

Thanks for the suggestions.  Thomas S.  Thanks. I do have some funds for a down around 5% plus closing. I was in the process of working a deal for a duplex when the ax fell.  Just hoping to figure out a way of getting back into this now that I have the time and opportunity to look for R.E. deals.  Hoping someone has creative financing advise.

Kyle Murphy · Answer

@Danielle Price What has come about in your search for approval? I am in a similar situation. I am a per diem RN but work full time hours >36 week. Any input is greatly appreciated.

Danielle Price · Answer

Chris Mason   Thanks you all for the insight.  Gives me somethings to think about.   I may just have to stay with one agency or get a local job.  The travel nurse gives me opportunity to scope out properties in many areas for possible R.E investments.   Plus its an adventure.  But my ultimate goal is to invest so I have to do what it takes to make it possible without added headaches of financing...   Thanks again

Danielle Price · Answer

Chris Mason  Well as a nurse we typically work 36hrs (3-12hr shifts), so I don't think they will verify 40hr/wk.   I'm sure my employer would not divulge that my contract is ending in 3 months.  Previously employment verification have only stated from date i signed up to current. This being that I always comeback to whomever has the best paying contract so employment doesn't end.    My concern is the tax returns (W-2) this shows multiple  employers.   Any other suggestions?

Danielle Price · Answer

Chris Mason   Previous job was w2.  Current job for next 3 months is also W-2 but the next one is a potential 1099.

How to get financing with fluctuating income

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