Getting a loan on a home... HELP!

[Roothead]

maybe I am missing something....

I just closed on a $750k home, put down enough cash so as to only take out a conforming loan of $417k....our individual credit scores are +800, etc....I used a privately owned bank that has an in-house RE portfolio that they both originate, keep on their books and service. The loan qualification and origination / underwriting process was the most intensive and invasive of any that I have ever gone through, short of the government back ground check I went through a few years back

So, I am stumped wondering how someone that has so far evaded paying Federal income taxes and has no formal records of income, will nonetheless qualify for a loan from ANY legal financial institution... ?

[instfixer]

Contract for deed

If I was rich and single and wanted to get a house for a provider, doing a contract for deed would be the way.

Of course I would want a down payment on the house so if the payments were not kept I could sell the house and get my money back.
At the same time getting above market interest- business is business and I am a 'tidewad' in that I don't give money away

If the provider gave me a large payment, I would be wise enough not to shove all of it in my bank account at the same time as to generate an automatic notice to the IRS
[Which may be anywhere from $4000 to $10,000]

While paying taxes may be a drag
One needs 10 years of paying taxes to qualify for Social Security

[acp5762]

Well they don't have a lot of options. They're almost at the mercy of Philanthropist.

[bladtinzu]

Originally Posted by acp5762

Well they don't have a lot of options. They're almost at the mercy of Philanthropist.

I.E. A sucker who will end up getting screwed over then cry about it to those of us in the hobby who damn well know better than to do stupid shit like that.

[Gotyour6]

It wont happen because they were living high on the hog not paying taxes and now they understand that you have to show income to get the pretty things.

OH NO! I have no way of showing income!!!!!

Love it.

Maybe you can bat your eyelashes at the banker and he will sign the paper for you to get a loan.
Rub his thigh a little, blow in his ear and tell him all the things his wife doesnt.

Nope, that wont work either.

[Lovely Lexi MILF]

Originally Posted by shorty

Could also see if owners are willing to finance it for you. Its more like a lease to own agreement. If you do reach an agreement with the owners to finance it, keep all reciepts that you made your payments.

This is a good suggestion if you can find an investor or homeowner willing to act as your "lender" and finance the sale of property to you. I must stress the importance of making all mortgage payments via YOUR checking account. The cancelled checks made payable to seller/lender will be required to prove payment history on the loan. Please understand late mortgage payments (30 days or more) can adversely affect your ability to refinance the note.

Originally Posted by Whispers

You need 2 years tax records where your AGI (after deductions if self employed naturally) is enough income to justify the loan after taking existing debts into consideration. This trips up most self employed that like to write off everything they can.

Unlike W2 borrowers, who are allowed to use "Gross Wages," self-employed borrowers' income is calculated using "Net Income." However, from a lending standpoint, certain deductions can be added back to "Net" or "AGI," such as Depreciation, Depletion and Business Use of Home. Your CPA would need to verify whether any of these deductions apply to you.

Originally Posted by Whispers

You need someone to run the figures for you but if you have enough money for a down payment and to go back two years legitimizing taxes you might want to just find a hard money lender that will charge you a higher rate but possibly finance possibly 70% of it's appraised value. $40-$50K WILL get you into a house. Rate will be high but legitimize your documentation and refinance in a couple of years. Buy the right property and odds are it will appreciate enough to justify the short term expenses.

Good advice, as well, I only want to touch on the fact that not all hard money lenders (at least in Texas) will lend on "Owner Occupied" properties. This is because homestead property can be protected from foreclosure via Chp 13 bankruptcy filing.

Originally Posted by Jackie Devlin

Best answer in the thread - whatever you do - DO NOT "fake" your tax return and try to use a document you didn't actually file with the IRS with a bank or lender . . . they'll find out, and they prosecute. . .

Originally Posted by the banker

Jackie is correct: don't falsify any income documents. We have fired an employee and brought charges against a borrower for that stuff. It's good to ask to see what can be used, especially in this situation. Income will not be the issue, the source of the income will be. With no tax on file, it would be a tough climb.

"Fraud" is a hot topic, as it should be, and falsifying documents will not be tolerated. Safeguards, such as requiring the previous (2) tax transcripts from the IRS, are in place to help protect against income fraud. The tax returns you provide will be checked against what you filed with the IRS.

Originally Posted by Roothead

maybe I am missing something....
I just closed on a $750k home, put down enough cash so as to only take out a conforming loan of $417k....our individual credit scores are +800, etc....I used a privately owned bank that has an in-house RE portfolio that they both originate, keep on their books and service. The loan qualification and origination / underwriting process was the most intensive and invasive of any that I have ever gone through, short of the government back ground check I went through a few years back.

This is an all-to-common sentiment shared by many frustrated borrowers in today's market. Unfortunately, lenders and their investors do not look at files any differently for strong borrowers such as Roothead, who has a solid credit score and history and large down pymt (20% or more), any differently than borrowers who have the minimum credit score and history and who are making the minimum cash investment.

The only additional advice I can think to offer is to ensure your credit score and history are within current guidelines. If your credit has some "hits" and "dings," you might consider contacting a reputable and legitimate credit restoration company. Your mortgage specialist should be able to offer recommendations. If you lack credit "tradelines," the credit restoration company might or should offer suggestions on what type (revolving or installment or both) of credit you need to improve your score and where to find assistance. Also, ensure you are educated on the role utilization of revolving credit plays in credit scoring. (balance versus credit limits)

If you are needing to build credit and/or add tradelines, Credit Unions are a great tool. Keep in mind, if you need to build credit, most lenders require a 12-mo history on all usable tradelines (generally 3 trades; open or closed).

[ck1942]

Truth is, there are many reasons (outlined above) to FILE income tax returns. Even if no tax is due because income is below the tax payment requirements.

But, unless earned or un-earned other income hits a certain level, there is virtually no requirement to file a Form 1040 or 1040A etc., unless you owe self-employment taxes.

Self-employment taxes also help build your potential Social Security retirement (OK, stop laughing) and Medicare (assuming either or both are around 30-40 years from now).

Additionally, if you claim a child dependent, the EIC (Earned Income Credit) can be worth a couple of grand cash per year even if taxes are minimal or below limits.

Thing is, as Whispers points out very well, there are more than a few options on buying a house, such as owner-finance or rent-to-own.

*** I would also suggest that anyone considering a home purchase also RUN the numbers on the true cost of owning (and maintaining) a home before rushing into the residential property cycle. ***

Those considering a house purchase should do it for one reason and one reason only: SHELTER.

Always first consider the cost of insurance, property taxes, auto insurance (which is also very dependent on location and zip code, not just accident records), home maintenance and repairs, and many other et ceteras. Utilities, neighborhood potential for change to the worse or to the better, taxing districts and sub-districts, and maybe 50 or 60 other factors. If, for example, your neighbors' behavior in an apartment bother you, it's a lot easier to have the landlord address that issue than calling the cops or maybe having the HOA address an issue. Worst scenario, moving from an apartment complex (or within one) beats trying to sell a house.

And remember that the true PRICE of any building must be multiplied more than a wee bit to account for INTEREST you are paying every month, even if tax deductible. And the tax deduction for interest is not dollar for dollar but dollar times the personal income tax rate. If you are in the 15% tax bracket, the 8 or 10 grand in interest you pay returns only 1,200 to 1,500 in tax "savings."

A personal residence is no longer the "investment" it used to be to due many changes in this economy.

And there are few if any future guarantees for that to change even in a somewhat "hot" real estate market like an Austin.

imo the best thing you can do with your excess cash is to gently and slowly invest in something that might get you some returns, or, better yet, pay down and pay off any credit cards you might have since cc interest rates are outrageous.

Build your credit worthiness and protect your existing assets.

[acp5762]

Originally Posted by bladtinzu

I.E. A sucker who will end up getting screwed over then cry about it to those of us in the hobby who damn well know better than to do stupid shit like that.

Well it looks like she can't count on you then, lol.

[bladtinzu]

Originally Posted by acp5762

Well it looks like she can't count on you then, lol.

Not no but HELL NO! I would be better off taking a couple hundred grand in cash and lighting the grill with it. Least then that money would do some good.

[theotherguy1]

The way this can be handled is someone purchases the house then resell it to the individual using owner financing. I have done it in the past and I sell it at a premium and demand a good down payment then I later sell the payment stream at a discount. Of course this only works in certain conditions but is legal (in the states where I have done it). It is not a stupid move if you know what you are doing.

[acp5762]

Originally Posted by theotherguy1

The way this can be handled is someone purchases the house then resell it to the individual using owner financing. I have done it in the past and I sell it at a premium and demand a good down payment then I later sell the payment stream at a discount. Of course this only works in certain conditions but is legal (in the states where I have done it). It is not a stupid move if you know what you are doing.

So my original suggestion was kinda fuckin close wasn't it?

[guest043013-2]

There are so many ways a deal like this can go south. And some states may be harder to use these methods. My guess is Texas would be one of the difficult states.

Of course, the guy has to have either disposable cash to buy the house, or good enough credit to float the loan in his name, and no one (such as a wife) looking over his shoulder asking WTF do you think you are doing?

[theotherguy1]

I can't comment on Texas Real Estate law. I do know that you have to think with the correct head. This would have to be someone who is involved in Real Estate investing.

[samantha thom]

You haven't filed taxes for years??? Why would you do that? Start filing...and you probably owe a LOT!
Girl, you need to start planning for the future! It's not rocket science, it's all common sense! You can't get the house now. If you pay $150K in cash, it's gonna set an alert with the IRS. You will not get approved for a loan. So you are stuck with renting for now until you get all your financial records straightened out.

[Mojojo]

Originally Posted by samantha thom

You haven't filed taxes for years??? Why would you do that? Start filing...and you probably owe a LOT!
Girl, you need to start planning for the future! It's not rocket science, it's all common sense! You can't get the house now. If you pay $150K in cash, it's gonna set an alert with the IRS. You will not get approved for a loan. So you are stuck with renting for now until you get all your financial records straightened out.

Also don't run to the bank and deposit anything over $9,998.00 the bank will report it to the Feds.