FranLab is getting evicted

[james_s]

I don't think it would make any difference. At least here in Seattle piles of trash, used syringes and feces scattered around ratty tents doesn't seem to slow anything down. When a building is being demolished crews sweep the camp which soon pops up somewhere else nearby. Unfortunately well meaning people trying to advocate for the homeless mostly end up enabling addicts to live like this more so than helping but that's another topic.

[Carl_Smith]

Like I commented on her video:  Google says 70% of all businesses in the US are sole proprietorships.  You can't tell me that none of these business owners qualify for or have any sort of mortgage.  Being a sole proprietor is not an automatic disqualification.

[KL27x]

Cities in general are statistically far less safe than the suburbs and either way there are only a few pockets scattered around the country that I would consider genuinely unsafe to live in.

Not only this, but Philly has to be one of the worst cities for any kind of woman to live in. The street people in Philly are the most aggressive and privileged I have ever encountered. I have seen them follow a 70 yr old lady down the street, within arms reach and yelling so loud you can hear the harrassment from down the block, word for word. If they don't get your money, that won't stop them from marking "their territory" and making you feel unwelcome. And this isn't in the ghetto. It's everywhere there are restaurants and shops and businesses, and especially in the touristy areas.

I can't think of a worst place, other than small pockets of larger cities which are easily avoided and best forgotten. Baltimore might be up there, too, but Philly sure leaves an impression. I have no doubt Fran has friend that make her feel safe, there. But in 99.9% of the country, she wouldn't feel as unsafe to begin with, I imagine.

[Nusa]

Like I commented on her video:  Google says 70% of all businesses in the US are sole proprietorships.  You can't tell me that none of these business owners qualify for or have any sort of mortgage.  Being a sole proprietor is not an automatic disqualification.

For comparison, that's a meaningless stat unless you quantify how many of those actually need to rent a large space in a major metro area similar to Philadelphia. Sole proprietorship is basically everyone who works for themselves, without using separating business and personal assets and liabilities. The bulk of that 70% are probably home-based and consist of a desk, a computer, and maybe some equipment in the garage or business vehicle. Heck, if the neighborhood kid shovels snow for pizza money every year, even that is a sole proprietorship. When I was doing consulting work, I was a sole proprietorship....other than a drawer full of records, I didn't need to buy any business assets at all.

[beanflying]

Like I commented on her video:  Google says 70% of all businesses in the US are sole proprietorships.  You can't tell me that none of these business owners qualify for or have any sort of mortgage.  Being a sole proprietor is not an automatic disqualification.

Sole proprietors worldwide can generally get a loan if they have a good track record and figures to back them. A good mate of mine recently got a 90% loan for a house and has had a sole trading business for 7-8 years as an example but his accountant is a good one and the business has been doing well.

If you are struggling or marginal and a sole proprietor you won't as for a start any sensible bank puts you in a higher risk category. This is an example of where Fran's recent content would make that all the harder.

[EEVblog]

Like I commented on her video:  Google says 70% of all businesses in the US are sole proprietorships.  You can't tell me that none of these business owners qualify for or have any sort of mortgage.  Being a sole proprietor is not an automatic disqualification.

For comparison, that's a meaningless stat unless you quantify how many of those actually need to rent a large space in a major metro area similar to Philadelphia. Sole proprietorship is basically everyone who works for themselves, without using separating business and personal assets and liabilities. The bulk of that 70% are probably home-based and consist of a desk, a computer, and maybe some equipment in the garage or business vehicle. Heck, if the neighborhood kid shovels snow for pizza money every year, even that is a sole proprietorship. When I was doing consulting work, I was a sole proprietorship....other than a drawer full of records, I didn't need to buy any business assets at all.

That's not Carl's point. Fran has made the assertion that she flat out does not qualify for a home loan because she is a sole proprietor.
I agree with Carl, I can't see how that fact alone can be possibly true. There must be a way to get a loan given enough deposit and income.
Fran is not looking for a commercial business space, or a business loan, she's looking for essentially a home loan (or large apartment space) for a space she can live in. The fact that she operates a sole proprietorship from the space is inconsequential.

[EEVblog]

If you are struggling or marginal and a sole proprietor you won't as for a start any sensible bank puts you in a higher risk category. This is an example of where Fran's recent content would make that all the harder.

But what if you had say a 50% deposit? Wouldn't that be a slam dunk for any sensible bank?

[Psi]

If you are struggling or marginal and a sole proprietor you won't as for a start any sensible bank puts you in a higher risk category. This is an example of where Fran's recent content would make that all the harder.

Even if you have plenty of income.
The banks do not like self employed people who get income in tiny amounts but from many sources. Even if they have plenty of total income to service the loan.
They prefer a self employed person who gets paid all their money from doing one or two tasks.

This makes no sense to me, but that's the way they think.
Maybe they are required to investigate and document all the sources of income and can't be bothered looking over 100 separate sources.
Or maybe they don't like 100 little sources coming and going from week to week.
Yeah, it's probably less about the person proving they had plenty of income in the past, and more about the bank knowing their sources of income are static and never changing.
i dunno.

[Carl_Smith]

Like I commented on her video:  Google says 70% of all businesses in the US are sole proprietorships.  You can't tell me that none of these business owners qualify for or have any sort of mortgage.  Being a sole proprietor is not an automatic disqualification.

For comparison, that's a meaningless stat unless you quantify how many of those actually need to rent a large space in a major metro area similar to Philadelphia. Sole proprietorship is basically everyone who works for themselves, without using separating business and personal assets and liabilities. The bulk of that 70% are probably home-based and consist of a desk, a computer, and maybe some equipment in the garage or business vehicle. Heck, if the neighborhood kid shovels snow for pizza money every year, even that is a sole proprietorship. When I was doing consulting work, I was a sole proprietorship....other than a drawer full of records, I didn't need to buy any business assets at all.

You do have a point there but it doesn't totally disprove my point. 

Probably a lot of those sole proprietorships are like you mention, a kid shoveling snow that has support of his parents for a place to live. Or people that run a side business from home but have a "real" job or a spouse with a "real" job that qualifies them for a mortgage on the home they live in.

But Fran was saying that if you are a sole proprietor you can't get any sort of mortgage, even for the home that you are going to put that desk and computer in to run your home based business, which is not true.  A significant portion of those sole proprietors are people that have no other income to qualify for a mortgage.

The problem is not being a sole proprietor.  Probably the problem is not having a regular consistent and reliable stream of income from that business.

[Psi]

The problem is not being a sole proprietor.  Probably the problem is not having a regular consistent and reliable stream of income from that business.

Maybe not reliable, as you can prove reliability by looking at past history.
But definitely regular and consistent is the key issue.
If money comes in randomly and from random sources they wont touch you.

[KL27x]

When the bank loans you the money, they own the property. 50% down is a no brainer. Default on payment, they get the property, they keep your 50% down. And they have to pay only for evicting you and cleaning up the property.

Probably the problem is not having a regular consistent and reliable stream of income from that business.

If she can't get a mortgage with 50% down, I would bet dollars to donuts it is because she has bad personal credit and/or the property is way overpriced to begin with. I don't care if she's a sole proprietor. I live in the US, and I'm a sole proprietor. IME, the bank mainly cares to see 3 things. That your last two months of deposits checks out with the annual income you are claiming, your personal credit history, and your asset to debt ratio, e.g. bank accounts and other loans and credit card balances.

 

[Carl_Smith]

If you are struggling or marginal and a sole proprietor you won't as for a start any sensible bank puts you in a higher risk category. This is an example of where Fran's recent content would make that all the harder.

But what if you had say a 50% deposit? Wouldn't that be a slam dunk for any sensible bank?

I was thinking the exact same thing.  You would think putting 50% down would pretty much guarantee the loan as you can use that 50% as collateral against the other half.   But maybe the banks still worry about how you are going to make payments on the other half.

[beanflying]

If you are struggling or marginal and a sole proprietor you won't as for a start any sensible bank puts you in a higher risk category. This is an example of where Fran's recent content would make that all the harder.

But what if you had say a 50% deposit? Wouldn't that be a slam dunk for any sensible bank?

I was thinking the exact same thing.  You would think putting 50% down would pretty much guarantee the loan as you can use that 50% as collateral against the other half.   But maybe the banks still worry about how you are going to make payments on the other half.

50% of what and if that source of lump money is not your own then that is also a consideration to loan the $. That then Guarantor needs to be part of the loan agreement in most/all cases.

I have been a sole trader and or an unemployable bum for about 20 years so I have had plenty of exposure to banks and how they treat sole traders.

[forrestc]

If you are struggling or marginal and a sole proprietor you won't as for a start any sensible bank puts you in a higher risk category. This is an example of where Fran's recent content would make that all the harder.

But what if you had say a 50% deposit? Wouldn't that be a slam dunk for any sensible bank?

You would think so, wouldn't you?

The problem in the US is that a lot of banks are either extremely risk-averse or are large enough to not care.

If you have a perfect credit score, a "normal" easy-to-sell property, a large down payment, and a lot of wage (not self-employed) income, then things are fairly easy.   The more ways you differ from this the fewer options you have. 

One thing most people don't realize is that a very large percentage of loans (almost all?) are done through an automatic underwriting package which uses verifiable information to come up with an approve/deny based on weighted factors.   There are still manual underwriters out there but they're few and far between.   The automatic underwriters all seem to have 'hard qualification' issues.

For instance:

1) I've attempted to get a loan on a property which had a residence on just over 20 acres (like 20.05).   A lot of lenders won't write on anything over 20 acres.  Even if it was 20.05.   

2) A lot of lenders won't write to anyone who doesn't have wage income (as opposed to self-employed income).

3) A lot of lenders won't write to anyone who has a business on the property.    For example FHA (government guaranteed) loans don't permit loans on property with over 25% of the square footage being dedicated to business or non-residential use.

4) A lot of lenders won't write for anything slightly unique.   I once owned and lived in an old church which had been converted to a residence.   Because it looked like a church, most lenders wouldn't even consider a loan.   Add in the fact that I've pretty much always been self-employed, and financing it and refinancing it was typically a year-long process due to repeated rejections from different lending companies, usually due to the nature of the property, even though there are several properties like this in the neighborhood and they have historically sold very quickly - assuming a buyer can find financing.

5) If you have a business on the property, many home insurance companies won't write an insurance policy.   All lenders require you to have an insurance policy in place.   

6) If you're self-employed, lenders are VERY VERY fussy about proving consistent income which meets their thresholds and rules.   Anything perceived as not long-term is often a disqualification.

Combine more than one of the factors above (and probably others), and you'll find that getting loan is very difficult.  Especially if you don't have a perfect credit score.

My experience has been that down payment actually makes little difference to the lenders.   All they seem to care about is that you have either 20% to not have to pay extra for mortgage insurance, or if you qualify, even less is accepted but with mortgage insurance being charged every month.

[EEVblog]

The problem is not being a sole proprietor.  Probably the problem is not having a regular consistent and reliable stream of income from that business.

And not having found the right broker who can help. There are almost 5000 banks in the US, and this is a list of banks in Pennsylvania:
https://www.usbanklocations.com/pennsylvania-bank-list.htm

[EEVblog]

If you are struggling or marginal and a sole proprietor you won't as for a start any sensible bank puts you in a higher risk category. This is an example of where Fran's recent content would make that all the harder.

But what if you had say a 50% deposit? Wouldn't that be a slam dunk for any sensible bank?

I was thinking the exact same thing.  You would think putting 50% down would pretty much guarantee the loan as you can use that 50% as collateral against the other half.  But maybe the banks still worry about how you are going to make payments on the other half.

Err, that's the point.
The bank owns your property, let's say valued at $200k contract price.
You put down 50% deposit and borrow $100k to buy the place.
You can't make the repayments, the bank can sell the property easily for $100k to recover their costs. Let's say $120k to include any foreclosure costs or whatever.
It's almost zero risk, unless you were completely hopeless at valuing properties, or the value more than halves.
Damn, I'll take that deal every day of the week, seriously, I'll go into the lending business. I'm not kidding. Anyone who wants to give me the title deed to a $200k housing asset to borrow $100k, I'll loan you the $100k no questions asked.

[KL27x]

I was thinking the exact same thing.  You would think putting 50% down would pretty much guarantee the loan as you can use that 50% as collateral against the other half.  But maybe the banks still worry about how you are going to make payments on the other half.

But...
This person can take out a second mortgage with another lender, taking loans/credit on that original 50% down, then fuck off into overspending with no way to repay any of it. The second lender may be able to put a lien against the property.

[Nusa]

I was thinking the exact same thing.  You would think putting 50% down would pretty much guarantee the loan as you can use that 50% as collateral against the other half.  But maybe the banks still worry about how you are going to make payments on the other half.

But...
This person can take out a second mortgage, taking loans/credit on that original 50% down, then fuck off into overspending with no plan to repay any of it.

That is largely irrelevant to the first mortgage holder, since they get paid before the second mortgage holder gets any. That's on whoever gave/authorized the second mortgage.

[Carl_Smith]

I have been a sole trader and or an unemployable bum for about 20 years so I have had plenty of exposure to banks and how they treat sole traders.

In that case you probably have a better view of the situation than I do.  I just have a problem with her attitude that this is an unsolvable problem.

[maginnovision]

I actually had a friend a couple years ago who bought a house and his situation wasn't TOO much different. He made his money working on cars for people. He didn't have a proper business set up but he had a shop and regular customers. When he went to buy his house I helped him with that. The bank basically needed a record of money coming in and money going out going back 2 years. Wasn't quite as simple in the moment with lots of back and forth but that's about what it came down to. He got an FHA loan and only put down 3.5% so I really doubt she can't get a loan.

[EEVblog]

I was thinking the exact same thing.  You would think putting 50% down would pretty much guarantee the loan as you can use that 50% as collateral against the other half.  But maybe the banks still worry about how you are going to make payments on the other half.

But...
This person can take out a second mortgage with another lender, taking loans/credit on that original 50% down, then fuck off into overspending with no way to repay any of it. The second lender may be able to put a lien against the property.

The first lender physically holds the deed, they own it.

[forrestc]

The problem is not being a sole proprietor.  Probably the problem is not having a regular consistent and reliable stream of income from that business.

And not having found the right broker who can help. There are almost 5000 banks in the US, and this is a list of banks in Pennsylvania:
https://www.usbanklocations.com/pennsylvania-bank-list.htm

I agree with finding the correct broker helps.   I finally found a local bank which makes a lot of their money with being a mortgage broker, which has helped greatly with my most recent loans.  They only make money if they can place a note with someone, so they have a LOT of options which they can sell the mortgage to once originated.

Which brings up another point - although there are 5000 banks in the US, very few actually carry their own paper.  Instead, the vast majority of them rely on being able to sell the note to someone else, which is why once you get outside "normal" your options shrink.    In the US, 90% of Mortages are either held or insured by one of the federal loan programs (Fannie Mae, Freddie Mac, Ginnie Mae), so the loans which are to be sold to those programs have to meet their borrowing requirements.   What you find as a result is that a large portion of lenders have a very similar set of lending requirements.   So much so that I can definitely understand why someone who is outside these requirements would feel like they can't get a loan at all.

Which comes back to the whole, yes, finding the right mortgage broker is important once you step outside the norms.

[james_s]

Like I commented on her video:  Google says 70% of all businesses in the US are sole proprietorships.  You can't tell me that none of these business owners qualify for or have any sort of mortgage.  Being a sole proprietor is not an automatic disqualification.

For comparison, that's a meaningless stat unless you quantify how many of those actually need to rent a large space in a major metro area similar to Philadelphia. Sole proprietorship is basically everyone who works for themselves, without using separating business and personal assets and liabilities. The bulk of that 70% are probably home-based and consist of a desk, a computer, and maybe some equipment in the garage or business vehicle. Heck, if the neighborhood kid shovels snow for pizza money every year, even that is a sole proprietorship. When I was doing consulting work, I was a sole proprietorship....other than a drawer full of records, I didn't need to buy any business assets at all.

That's not Carl's point. Fran has made the assertion that she flat out does not qualify for a home loan because she is a sole proprietor.
I agree with Carl, I can't see how that fact alone can be possibly true. There must be a way to get a loan given enough deposit and income.
Fran is not looking for a commercial business space, or a business loan, she's looking for essentially a home loan (or large apartment space) for a space she can live in. The fact that she operates a sole proprietorship from the space is inconsequential.

My mom is a sole proprietor and has a mortgage, it was not easy for her to get qualified but she did. That is the only data point I have, but it is proof enough that it is possible.

[tom66]

Even if you have plenty of income.
The banks do not like self employed people who get income in tiny amounts but from many sources. Even if they have plenty of total income to service the loan.
They prefer a self employed person who gets paid all their money from doing one or two tasks.

This makes no sense to me, but that's the way they think.
Maybe they are required to investigate and document all the sources of income and can't be bothered looking over 100 separate sources.
Or maybe they don't like 100 little sources coming and going from week to week.
Yeah, it's probably less about the person proving they had plenty of income in the past, and more about the bank knowing their sources of income are static and never changing.
i dunno.

This is one reason many managing directors in the UK struggle to get mortgages, even when running £1m+ turnover businesses.
You will want to pay yourself a salary. My boss had the same issue. No one would lend him £300k to buy a house, despite business turnover being 10x that, because he was paying himself in dividends only.
He had to draw down a salary, take the mortgage, and then switch back to dividends. Cost him a bit more in tax, but made the mortgage achievable.

[soldar]

When the bank loans you the money, they own the property. 50% down is a no brainer. Default on payment, they get the property, they keep your 50% down. And they have to pay only for evicting you and cleaning up the property.

This shows no understanding of how banks operate legally. That is not the way things work.

In any case, most banks have no interest in executing mortgages, their interest is in having performing loans which pay their interest regularly. If the bank does not want to foreclose it does not matter if you put 90% down, they are not interested. They want to see ability to pay and meet your obligations.

Go to your local grocery store and tell them you want to leave your gold watch as collateral and come back to pay next week. They can't lose. Still, they will not accept because that is not the business they want to do. Maybe you can pawn the watch elsewhere but not at the grocery store even they might win a watch in exchange for a can of beans.

Most banks are not interested in foreclosures. It is not the business they are looking for and they try to avoid it. Arguing that they are protected is useless because it is not a business they are interested in. They will tell you to go find another lender who might be interested.