AskMorgageFilter
May 11, 2010 6:52 PM Subscribe
I am a young person looking into buying real estate. My income is considered very variable but I have lots of assets. Can I get a loan?
I have been looking at the possibility of buying some property to rent out for a positive cash flow (most likely a duplex or triplex).
I have good credit (780), no debit, and 150k of savings. But, I play poker for a living. I made 25k after graduating from school last year. I assume I will make 50-100k this year. I own a paid off 750k home which I make 25k a year from in rent (I rent an apartment in a different place).
My question: is it going to be very difficult to get a loan? How much could I get a loan for? Is it going to make a big difference if I live in one of the units or not?
I just wanted to get a rough idea of these things before I start to look for places and do more research.
You are not my banker...
I have been looking at the possibility of buying some property to rent out for a positive cash flow (most likely a duplex or triplex).
I have good credit (780), no debit, and 150k of savings. But, I play poker for a living. I made 25k after graduating from school last year. I assume I will make 50-100k this year. I own a paid off 750k home which I make 25k a year from in rent (I rent an apartment in a different place).
My question: is it going to be very difficult to get a loan? How much could I get a loan for? Is it going to make a big difference if I live in one of the units or not?
I just wanted to get a rough idea of these things before I start to look for places and do more research.
You are not my banker...
If you're buying a property strictly as an investment, you're income shouldn't be a major factor. The bank will primarily want to see that the projected cash flow is realistic and covers the debt service by a comfortable margin (these days they'll probably expect at least a 1.25 debt coverage ratio). The fact that you have $900k in unencumbered assets will make them happy. The fact that you have some experience managing a rental property will help. Your personal income can't hurt, but it won't swing the pendulum very far. You'll also probably be expected to put at least 30% down, depending on the debt coverage ratio.
And, I just noticed that you're a poker player for a living. That's a little out of my sphere of knowledge. If I were you, I would expect that to spook the bankers. Like a lot. They would probably want to know that the assets the bank is relying on for their recourse against you aren't vulnerable to your potential gambling losses. Also, they'll probably be very nervous over questions of legality.
If you're buying a duplex or triplex as a primary residence + rental income, the formulas are completely different. In that case, your income is paramount and the potential income from tenants can help offset the PITI (principal, interest, taxes and insurance) used to calculate your maximum loan amount. You can qualify for Fannie Mae and FHA programs under these circumstances, which might be beneficial, but I doubt any bank is going to give you credit for poker income. My guess is that you'll find going this route to be unworkable.
Talk to some mortgage brokers. They aren't banks and you have nothing to lose by disclosing your unique circumstances to them. Half of them probably wish they played poker professionally and will enjoy the challenge of finding a loan product that can work for you.
posted by boots at 7:18 PM on May 11, 2010
And, I just noticed that you're a poker player for a living. That's a little out of my sphere of knowledge. If I were you, I would expect that to spook the bankers. Like a lot. They would probably want to know that the assets the bank is relying on for their recourse against you aren't vulnerable to your potential gambling losses. Also, they'll probably be very nervous over questions of legality.
If you're buying a duplex or triplex as a primary residence + rental income, the formulas are completely different. In that case, your income is paramount and the potential income from tenants can help offset the PITI (principal, interest, taxes and insurance) used to calculate your maximum loan amount. You can qualify for Fannie Mae and FHA programs under these circumstances, which might be beneficial, but I doubt any bank is going to give you credit for poker income. My guess is that you'll find going this route to be unworkable.
Talk to some mortgage brokers. They aren't banks and you have nothing to lose by disclosing your unique circumstances to them. Half of them probably wish they played poker professionally and will enjoy the challenge of finding a loan product that can work for you.
posted by boots at 7:18 PM on May 11, 2010
I am a banker but not your banker. Do you declare your income from playing poker on your taxes? This makes a big difference. If you can show that you are making income legally and reliably for a couple years, your credit is great, and you have a big down payment, you can get a loan-you'll just basically be a self employed borrower. In your case, you have reportable income from the poker and the rental income-so you should be able to get a home loan. Living in one of the units will make you a better risk and will possibly get you a better rate. But it should not make or break the deal.
Go get preapproved before you go house shopping so you'll have the chance to go over this with your bank and make sure they are willing to play ball.
posted by supercapitalist at 7:24 PM on May 11, 2010
Go get preapproved before you go house shopping so you'll have the chance to go over this with your bank and make sure they are willing to play ball.
posted by supercapitalist at 7:24 PM on May 11, 2010
Just as an FYI, I find posting this question anonymously hilarious... how many pro poker players do you think post on mefi? You're not all that anon.
Anyway, if you're self employed, I always think a mortgage broker is a good idea. Brokers tend to work more often with people who have less textbook circumstances. Banks tend to be easily freaked.
I mean, just look at the weird questions about the legality of pro poker and if you file taxes...
posted by DarlingBri at 8:11 PM on May 11, 2010
Anyway, if you're self employed, I always think a mortgage broker is a good idea. Brokers tend to work more often with people who have less textbook circumstances. Banks tend to be easily freaked.
I mean, just look at the weird questions about the legality of pro poker and if you file taxes...
posted by DarlingBri at 8:11 PM on May 11, 2010
Providing proof of your assets shouldn't be a problem in getting a loan....though if you are female, be prepared for getting a lot of comments about how you shouldn't be able to have your wealth (the correct response being a hard stare and "Why not?).
posted by brujita at 11:00 PM on May 11, 2010
posted by brujita at 11:00 PM on May 11, 2010
how many pro poker players do you think post on mefi?I know at least four! I would be shocked if there weren't dozens.
If you have been reporting your poker income on Schedule C (which should be your choice if you don't have a day job -- memail me for more information if you don't know the issues between Schedule C and "gambling winnings" on the 1040), you should be OK. I know lots of players who have mortgages. As I reread your question, it seems that you have only been doing this for a year or so. With no income history, you will have more trouble. It will go better if you played in school and reported income.
You can easily enough get a HELOC against your other property and spend it to buy a new property, if that gives you enough leverage. I am completely ignorant on the ability to qualify as a strictly cash-flow business proposition.
posted by Lame_username at 2:16 AM on May 12, 2010
Of course you could just buy a place for cash if you live in a part of the country where 150,000. will buy you something decent. I just bought a nice house for less than that in Savannah.
posted by mareli at 6:55 AM on May 12, 2010
posted by mareli at 6:55 AM on May 12, 2010
Sorry, I realise in reading back that my previous post probably reads as hostile or snarky and I sincerely didn't mean it that way. OP, I wasn't trying to be all "ha ha I know who you are!" or anything. I apologise if it may have read like that.
I think the frustration of typing on a little tiny screen with one finger on a little tiny phone over a really tiny internet connection spilled over into a momentary lapse of reasonable communication.
posted by DarlingBri at 5:33 PM on May 12, 2010
I think the frustration of typing on a little tiny screen with one finger on a little tiny phone over a really tiny internet connection spilled over into a momentary lapse of reasonable communication.
posted by DarlingBri at 5:33 PM on May 12, 2010
If you haven't been declaring this income on your taxes, you can file amended returns, pay your back taxes, and have proof of income for the last couple of years.
Planning on living in the duplex or triplex is likely to be to your advantage in getting a loan.
posted by yohko at 3:17 PM on May 14, 2010
Planning on living in the duplex or triplex is likely to be to your advantage in getting a loan.
posted by yohko at 3:17 PM on May 14, 2010
This thread is closed to new comments.
posted by box at 7:13 PM on May 11, 2010