Is it hard for traders to get loans/credit?

I'm in same boat in fact was going to talk to a lender this week.

Right now I rent , am pretty liquid and have no debt.

I either want a mortgage for a house to live in for myself or be able to start getting mortgages to buy rental property and then get some "stable cashflow" that way so in turn can get a mortgage for my own residence.

I may have to start by buying the first rentals in cash which I don't really like the idea of considering rates are dirt cheap right now and over the long haul my rental cashflow with inflation would basically cancel out the interest.

After a couple years of having a rental or two hopefully they would give me a mortgage.


They give some guy with 80k in college and cc debt making 40k a year a mortgage but not a guy who can pay cash for the house!

Who's to say I wouldn't get canned tomorrow if I go work at some Corporation? It's dumb
 
Quote from dv4632:

If you're an independent trader (either at home or prop) is this a big problem? Since your income is unpredictable it's possible that many lenders (or landlords even) would not want to deal with you.
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would you loan money to someone who has, as the data shows. only a 10% chance of making money? i wouldnt.
 
Quote from garachen:

I had a *wonderful* experience with this. Last year I went to buy a house. I'd done this before when I had a W-2 job so I thought it would be pretty easy. I called up a few places including Bank of America where I used to work and started sending them my tax returns. They all promised the world and said it would be no problem.

The problem starts when it gets to underwriting. Your typical underwriter can't distinguish between "investment income" and "trading income". Everything is viewed as capital gains (bad income). After 3 months of hassle and talks with the underwriter where I even had the head of Chicago underwriting call my California underwriter to explain to her how a trader's income really works it all just failed.

In the end - get this - they said they would need to see 10x my ANNUAL income in savings in order to justify my capital gains income. I pressed them on this saying... "so if I make $1 Million a year you need to see $10 Million in savings. But it I make $5 Million you want $50 Million in savings."

Did it matter that this made no sense - no. Did it matter that I demonstrated I could cover the purchase price of the house in cash if I wanted to - no. I told them that under these conditions Warren Buffet would not be able to get a home loan through them if he happened to make too much one year. They agreed that yes, he would not.

So, yeah, unless you live in Chicago or New York where you might get an underwriter who understands this stuff it's pretty much impossible.
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We're you showing 1mm in income? If you we're showing a 100k and asking for a300k loan it's not an unreasonable request.
 
Unless the loan is unusually large, they'll just average your last two years tax returns and that's your income. No big deal. I'm speaking about mortgages. For most other consumer credit, they rarely verify income anyway and do it based on credit history.

For landlords, the tax returns will suffice as well. Their margin of safety is mostly your deposit anyway.
 
Quote from marketsurfer:

The ONLY way to get a loan as a at home trader is to create a company and have the company pay you via W2's yearly for the last 3 years.

/B]
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I could add this.

When I was self employed, I used an employee leasing company. Basically I leased myself to my company, I recieved a W-2 from the leasing company on my income. (I decided what I paid myself). You do have to pay admistration fee for this but is deductible on your taxes.

This worked out well, they took care of unemployment compensation . disability, health insurance and all taxes. if i hired an employee, I just added them on. The new employee was leased to me. The whole thing was wierd but worked out well.
 
Quote from nutmeg:

I could add this.

When I was self employed, I used an employee leasing company. Basically I leased myself to my company, I recieved a W-2 from the leasing company on my income. (I decided what I paid myself). You do have to pay admistration fee for this but is deductible on your taxes.

This worked out well, they took care of unemployment compensation . disability, health insurance and all taxes. if i hired an employee, I just added them on. The new employee was leased to me. The whole thing was wierd but worked out well.
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smart. Makes perfect sense, thanks for the idea!

surf
 
Quote from Traveler:

Unless the loan is unusually large, they'll just average your last two years tax returns and that's your income. No big deal. I'm speaking about mortgages. For most other consumer credit, they rarely verify income anyway and do it based on credit history.

For landlords, the tax returns will suffice as well. Their margin of safety is mostly your deposit anyway.
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No friend, tax returns don't cut it any longer-- this is particularly true for the self employed. Banks caught on to the fake tax return scheme a long long time ago. Now, in 1995, you would be correct.

surf
 
I agree that a consistent deposited as "earnings" every month slightly helps paint the right picture. But to think that telling even the stupidest loan officer that you buy and sell securities and then giving him a tax return that shows you are not employed by a firm convinces him you are doing something other than trading seems naive. If you are dealing with large numbers they may simply not care that you trade but that is clearly not the OP's situation.

What am I missing here?

Quote from danielc1:

I have found out the following when applying for (big) loans while being a trader:

Deposit every week or month the same amount in one of your bank accounts for a year or two, three.

When you apply for a loan, you are selfemployed, and if they ask you what you do, you say that you sell and buy securities. When they ask how much you make, you tell them the amount you have put in your bank account for the last two, three years or give them your tax return.

The loan officers, banks and leasing company's will treat you like any other business person.

If you just tell them you are a fulltime trader, they will not take you seriously.
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Quote from dv4632:

If you're an independent trader (either at home or prop) is this a big problem? Since your income is unpredictable it's possible that many lenders (or landlords even) would not want to deal with you.

If you have a high enough net worth, or make far enough into 6 figures a year, or into 7 figures, then obviously you shouldn't have many problems.

But for many aspiring traders who seem to simply want to replace the income from a job this seems like a risky proposition. My thought has always been if I can't expect to make 2-3 times what I could make in a job then this isn't worth pursuing.

If you're making 50k a year in a job and transition to making 50k a year as an independent trader, that could mean some big changes in your life. Not only a loss of benefits at work, but getting car loans, a mortagage, or even being able to rent an apartment could become big obstacles.

Anyone have any personal stories of how being a trader impacted this aspect of their lives?
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Use your tax returns if, you have been a profitable trader with large enough profit, last two years should suffice; as long as you don't have anything deregatory on your credit history.
 
Quote from dealmaker:

Use your tax returns if, you have been a profitable trader with large enough profit, last two years should suffice; as long as you don't have anything deregatory on your credit history.
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Wrong. Tax returns are no longer accepted as income proof for the self employed.
 
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