Financing fell through last minute - how can I save the deal?

[Jan Kutrzeba]

Hi BP,

My lender (a local bank in PA) pulled out only a couple of days before closing. Underwriting said our usable income is not sufficient for the bank to grant the loan.

A mortgage officer from another bank is working on it and said he sees no issues, but I haven’t heard from him in +24h and closing is now scheduled for Friday. Obviously we won’t make this closing, but I’d ask for an extension tomorrow if the bank says yes.

The problem seems to be that both wife and I are self employed and show very little income on paper. We’ve been pulling in about $90-$120k/y gross the last three years, but obviously expense everything we can hence net income shows very low. We have no debt besides a $11k auto loan. We both have excellent credit. No kids no pets no loans no liabilities.

The deal:

$66k SFR in Allentown PA that's occupied and cash flows $400/month. 12% cap. Clear CO. We've been applying for conventional financing with 25% down.

Strategy

Buy and hold long term rental

What’s your advice? A hard money loan would seem to be the easy way out, but monthly payments would kill us and the loan amount is probably too small for a hard money loan to begin with, and too small for any lender to refi.

What would you do?

Thanks everyone in advance!

[Brent Shields]

When I started out I applied for every credit card I could find that would offer me a cash advance option, it was a bit of work but I got it up to the point where I could pull out $75,000 on my combined cash advances. Then when I ran into a problem like yours, which happens a lot with banks, I would just put it on my credit cards until I figured out another solution. 

Then after a while I got a line of credit on my house and would pay it off any chance I would get, that way I could withdraw the money when I needed it, so I had two options of coming up with money when a bank backed out of a loan at the last minute. 

Neither of these options will help with your current deal, but maybe a future one.