Refinance without full-time job

[Cody Neumann]

So I recently bought a property early March of this year with plans to refinance after six months using my rental income as proof of income for the refinance but my bank won't let me refinance out of my current loan with that income and I don't have a full time job.

I have the property fully renovated and should have around 60k of equity in the property after the appraisal and I am worried about the future of the real estate market so I am not sure I should wait a year or so to refinance in case the market goes down

Does anybody have any experiences that they have gone through like this and how did you overcome it? Any help would be greatly appreciated! Thank you in advance

[Nghi Le]

The general rule of thumb is that bank loans, both conventional and commercial, tend to be cheaper, but move slower and can have more underwriting headaches. I do recommend that investors try reaching their conventional limit first, especially since we're seeing the lowest interest rates of all time right now. However, conventional loans get harder and harder the more properties you own and the more complicated your taxes get, especially if you don't have a W2 or strong/stable income.

Even though I can get conventional loans, I often try to go asset-based or commercial lending because I don't want to deal with tax returns (I always file at the end of my extensions) or worry about DTI, and I want to have loans to my LLC. It is a trade-off because conventional loans have 30-year terms (and so do asset-based loans but most commercial loans don't), lower rates, (almost) no prepayment penalties, and is better if you have high income or the property doesn't cashflow too well.

Commercial loans are best done through your local banks and credit unions, especially in more rural areas or lower price points (i.e. values below $100k) as national lenders tend to stay away from these areas, especially during COVID.  Long-term asset-based loans, which are loans that are primarily based on the subject property's cashflow and not your personal (or global) income (i.e. no tax returns, pay stubs, personal financial statements, etc.), usually come from hard money lenders, such as CoreVest, Civic, Lima One, LendingOne, LendingHome, Visio, and us (Certain Lending).  It's hard to hear that since we're used to associating hard money with short-term loans at double-digit interest rates, but these loans are actually underwritten not much differently than a hard money loan (again, because they are asset-based).

The rates on these 30-yr asset-based loans are often higher than a bank loan (although they are on a downward trend), currently averaging in the mid 6's, but again they are much more flexible and less headaches to deal with. I like to use "average rates" (i.e. the rates that the majority of borrowers actually get) because most of these lenders tend to advertise a low starting rate that 95% of borrowers can't actually get, i.e. "starting at 4.95%" and then they quote 7% for a loan. It's because that low rate is for a perfect borrower with 760+ credit who wants to put a loan on a $300k+ property at 50% LTV that cashflows 2x monthly expenses.