Financing options for next purchase

[Patrick Livers]

Just wondering if anyone has any suggestions for financing options for my next project. My issue is on paper by myself I don't make a enough money (25,000) to qualify for any loan or line of credit. Currently I own three homes outright and have a good credit score with no debt. Are there any conventional options available to people in my situation looking to start another project. I thought for sure I would've been able to leverage the houses I have to secure financing for future deals, but that hasn't seemed to be the case. Thanks for any advice in advance.

[Andrew Postell]

@Patrick Livers this post is going to be lengthy but it will be the exact information you need to have.  

If you purchased these properties in 2016, and you haven't filed your 2016 taxes yet, then a "conventional" loan will allow you to use rental income from those properties with an executed lease agreement.  A conventional loan is a loan governed by Fannie Mae and Freddie Mac.  They are the loan types with the most favorable terms (low interest rate, fixed rate, 30 year term, etc) Once you file your taxes, or if you bought the properties before 2016 and have already filed your 2015 taxes, then they have to be on your tax returns for the income to be used.  So if you think you should be able to use this rental income, and the bank is still telling you no, then I would suggest going to another bank.  These are CONVENTIONAL rules. Keep in mind that banks are allowed to be MORE restrictive on the guidelines...but not less restrictive.  So if the conventional guidelines state that they will lend on a 660 credit score the bank can actually say "Well, we aren't lending below 700" and Fannie/Freddie are ok with this.  These extra rules are called "overlays".  The bank you are talking to may just have an overlay that disqualifies you from using the income.  Look for a lender with no "overlays" and you will find the most flexible lender you can find.  But there is another option.  

If for whatever reason you cannot qualify for a conventional loan you can seek out a "portfolio" loan. A portfolio loan is a loan type that the bank has direct control over...because it is essentially the bank's direct money...and not Fannie/Freddie money.  So the bank can say, we'll lend on "whatever".  Each bank will have different rules for their portfolio money.  Some banks will have higher interest rates.  Some banks will only have a 15 year mortgage, some banks will have Adjustable Rates.  So it's each banks direct money, each bank's terms could be different.  It is important that if you need a portfolio loan that you find out all the terms for these loans.  An example of a portfolio loan is that as long as the house cash flows $1 then you can be approved.  Meaning they ignore income ENTIRELY!  Now, they will still want you to have decent credit and some assets...but if income is the real issue then seek portfolio.  Private message me if you need any more help on this subject.  Thanks!