Can I get a loan/refinance a house without regular, steady income?

September 26, 2010 1:07 AM

Is it going to be difficult for me to refinance my house .. and get a car loan .. or a loan of any type not having a regular income?

I *just* started working as a freelance developer after a summer in Ecuador. Things are great, but I don't have a regular, steady income. Its more sporadic and comes from a few different clients.

I don't have a problem paying my bills and my credit score is *excellent*.

Is it going to be difficult for me to refinance my house .. and get a car loan .. or a loan of any type .. with me not having a regular, steady source of income?

posted by jason9009 to Work & Money (8 answers total)

Short answer: yes.

Longer answer: Once you have a track record (read, a couple of years of tax returns as a freelancer), it becomes easier but it will never be as easy to get credit as if you were an employee of ABCD, Inc.

Until you have proof of aggregate income via tax forms, it's going to be fairly difficult to get a significant loan, in my experience.
posted by maxwelton at 4:05 AM on September 26, 2010

In the United States? Yes. At the moment is difficult even for people with good credit and steady sources of income to do these things. After you've been freelancing for a few years, and have several year's worth of tax returns and so forth to point to, it might be a bit better. And I'm not sure whether the car manufacturers are any looser than the banks; it's possible a car loan, as it's a smaller amount and you're often getting the money from a car company, might be easier to swing. But lending is tight, tight, tight right now. Put it this way --- the Federal Housing Administration, which runs a special low-down-payment loan program for people with decent credit who can't get other types of loans, was financing 20 percent of the mortgages in the country earlier this year. A few years ago, that number was less than 2 percent. Tons of first time homebuyers simply couldn't get a standard loan, when a few years ago they certainly would have. And even the FHA has tightened up.
posted by Diablevert at 4:11 AM on September 26, 2010

I was in your position recently. Self-employed, one income in the family, and needing to refinance our mortgage.

Banks wouldn't even talk to me until I had 2 years of tax returns, and even then, only one lender and one broker would even consider our application. (I talked to 12-15 different lenders in the process, including national banks, local banks, credit unions, and mortgage brokers.)

I finally found a bank willing to work with us on it (Quicken Loans, who gave me a good deal), but it took a lot of work. And, as I mentioned, it required 2 complete years of tax returns, and our credit rating is/was outstanding.

Good luck, but it's probably best to be patient for now.
posted by Alt F4 at 4:35 AM on September 26, 2010

They call these NINJA loans ( no (proof of) income, no job, no assets.) Giving relatively easy credit to folks in this category - that is, no-doc loans where the borrower just said "I pay all my bills on time and these jobs are all pretty steady," and pulling the borrower's FICO, and then giving them money - worked out badly for everyone.

Wait a few years on the house for the tax backups, and long enough on the car to put down a sizable downpayment. And be very careful. The reason it is harder for people in your situation to get loans is because you are very vulnerable to risks.

(This is not legal or financial advice, I am not your anything, etc.)
posted by SMPA at 8:13 AM on September 26, 2010

If you incorporate yourself and pay yourself a steady salary with the appropriate documentation, things may be easier. Talk to a financial advisor or tax attorney for more information. At worst, they tell you the right type of person to talk to.
posted by reddot at 8:51 AM on September 26, 2010

Response by poster: Wow, it almost sounds like I should go out and get a part-time/full-time job just to be able to secure a loan or two .. which sounds like a lot of red tape and hassle :(

I don't really have the luxury of waiting on the car. I suppose I could buy a $2000 beater car, but I'd rather buy something in the 10-12K range and make low payments so I don't have to go through this cycle of car shopping and selling :(
posted by jason9009 at 9:05 AM on September 26, 2010

Maybe not a car loan, especially if you through the dealer. I think they tend to rely more on credit scores and available credit.
posted by bluedaisy at 9:39 AM on September 26, 2010

To clarify, I meant: it might not be too hard to get a car loan.
posted by bluedaisy at 9:40 AM on September 26, 2010