Any idea on finacing my situation?

Question

Hello All,

I am 23 years and graduated from college a couple years back. I started a very successful internet business selling electronics and I have been itching to get into real estate but ive been sidelined until I have can show documented income.

2011 will be my first actual business year in the books and I will send around 140K AGI to the IRS.

Now my question...

With 1 year doc income at 140K and a 740 credit score, would I be able to get more then one home loan in 2012? I want to purchase my first house along with my first investment property if not more.

Or is my short credit history/income history going to limit me.

I can most likely come up with 15-25% down on both purchases.

I would purchase 5 houses in 2012 if I could be financed, though I understand that might not be so wise my first year in.

Any insight on credit standards is appreciated.

Ember Meadows · Answer

You probably want to look at smaller banks. I worked at Chase up until 2 months ago.  There is absolutely no getting around the 2 years of income if you are self-employed.

Mike H. · Answer

It might depend on your employment status. Do you get w-2 income from your corporation or was your income passed through?  If you are self employed, they will typically average two years of tax returns to come up with a number to use.

At 70k, you should be fine.

That being said, a local bank would probably have no problem lending to someone with income of 140k on this year's tax return and that has a strong credit score.

You'll be fine.  Although I would like at some of the other financing products out there to see if you can stretch your money a little.

Steve Babiak · Answer

Being that you are self-employed, you might be asked to show 2 years worth of tax returns to prove your income.

Cheryl C. · Answer

FWIW, my son got a conventional investor loan after only 3 months on the job with no prior income.  He is 22 and had just graduated from college.  They wanted proof that he had just graduated but that was enough to account for the 2 yrs.  His fico was 780 and he had  substantial savings.

Andy Collins · Answer

go start talking to mortgage brokers/banks, but do NOT give them your social security number or your credit report will be hit, repeatedly by hard inquiries,,,,,tell them your situation, give them your FICO scores (you can get transunion and equifax from myfice.com),,,

they will have to run your credit themself, but don't let them do it till you are actually working on a deal and applying for credit,,numerous hard inquiries hurt your score

Adam Craig · Answer

Thanks AG, very informative. From that answer it looks like I shouldn't have a problem getting at least 2 with some money down. I also read that 2 years of doc income is typically required but I talked to my accountant who thought 1 year at 140k along with a down payment should be enough.

Other then the books/forums/podcasts - I am a complete rookie - all its the best time in history to be a buyer and its killing me every minute that I am sidelined.

Arthur Garcia · Answer

Adam,

First off, I would say your best bet is to talk to SEVERAL banks and mortgage brokers.

If they accept your documented income then you shouldn't have a problem getting multiple mortgages in one year - I got 5 in a matter of a year and a half.

I ran into two problems last year, I've listed them below:

1. Credit score - My Credit Score dropped due to having my credit ran multiple times and acquiring so many mortgages (lines of credit).

2. Rapid accumulation - I had multiple  brokers and banks turn me down for loans due to how quickly I acquired the mortgages.  Crazy, I know, but it happened.

A few other items I found helpful to know as you get financing...

* Properties 1-4:  You need to have at least a 620 credit score and you only have to put 20% down.

* Propertied 5-10: You need a credit score of 720 or better and need to put down 25%.

Also note, you need 6 months of cash reserves per property.

I think your biggest hurdle is the documented income.

My experience has been that most companies want to see 2 years of taxable income.

I hope that helps.

AG