Having problems getting mortgage for first investment property

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Having problems getting mortgage for first investment property

Kane Rickman
Estes Park, CO · Member since 2016 · 9 posts · 1 vote

Here's the situation.. we found a great home which can easily become a 4 bed 4 bath close enough to a college so we can rent out two rooms easily.. we have had a job for two years but the problem is that the house is located an hour away from where we work and our lender says this will not look good to the underwriters especially since we don't make so much there (can't claim tips). Our real plan is to work the other job we already have set up which is in the same area.. but we can't really tell the lenders that because that obviously shows a lot of risk.. I need advice on how to by pass this in anyway.. is FHA going to be easier then conventional? Can we make it a investment property instead..? We could have 20% down but would have to pay our investor a pretty high interest rate.. instead we only have 4%

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Bill S.Pro Member
Moderator
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
9y

@Kane Rickman your lender is telling you they think it will be a hard sell to underwriting. You need to find another lender or rethink your plan. Since your lender is slow getting back to you it's because they have bigger fish to fry (they don't think your loan has a high chance of closing). 

Owner occupied has cheapest rates and lowest down payment (you qualify for the largest loan). 

Your occupation (contracting and restaurant work) are seasonal and in unstable industries. Lenders don't like them. In some cases you have to show two years of income or at least work in the field to have the income used for your loan qualification. You are in a tough place. It looks like you may be wanting to buy a bit more property than banks are willing to lend to you for. 

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  • Jeff Dulla
    Lender · Western Springs, IL · Member since 2015 · 472 posts · 245 votes
    9y

    @Kane Rickman You are saying you have two other jobs lined up closer to the subject property? Are the two jobs the same or similar to what your current job is?

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  • Kane Rickman
    OP
    Estes Park, CO · Member since 2016 · 9 posts · 1 vote
    9y

    I have one other job lined up but would be planning on working both jobs. And no, one job is restaurant work while the other is construction 

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  • Shaun Weekes
    Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
    9y
    Originally posted by @Kane Rickman:

    Here's the situation.. we found a great home which can easily become a 4 bed 4 bath close enough to a college so we can rent out two rooms easily.. we have had a job for two years but the problem is that the house is located an hour away from where we work and our lender says this will not look good to the underwriters especially since we don't make so much there (can't claim tips). Our real plan is to work the other job we already have set up which is in the same area.. but we can't really tell the lenders that because that obviously shows a lot of risk.. I need advice on how to by pass this in anyway.. is FHA going to be easier then conventional? Can we make it a investment property instead..? We could have 20% down but would have to pay our investor a pretty high interest rate.. instead we only have 4%

     Is this an investment property or is this going to be your primary residence?  Also do you currently own or are you renting?

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  • Kane Rickman
    OP
    Estes Park, CO · Member since 2016 · 9 posts · 1 vote
    9y

    I applied for a primary residence but i would also be okay with it being an investment property if that makes it easier to qualify.. I live at home currently for free and can do that as long as I'd like. My main goal is to just get the house because it has such strong potential in my eyes.

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  • Jeff Dulla
    Lender · Western Springs, IL · Member since 2015 · 472 posts · 245 votes
    9y

    @Kane Rickman What is the price point? If you have the down payment for investment, they can use a rent schedule to verify average rent. A lender will be able to use that to potentially help you qualify. Also the geography of your current job becomes a moot point. 

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  • Franco Li
    Vendor · New York, NY · Member since 2017 · 217 posts · 88 votes
    9y

    I have rental property thats around 5-8 hour drives away from me. I've never had a problem securing leverage. You just need to show that you have sufficient liquidity and can service the debt. 

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  • Kane Rickman
    OP
    Estes Park, CO · Member since 2016 · 9 posts · 1 vote
    9y

    Jeff,  the purchase price is 260000 and i have qualified a couple months ago through a conventional 3% down for only 240000 as a primary residence.. im trying to raise the number and get a new prequal letter for the purchase price so we can get a contract but our lender is 1. Taking days to email me back and 2. Claims since i live far from the house I will be highly questioned by the under writers and it's unlikely to get approved.. I might thinking it might be wise to just switch it to an investment property instead of living in it.. 

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  • Jeff Dulla
    Lender · Western Springs, IL · Member since 2015 · 472 posts · 245 votes
    9y

    @Kane Rickman I understand what they are looking into but an hour is ridiculous. I do handle mortgages in Colorado but cannot claim to know distances like I do in Chicago. Here, there are plenty of people that live as far west as Elburn or further west from Chicago and commute/work in Chicago (it is over an hour in terms of distance and I would guess 50+ miles away). So the hour away thing does not sound right to me.

    While I do not know all the specifics, I can definitely hear your details and give you info. If you are interested. Just PM me. No worries either way. 

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  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    9y

    @Kane Rickman your lender is telling you they think it will be a hard sell to underwriting. You need to find another lender or rethink your plan. Since your lender is slow getting back to you it's because they have bigger fish to fry (they don't think your loan has a high chance of closing). 

    Owner occupied has cheapest rates and lowest down payment (you qualify for the largest loan). 

    Your occupation (contracting and restaurant work) are seasonal and in unstable industries. Lenders don't like them. In some cases you have to show two years of income or at least work in the field to have the income used for your loan qualification. You are in a tough place. It looks like you may be wanting to buy a bit more property than banks are willing to lend to you for. 

    1Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    9y

    Hi @Kane Rickman. Your profile says Estes Park. I'm down in Longmont, but used to live near @Jeff Dulla  in Illinois. He's right, in the Chicagoland area, everything takes at least an hour to get to, and many times it's double that. Traffic there is a nightmare.

    I commute to Denver twice a week, and people here think that's ridiculous, but even on a heavy traffic day it still takes less than an hour. 

    Where is the property located? 'Near a college' tells me Boulder or Fort Collins, but neither of those locations near the college are $260 for a 4-bed.

    Can anyone co-sign with you? @Bill S.  is right, owner occupied has the lowest downpayment - you'd need to come up with 20%-25% down for an investment loan.

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    BiggerPockets
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  • Jeff Dulla
    Lender · Western Springs, IL · Member since 2015 · 472 posts · 245 votes
    9y

    @Kane Rickman There is a fairly easy solution for this - a lender can do a TBD underwrite on the file. Basically we can take a proposed property, use those specifics and have the file underwritten. It will first pass through AUS (fannie/freddie automated underwriting) but then go in front of an underwriter. That will get you word before you are committed on something. 

    PM me if you want more details. 

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  • Whitney HuttenPro Member
    Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    I used to own in Estes Park... and drove for work to Westminster and Fort Collins (perhaps the flip of what you are doing). Although this was years ago, from what you shared, it sounds like the current lender you are talking to you is not a good match. Feel free to PM me and I can share lenders I've worked within the area (both FHA and investment). Good luck!

    Podcast Guest on Show How to Build Generational Wealth Without Losing it Along the Way
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  • Kane Rickman
    OP
    Estes Park, CO · Member since 2016 · 9 posts · 1 vote
    9y

    Mindy, 

    The property is located south Wellington  about 10-15 minutes from CSU.  It is still quite a distance but I have multiple friends who would love to rent from me and are okay with the short commute.. it's also a 3 bed 3 bath but has an unfinished basement which has potential for the extra bedroom and bath.. 

    Jeff, 

    I will be in contact with you shortly, thanks! 

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