What if your financial situation changes during the build process?Apr 16, 2021
It's a long process to purchase a new construction fourplex property. Sometimes you're identifying the property or making a reservation, and it doesn't start construction for another 3-12 months after that. Then you have the full-year build process. That's a lot of time for something to change in your personal life.
- What happens if your financial situation changes during that time?
- What happens if you switch jobs or your expenses/income changes?
These are all things that we definitely have to take a look at. Whenever you purchase with the Fourplex Investment Group, you have two transactions associated with the property acquisition.
In most cases, you've got a construction loan that you close on before breaking ground on the property. You put 25% down and are actually acquiring the property. The builder is using your construction loan to build out your fourplex. When the property is done, there's a refinance that takes place to pay off the construction loan and open up a fixed 20, or 30-year mortgage.
Those are two separate transactions and it's something that we have to take a look at if there's going to be a change in your financials.
We understand that the pre-approval in this situation is unique. Our pre-approval reviews are pretty dynamic and look for trends in the way your income is going. Our preferred lender will ask questions... whether you're self-employed, if you intend to keep the business for a number of years, whether there are any income changes that are coming that you can project out...
It's actually fairly uncommon where the change in circumstances causes an investor to not qualify for their long-term financing upon completion. They are few and far between. We've seen a handful of them and have been able to work through them one way or another.
We'll get the phone call several times each month where an investor mentions they're considering taking a job offer. A lot of times we go and look at the terms and it doesn't affect their ability to qualify at all.
So if changes do come up, just be open with them and communicate with your lender so we can have those discussions. Be open and very straightforward about it and we'll make sure that it won't be too big of an issue for you if it becomes relevant to your situation.