Can't get a mortgage while self employed- how about this?

Question

I realize that getting a mortgage as a brand new self employed person will be tough. I started my businesses this summer and I also just found a sweet deal in Oakland which is so hot right now.

I have good credit and a surplus of cash from recently selling my home. What I lack is two years of tax returns. So here's what I'm thinking....

I'd like to do a private deal with the seller. I think a lease to purchase deal would work for both of us. The house is currently empty. If I can't get low doc financing, I'll give a deposit then lease for a year with the option to purchase.

The house was on the market for a week, then off. I talked to the neighbors who said the owner has a hard time renting it. They gave me her contact info. It's in a great location and below the market (when it was on).

How would you approach this, you real estate masterminds!

Brian Gibbons · Answer

1. see a mortgage broker, fill out a mortgage app 1003 2. ask mortg broker what you lack in getting a fha mortgage and get that going.3. california I would do a lease purchase 3% earnest money, lease and sale and purchase.4. Go to a title company where you live, tell them you want to do a lease purchase as a buyer, give the 3% to the title co., if you dont have all the 3%, save up.5. be coachable to the mortg broker.Good luck!

Roland Thomas · Answer

Hi Dina, I just have a few questions, maybe I can toss out a few ideas. Why is she having a hard time renting it? What happened to the previous tenants? Does the seller own the house?

Dina Eisenberg · Answer

Wow thanks everyone. I appreciate it. Brian, that sounds like a roadmap. The broker said I'd need to do 25% down. I prefer the lease/ purchase. I'll keep you posted. I'm getting ready to reach out to the seller with a deal. 3% option fee, 25% down, a year of rent in escrow. Does that sound too generous? I don't want to scare her. Thx you guys are amazing. Dina

Mark B. · Answer

@Dina EisenbergWelcome and I hope it works well for you! You may already know this, but just in case; when looking at the property taxes use 1.25% of the sale price as your estimate. In CA the property taxes (the 1%, not all the add ons) are limited to an increase of the basis of 2% per year. If you are just looking at the assessors website and the currant owner has owned it for many decades the reported property tax is going to be substantially lower then what you will pay as the new owner. If you are looking at the real estate websites and apps they also pull this info and report inaccurate monthly payments.

Damion Byros · Answer

I would try to own and get financing but I like your approach or you could see if third willing to do owner financing but the lease to own opt i think was good

Dina Eisenberg · Answer

FIrst, thanks for responding; I really appreciate it. @Roland I wish I had answers. That's what the neighbors told me so I don't have more data about why? I'm also curious about why she (and Im assuming here) put it on the market but removed it so quickly. That says emotional attachment or huge structural problem to me. I believe she owns the place and the taxes are up to date. The house is beautiful and looks relatively well cared for. I can't imagine why there was trouble, except perhaps that it's 1 house down the street from a funeral home.@Ned, thanks for the warm welcome. I plan to get pre-approved before approaching so I have a lot of flexibility. I'm an interest-based negotiator, and I think that will be helpful in finding how to make this work for both of us.WOOT Massachusetts is in the house. I lived in Boston for 25 years before the snow drove me out. @Robert, it's not cashflowing now, no tenants. The fact that it's empty is part of why I think the seller may go for the deal. Rent in the short term and nice purchase price in a year.I started reaching out to my contacts to find a good mortgage broker, so fingers crossed! Thanks for making my first experience with BP so great!

Robert Nason · Answer

I feel many new investors shoot themselves in the foot by not approaching their local bank first to test the lending climate. Many investment deals are based on the deal as much as your financials. If the building is throwing cash and you have decent credit it may be possible. Why start your investing life with a complicated deal. Just my thoughts.

Ned Carey · Answer

@Dina Eisenberg I see you only have three posts so welcome to BP!It sounds like you have a good plan. Just be open and talk with the seller. Be clear in your communication. Creative stuff like a lease /option may not be something the seller is familiar with. Its a negotiation, you only get what you ask for. Some of the questions @Roland Thomas mentioned can be good negotiating questions. Why she is having trouble renting it puts here thinking about her property in a negative light. It has her focused on the problems.