How Do I Purchase A Real Estate Property With No Stated Income Or Any Income At All?
Well... this is my first postting and since this is the creative investors forum, this is my question, "how can I purchase a real estate property without stated income or any income at all?"
:-? :-? :-?
Maybe, since most on this site advocate that we be honest and act with integrity when we conduct ourselves in this business, it would be appropriate to ask you a qualifying question before an attempt to answer your question is made.
How do you intend to make sure the payments on this property would be made?
If you have no plan to ensure this, I feel that it would be unethical to tell you how to screw up other peoples lives, since other than paying cash, owner financing would likely come into play.
What are your objectives. What would your plan for the property be after you acquire it?
Okay I guess I have a similar question so let me just tack it on. I am a total beginner, read some books, and am looking to make my first real estate purchase within the next 6 months. Right now I have about $11,000 cash I can put down with only about $3000 more I need for other stuff. I have another $13,000 cash coming within 2 months, and I make about $1000/mo., but in a non-traditional manner that would be totally unacceptable to banks/owners (online poker). For all practical purposes however, I have no expenses. So with about $25,000 cash and a $1000 monthly income, I think I would be able to put 3% down on a rental property and still have good enough reserves to make some payments if I have to. BUT... will anyone else think so?? Will I be able to get financing?
Quote:I make about $1000/mo., but in a non-traditional manner that would be totally unacceptable to banks/owners (online poker).
Curiosity, do you mean you play poker, or own/license a site that provides online poker?
spades,
I agree with Jeff. If you want answers, you're going to have to supply a little more detail to the question.
JohnGalt2001,
Might I suggest that you spend the next 6 months learning the business of real estate rather than trying to buy a property. The main problem that most new investors make is to not sit down and make a business plan. I understand that it is called "investing" but in truth, it is a business and should be treated as such. You'd never (I hope) start or buy a business that you knew nothing about, so why would you buy an investment property without knowing how to make money with it?
As far as the financing goes, if you have a good business plan, then the money will come.
Roger
Okay well, that pretty much was the plan. I guess my hope is that within 6 months I will know enough to make my first deal. One of my concerns was that even if I found a good deal, I would be unable to get financing. I guess what you're saying is, I will learn all about that in the process and you can't just tell me about it?
Stated income loans require good credit. If you have very good credit the lender will not care where but they will want to know that your employed.
If self employed you need to be in the same line of work for two years. You would be considered self employed.
How long have you been making a living plying poker online?
Yeah... I'm 22 and still a full-time student, so I guess the answer would be zero years. So I guess a "stated income" loan is out the window for now. What about if I'm buying a rental property? Let's say, in a college town. Shouldn't it be easier to get a loan since I'm expecting to pay the mortgage mainly through rent receipts?
yes that would be your best bet. they have such loans as no doc no income no nothing. the problem is I dont think they have loans like that for non owner occupied, and if so they will probably want a lot down and very high interest rate. so I would start looking for a 2-4 unit building and plan on living in it and renting the other units out. you still will have a high interest rate loan and maybe low ltv but you will have tennants that will help pay if not pay all your mortagage. this is a very good way to get your foot in the rei door being in your position. I would really contact a broker who specializes in investment or difficult loans(try some on this site) and see what they can do. it will though depend much on your credit. probably should at least be a 680, but again you should be asking a broker that. good luck.
actually, not all stated programs require good credit. i am able to do stated programs for people down to a 500 credit score.
there are a lot of good no credit/good credit programs out there for stated. Just dig and you will find them.
Alright guys, here's a more specific question. I know I said I was taking the long view in buying something, but a deal is sitting there and I'm considering it... going to go take a look at it at least. Anyway I've gone through the numbers and taking a conservative view, I need at the very minimum 8% on $108,000 (10% down on 120,000) to make it work, 7% would be much, much better. 8% I wouldn't do unless I can get very favorable terms otherwise... it's basically neutral cash flow. 7% I probably would do. I checked my credit score it's 742. I'm going to start contacting people looking for sources of capital, but I am just wondering what my chances are of getting this. Should I forget about it or try to go a different route? For this particular property I cannot live there so I would be paying a property management company. Thanks for your comments so far.
if you had another 15% you could go fast and easy and get a great score...you need a 730 score for that program.
I'm looking at some lenders on here right now but they're trying to sell me ARMs which I don't think is a good idea. I am willing to put 20% if it makes it work but really don't want to put down any more than that.
well... i've just done some research. it is possible. You too can purchase without credit, money, or income. I'm in my first deal and everything looks good.
Thanks everyone.
Have you thought about maybee going into to this under someone that has alot of experience and let him show you what this is all about. You can still make money in this and learn, for example, just be a bird dog for an investor and find him deals. You can make a little extra change and learn out in the field as well without loosing any of your own money.
as advised. study. you will find if you study that bank fin. and ect. types of fin. are not the only fin. available. i have excellent credit, and can even pay cash for deals but it just makes more sense to me not to use all cash or bank fin. when other ways are available.......km
What is playing poker?
Hardmoney Ihear is easy to optain if you find a property below 50% market they will even give you money for repairs. But that is short term high interst financing some don't even pull your credit.
So... is that what is meant by "playing poker?"
It's a card game! 5 card stud, Draw Etc. They are not speaking code.
I can do up to 95% No Doc!! Call me with all your lending issues!
Baine 209-430-6032
ROFL HAHAHA.....
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Quote:
On 2004-10-10 19:03, jeff12002 wrote:
It's a card game! 5 card stud, Draw Etc. They are not speaking code.
A true No Doc loan requires no employment, income, or assets to be stated on your loan application. We do not verify any information beyond your credit profile and the value of the property. Lenders will allow as little as a 5% down payment on an owner occupied home or investment property depending on your credit profile. If you have had credit issues in the past you may need to make a slightly higher down payment but the loan can be done. This is the product of choice if your asset or income is difficult to verify or if you simply do not want the "hassle" of traditional mortgage documentation. Your good credit, a decent property and we are done.
Another option would be to add your employment to the application. This program is frequently described as a "NINA" (No Income No Asset" loan. In this case, we will verify your employment, but again, no income or assets are on the application. If you are self employed, the business must be verified with a business license, written contracts, supplier invoices or similar documentation. If you are employed by a company, we will verify your employment but nothing else. This small bit of documentation will generally save you .125% on the interest rate.
Yet another option would be to have us verify your assets but not income or employment. Using this approach will require verifiable, relatively liquid assets of not less than 6 months of your PITI. Again, this bit of documentation will usually save you .125 on the rate. If your situation will allow you to verify both assets and employment, you are better served with the Stated or No Income Verification program. If there is an issue with your debt to income ratio, you may want to consider a No Ratio loan.
Good Luck
so.... let me get this straight... when you guys are saying "playing poker" that's what it means? No hidden meaning. By the way, i'm not exactly the king of o.p.m. Can anyone give me methods to try out myself?
:-D
Go with a no doc program.
Spades,
In addition to searching the TCI forums, talk to lenders directly if you feel you need more info. I suggest this even before going to a mortgage broker.
Choose a short list of lenders licensed to do mortgages in your state (do an internet search) and ask the direct question -- "I am looking for information on your low or no doc loan programs for my (investment or primary?) residence/property."
Get the answer from the source directly. Once you feel comfortable with the financing options, consider using a mortgage broker if you feel your time is better spent doing something else (finding props).
Depending upon your goals & comfort level, if you feel you can do this for yourself, then go for it. If you feel the need to work with another investor first, then do that. At the minimum, develop an understanding of financing with soft $ (mortgages), hard money (private investors), owner financing, et al.
I'll do just that... speak with lenders to find out the diffrent programs. Anyone know of any good books about hard monies, soft monies, etc???? Anyhow thanks for the new angle. I'm slowly but surely learning new things. You all are appreciated.
Spades,
Can you point a fellow first-timer in the right direction on getting information about your no credit, no income, no down experience? I'd really appreciate anything you can share.
You know... I'm probably going to get a lot of heat for this, but here's my question... EVERYONE says "keep studying, the knowledge is out there." But what about sharing that knowledge so that some of us beginners could learn? I have to spend 6 hours/day sifting through messages, posts, articles, websites, and books to find out information that someone could detail in one place. Are people so greedy for the knowledge that they paid for, that they will not let others become empowered? I wonder why no one said "I was too lazy to study, I took a $3000 seminar, and here's what I've learned ______ ."
Well, for those of you seeking direction, here are my findings.
Finding #0
EVERYONE HAS A DIFFERENT IDEA OF WHERE YOU STAND! I pulled my 3 scores, and though I didn't find them in too good of a shape due to a stupid reposession I had from trying to buy too much of a car for me when I was few years younger, what REALLY surprised me, is that my mortgage brokers pulled a very different score! it was 22 points LOWER! No one knew why, but that wouldn't have changed much. They don't lend on what I have in my computer. My father kept telling me every day that I'm broke and in debt, while I was actually sitting on a little nest egg, so all of his predictions of my future were based on that, my best friend thought I sleep too much and don't have enough education, while I studied 6-8 hours each day. So the only opinion that matters of you - is YOUR OWN. If you don't like what bank tells you, get a business partner, become a bird dog, use private money or owner financing, and if you don't like what people around you tell you, then pretty much do as you did with the bank - go elsewhere for advice.
Finding #1
Do not accept phrases "RIGHT WAY" "WRONG WAY" "CANNOT DO IT" and "THIS IS ILLEGAL". Right way is anything that makes money, but it may contain risks that will take you and your whole business under. Was that right? Wrong way is doing something in a different way from the person instructing you. But why are they working a 9-5 selling you that 1 point loan, when they could be in Hawaii, enjoying their massive passive income? Connot be done is another way of saying - I don't know how to do it. Granted that SOME aspects of what you're trying to accomplish might be unattainable the way you're trying to do it, but in general, buying, renting, and selling properties is RE101. It's ALL been done before. Illegal is a matter of opinion. Even in the court of law, it's what the judge feels is right or wrong - an opinion. Laws are just guidelines. That said, an aspect of what you're trying to do MIGHT be illegal, but does that law apply to YOU? in YOUR case? in THIS state? in THAT kind of a transaction? Can you restructure it in a way that would accomplish the same without touching on that particular law?
Finding #2
As far as the law and morality goes - NEVER... and I mean *NEVER* do business on a con. If the numbers don't work for you legally - walk away, there's always another deal. If a con goes through, you MIGHT make your profit, and even then some times it can catch up with you, but if it falls - it gets REALLY nasty. If you go with NO DOC, then state a reasonable income that justifies the size loan you need. Do not state something that you could not possibly make. If you state 1000/mo, can't make a payment, and come to a bank telling them you need an extension - they'll work with you. If you come to them after stating 10,000/mo and your payment is 400/mo, they'll take you to court. But hey, don't take my word for it, learn the rules in your jurisdiction.
Finding #3
Your BEST weapon is a MOTIVATED SELLER. They will work with you, work with the numbers, work with the financing, and ALL sorts of deals. Some times motivated sellers don't know enough about your investing game to work with you on your needs. SO EDUCATE THEM. I found that I got the highest profits when educating people, not pointing them to go get educated elsewhere, and because of that and because of the wealth of knowledge that I've acquired, other investors were suddenly willing to work with me too. Teach the seller how you can save their credit, how you can rebuild it for them, that selling outright isn't the only way to pull out money from a asale, and how you can pay THEIR rent as they move to another city without much money by getting into a lease option and after 6-12 months of cleared checks, you could get under just about any loan you want, and buy the house outright. Or hey! You could sell it before you even get there if you went with contract for deed.
Finding #4
Cooperation is invaluable! I made a business partnership just today by asking my mortgage broker if he invested himself. In the process of conversation, he already knew I know a good deal when I see one, but he lives in a bad market for rentals. So before I knew it, I had a source of money I didn't know existed. All because I shared information, without getting competetive. There are enough good deals for EVERYONE.
Finding #5
Don't focus on BUYING the house. Focus on owning it. What will you do with it? What if you had 5? 10? 50? If you see yourself there, and like what you see, and know how you can get it done at that level, then sacrifice part of a first deal or two to just get into the game. Never at a loss to yourself, just at not as much gain. By letting someone take over my first deal I learned more about closing procedures, issues that come up during inspections and creative financing than any book prior has taught me. Here I was, co-signing with a person who has enough money to pay cash for the whole thing, and she just bought it 0% down, no out of pocket money, and pulled money from a loan to be used towards next deal and first month or two until renters could be found (plus some minor upkeep). Deal was closed in a month, reducing potential profit I'd have made from $400/mo to $150/mo, but it put knowledge in my head that made me turn around and buy 2 appratment buildings the same way with no money out of my pocket and a substantial cashflow.
Finding #6
Most important finding of a broke bottom guy who desperately needed a loan. When you find yourself that you have changed and you "know better now", but your old evil ways have gotten you close to a financial ruin that only a 0 down, no money out of pocket deal will save you... here's what you do:
LOOK FOR RENTAL PROPERTY WITH CURRENT RENTERS SELLING LOWER THAN APPRAISED VALUE!
once you find a deal like that, you can go to a portfolio lender (There's a good article here on these "short gun" lenders) if you can find one, and have them lend on an appraised value, reducing your LTV to an acceptable level, which lets you pull the same amount of money without paying a down. Some of these lenders will want you to get out of the loan in 45-60 days, so you need to refinance right away to a loan with no appraised value seasoning. That means that you don't have to wait typical 12 months until an appraisal value is used for refi. Some will wave seasoning at 6 months, some at 7 days, some the very next day. IF you could not find a lender like that, worry not. Get a buyer to sell you the property for 20% more (which should still be below or at appraised value), and also sign a note that they will credit you at closing. Then receive this virtual credit from them. They pay nothing, you get a no-down loan. Be sure how that credit is formed. If they credit you in form of just "putting some virtual cash in your pocket", most loan bankers will call that seller concession, and will not allow more than 2-6%. It should be a credit line, such as one in form of 2nd mortgage. Consult your mortgage broker for more details of that trick. Not all will know about it, not all will work with you to make it happen.
FINALLY!
I read it in a 0 down book somewhere that this one couple went to 37 different brokers and they were turned down, and the next one said yes. If you know that your case is "marginal" menaing that you don't meet qualifications by just a hair here and there, then keep calling around. Someone WILL overlook that hair and consider you a good risk. Educate yourself on how banks make money, and how your credit works, and that will empower you to get money better. Educate yourself on how to sell a house, and you would be able to buy better. Funny how that works. :-D
LouInvestor,
Well said and thank you for sharing.