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HELP: Self Employed Buyer can't get a mortgage

Posted by jmos27 (My Page) on
Mon, Sep 19, 11 at 21:54

I am a relo and have had my house for sale for almost 8 mos. I have a company buyout but I am taking a bath on my house and finally have a great buyer that is in love with my house. As luck would have it, they are self employed for only 18 months but are making very good money. So far they have not been able to secure a mortgage and I am trying every option. I am looking for any suggestions on lenders that may be able to take a loan of this sort. Any advice or recommendations would be greatly appreciated as I need to find the buyer a viable mortgage or simply take my buyout. Thanks in advance for your help


Follow-Up Postings:

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RE: HELP: Self Employed Buyer can't get a mortgage

This is just the reason why I lost my last buyer. A lot of people on here were saying, "Nah, he must have bad credit," and "He's self-employed and he's relocating? That means he's UNemployed." We had a bank that was willing to give him a mortgage. Farm Credit. But they wanted him to put 40% down and one year's worth of mortgage payments in escrow. He didn't have all that. I'm sorry I can't tell you I saved this guy by finding him something else. Maybe someone else can tell you something helpful.


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RE: HELP: Self Employed Buyer can't get a mortgage

Thanks. They actually have pretty good credit and are putting down around 25%. I hadn't realized how difficult it has become for the self employed. I am hoping someone on this great forum can point me in the right direction.


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RE: HELP: Self Employed Buyer can't get a mortgage

Self employed is very high risk for default. Especially for someone with such a short time in business. Most banks want at least 3 years of success, coupled with a high downpayment. Both. Not one or the other. Unless you are willing to carry the mortgage yourself and take on the risk, the only solution is the buyer to have more money down. As in a mostly cash sale. If you're not willing to take the risk, why should a bank be?


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RE: HELP: Self Employed Buyer can't get a mortgage

I totally understand the risk of a self employed buyer and the difficulty in obtaining a mortgage hence the reason for my post. I have been asked to owner finance which I simply cannot afford to do at this time. My request was has anyone had success or can recommend a lender where they have success with this type of buyer. I am only trying to find a mortgage for my potential sale as I have become acutely aware of the risks of self employed buyers. If anyone can recommend an institution that may be more inclined to take this type of loan then please let me know. Thanks again for the response


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RE: HELP: Self Employed Buyer can't get a mortgage

Sorry - nobody is making these loans. 10 years ago - no problem. Today - not happening. No big lender is going to touch this loan. His only hope is if he has a preexisting relationship with a local credit union eg he's an officer there and they've known him for 20 years.

IMO - Time to move on to other options.


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RE: HELP: Self Employed Buyer can't get a mortgage

There isn't a bank that will do a loan for someone categorized as self employed if that business has not been in existence with well documented income for at least 3-5 years. If he had a past history of being in the same business successfully in another location with that longevity and he had 50% down, you possibly could find a bank to work with---but at a higher rate. Self employed folks are high risk.

Sorry, but you do not have a "great buyer". You have someone who is high on himself with wishful thinking. He may be a nice person, and his business may be on it's way to being a great success eventually, but it's far too soon to be able to say that with any certainty. If he was a great buyer, he'd have the additional money to buy the house outright without a bank's involvement. If he can't come up with that, then he's not a buyer. He only wishes he was a buyer. And unfortunately, you're also falling into his trap of wishful thinking.

It wouldn't cost you any money out of pocket to hold the note, so if you really believe in this guy, take the risk yourself. But, deep down, you don't, and aren't willing. No bank will be either.


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RE: HELP: Self Employed Buyer can't get a mortgage

GreenDesigns, do you hear yourself?

Jmos27, why don't you call some banks and mortgage companies and tell them the predicament? They usually know what's available. How much do they have to put down? Like I said, my guy would have gotten the loan if he had 40%. I'm sorry you're going through this. It's almost worse when people actually want your house but they can't get the mortgage.


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RE: HELP: Self Employed Buyer can't get a mortgage

18 months of employment is not enough time to be able to qualify for most regular mortgages, much less one based on the uncertainty of self employment. There simply isn't any way this person is going to get a loan. It's a bit rough to say he's full of wishful thinking, but that IS pretty near the truth. He HAS to know that no bank will give him a loan. It's standard risk management.

A private lender is the only way that this sale could happen. Does he have family that could lend him the money? That would be the only other alternative that hasn't been mentioned so far.


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RE: HELP: Self Employed Buyer can't get a mortgage

Good advice from live wire ...

The only other thing to add, does he personally or professionally have a relationship with a bank. Sometimes private bankers can get loans for people that don't fit the normal programs.


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RE: HELP: Self Employed Buyer can't get a mortgage

Here is the latest. They actually qualified for a $650000 mortgage and have $230k to put down. The sale price is $1150M sowe are getting closer. We are exploring every option as I found that there is always someone willing to take on risk you just need to find them. I have taken the path of flipping over every rock to make thishappen. I have also offered to takemsome front end risk but I cannot take on $200k as I am already taking a bath. Thaks for all the feedback as GW is always the best place to go for help


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RE: HELP: Self Employed Buyer can't get a mortgage

Sorry if you think my wording was harsh, LITH. I think you have some emotional investment in the responses rather than viewing things dispassionately. When you eventually sell your home and move to restart your business, you will be a cash sale that won't involve the bank, so your situation is different. On the other hand, if you did need to obtain a real estate loan, you would be in similar situations to that of your potential buyer and the OPs potential buyer, so I can see how you can feel that you have a stake in the answer here.

If you were on a bank's loan committee, would you view someone with only 18 months of self employment as an acceptable risk? Or, would you want to see more longevity of employment and a higher down payment in order to write them a check for many thousands of dollars? If they were having a runaway success with their new business, they would be able to write the check themselves and not need any bank. If they had been in business longer, they'd have hat history plus have saved more down payment and then the bank wouldn't have an issue with giving them the money.

Just because there are deals to be had in the real estate market currently doesn't mean that anyone anywhere can take advantage of those deals. You have to crawl before you can walk. These people are still crawling.

And, it's a legitimate question: If you feel that this person is a great financial risk, then why don't you hold the note? If it doesn't make financial sense to you do so, then why would it be any different for a bank? Why do you want an institution to take a risk that you are unwilling to do? Isn't that part of why the loan market is such a mess right now? But that doesn't matter to you as long as someone who wants to purchase your home can get a loan no matter how high of a risk they are to the lender? I find the hypocrisy irritating and perhaps I let that come through in my response. My apologies.


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RE: HELP: Self Employed Buyer can't get a mortgage

I'm confused about how much the house is selling for.

"They actually qualified for a $650000 mortgage and have $230k to put down. The sale price is $1150M so we are getting closer."

Sounds like it is an expensive property (1.1 million?) so no wonder the bank is being cautious.


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RE: HELP: Self Employed Buyer can't get a mortgage

As others have posted, he's going to need at least 40%. That is in line with the 43.5% that this bank is demanding. If he only has 20% to put down, you aren't really very "close." If he doesn't have an extra $270,000 laying around, it isn't going to happen. I don't know of any lender who would accept a $270,000 "gift" from a family member as down payment.


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RE: HELP: Self Employed Buyer can't get a mortgage

Thanks again for the responses. As far as the point of why aren't I willing tot ake the risk the simile answer without getting too personal is my wife's leaving a BIG VP job and we are having our second baby anyway now. my risk tolerance is not relevant at this point as it is in fact very low at this moment in time. I totally understand the odds of this buyer actually securing a loan and I setting my expectations low. Is there a little wishful thinking on my part, of course, what seller today wouldn't? I was only trying to see if anyone out there has come across a solution in their experience. It is clear that the majority feels it wont happen which is fine. I am merely trying to explore every option before I give up. As you can imagine selling a $1M home is never easy. I may just take my companies relo buyout and put this behind me but I only want to make sure I don't look back with any regrets. I have posted here because I have found more answers on GW than anywhere else I have looked. This forum allows us to find the one edge case that may exist because of the rich cross section of experience this forum brings to bear. Thank you once again for all the feedback


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RE: HELP: Self Employed Buyer can't get a mortgage

GreenDesigns, I wasn't arguing with you about the quality of the poster's buyer or the validity of the bank's rejection. I asked if you heard yourself. When you speak in a condescending, patronizing way, it is not helpful and that's what people come on here to get. You might be smart and knowledgeable but when you speak like that, I could care less.


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RE: HELP: Self Employed Buyer can't get a mortgage

LoveInTheHouse,

I don't know if your view of GreenDesign's post is coloured by other threads that I haven't read, but I don't see how what he said was condescending. When you posted "do you hear yourself?" I went back and read his post several times and couldn't figure out what you were talking about. I guess it's hard to convey feelings in a print-only environment and different people interpret things differently.
I'm not trying to attack you, I just wanted to say that I can also see why GreenDesign is confused by your reaction.


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RE: HELP: Self Employed Buyer can't get a mortgage

"'LoveInTheHouse,

I don't know if your view of GreenDesign's post is coloured by other threads that I haven't read, but I don't see how what he said was condescending. When you posted "do you hear yourself?" I went back and read his post several times and couldn't figure out what you were talking about. I guess it's hard to convey feelings in a print-only environment and different people interpret things differently.
I'm not trying to attack you, I just wanted to say that I can also see why GreenDesign is confused by your reaction.'

I felt the same way reading those posts!
GreenDesign's post was well-written and appropriate.


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RE: HELP: Self Employed Buyer can't get a mortgage

All I said was, "Do you hear yourself?" and GreenDesigns said, "Sorry if you thought my words were harsh." If they weren't, how did he know what I meant? Wouldn't he have said, "What do you mean?" He didn't because he knew what I meant because he was being snotty. If I'm wrong, I'm sincerely sorry.


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RE: HELP: Self Employed Buyer can't get a mortgage

Sorry to derail, but I'm curious about this:

18 months of employment is not enough time to be able to qualify for most regular mortgages

Does this mean 18 months in the same job? I've had mortgages in the past, but it's been a while since I've applied for a new one. I'm getting ready pretty soon. I'm also thinking about changing jobs, to one which would be a promotion and a raise. I've been at my current employer for 5 years. Is it really going to cause a problem to change to this new job before applying for a mortgage? It seems like a catch-22. The new job will pay more so I can more easily afford the mortgage, but if I need to stay in it for years before qualifying, that's no good.


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RE: HELP: Self Employed Buyer can't get a mortgage

Money will solve it all.

It's all a balancing equation. Less time in your job means more money down is needed. Working for yourself rather than a company means more money down.


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RE: HELP: Self Employed Buyer can't get a mortgage

Northlut, ask the bank that you're thinking of getting a mortgage with. My current buyer was going to apply for a job transfer to a company closer to my home after he got settled in. I told him not to tell the bank he was planning to change jobs later because I was worried they'd reject him for having a new job. It wasn't the same company but they are affiliated and it was the same field. Turns out this bank WANTED him to change jobs because the new one is less of a commute. They wouldn't go forward on the loan until he did. So I'd say ask a bank. But still--take everything they say with a grain of salt. Everytime I got a buyer, I spoke to the loan officers and gave them details about my property and my buyers gave them their personal information and they'd start out telling us yes! they will get a loan! But two times they reneged on what they told us verbally and wouldn't fund the loans. It's a nightmare nowadays.


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RE: HELP: Self Employed Buyer can't get a mortgage

"Does this mean 18 months in the same job? "

This was in reference to someone who is self employed. If you run your own business, 18 months is a pretty short track record. I haven't heard of any lenders requiring more than a year of documentation for a "normal" job.

Also, every lender is going to have their own criteria. I'm sure you wouldn't have a problem finding a loan if you leave 1 job for another higher paying one. However, if you are counting on the extra income to qualify for a higher mortgage, they will likely want to see some track record of you actually making that higher figure.


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