Is it possible to get a mortgage?

Question

Hey everyone,

I have met with several Real Estate agents and they have all said the first thing I need to do is check my financing and see what I will be able to afford before buying an investment property. Here are the circumstances:

I am only 20 years old.
I work part time (17-20 hours a week) while going to ASU so I only make say $15,000 a year.
I have had 2 credit cards for 2.5 years and have never missed a payment so I am assuming I have good credit.
I have had a good amount of money in the bank (Certificate of Deposit Accounts) for about a year.

Could I get a mortgage? Or since I only make $15K a year is it not possible?

Jim Gordon · Answer

You did not say what kind of investing you are looking at doing. I work with lenders and most will allow 75% of the rental income to be used as income. They adjust to 75% to cover vacancy and repairs. If you find a good cashflow property and have adaquate cash reserves (these will vary with the lender) you may be able to get a mortgage.

If you are looking to buy fixer uppers and rehab them the only way is a hard money lender and they will want to look at the LTV of the property and your track record not your credit score.

N/A N/A · Answer

My brother goes to grad school with no job and he got a higher mortgage then I did (with a ful-time)...Just accept to pay a higher then normal interest rate or have you parents co-sign...

Ryan Webber · Answer

Wow, noobdog those are some great questions.

First, you are right.  Wholesaling is absolutely a numbers game.  A wholesaler will make a lot of offers, but that's true for ANY investor who is serious about buying good deals.

I remember reading somewhere in Robert Kiyosaki's material that you will look at 100 possible deals to buy 1, and I completely agree.  I prescreen 90%+ of my possibles and find out before I make an offer that they are not deals, and I still only have about 1 out of 10 offers accepted.  That's about 1 in a 100.   :D

Now in reference to whether I am targeting specific houses or not, I would say I do both.  I am in the business of finding one of two things.  Either a motivated seller and/or a distressed property.  I target any and every property that I believe has one or both of these.  All of my marketing/searching/researching is focused around finding either a motivated seller and/or a distressed property.

If I see an abandoned/vacant house, I get very specific with finding that owner and making an offer.  Every month, I target specifically every foreclosure that might possibly be a deal and focus on contacting the owner by phone, mail, and/or a door knock.

Now on the other side, most of my marketing/advertizing is geared to generate general calls from either motivated sellers and/or distressed property owners, but obviously I'm not targeting a specific house.  I'm just generating leads.

In reference to techniques for a buyers list.  Here's a couple ideas I posted on building your investor buyer network:
http://forums.biggerpockets.com/viewtopic.php?p=16107&highlight=#16107

Tom McGiveron · Answer

ryan,

now with the wholesaling, i mean, isn't it a numbers game?  you have to make a lot of offers to actually nail a few deals?  i mean, you're not going out there and targeting a house here and there and putting in offers this way, or are you?

additionally, what about finding buyers?  could you expand on your techniques for finding buyers, or explain a little about your network, i.e. selling to other investors...

Ryan Webber · Answer

Well noobdog, you CAN jump off the Empire State Building and live, but you need the right tools to do it (i.e. a parachute).  lol.  Sorry, I'm a skydiver so I had to say it.  :joker:

Noobdog is absolutely right.  You don't have to have good credit to invest.  It helps, and I would highly recommend to anyone looking at investing long term to do everything you can to improve your credit, but there are multiple strategies to start investing and making money without good credit.  Noobdog touched on several good ones.  I'd also through in there hard money lenders.  Many hard money lenders will overlook your credit problems (some don't even care about your credit) if you are buying the property at a deep enough discount.

I am very partial to wholesaling for the person just getting started who doesn't have a lot of capital or experience.  It has the lowest risk with the highest return that I have seen in real estate.  I am biased, though, because I specialize in wholesaling.  :D

Tom McGiveron · Answer

first, MG, anything is possible..within reason (i.e. you can't jump off the empire state bldg and live...duh), but most things within any reach of being possible - are!

there are so many ways to buy real estate.  you do not need bank financing.  you do not need credit.  although it helps.  after 2.5 years of having a CC with no late payments....mmmm...you're young so your credit is probably okay.  building good/great credit takes TIME.

and remember all credit is is a running tab of how you pay your debts.  the whole idea behind "good credit" has been pumped into the human psyche so that bankers and bank owners can get rich!!  i attribute the dramatic increases in prices of items to this idea and utter acceptance of "credit".  You can't buy a new car today for less than 12,000.  who has 12k to buy a car?  most people, no matter what the price, FINANCE, many different purchases.

focus on your MONEY.  focus on how much MONEY you can create for yourself.  you MONEY management skills will pay off in spades.  pay attention to things like APR and how much interest you pay for things you buy.  don't buy things that give you "bad" credit...like a depreciating vehicle.  if you can avoid such purchases, then do.

as far as making real estate purchases - the options are many:
sellers can finance the purchase, partnering with someone else, partnering with a mentor for your first few deals, borrowing from relatives/friends, having relatives GIVE you money with no return payment expected, Lease Options, land contracts, short sales, flipping [wholesaling].

now you can't just jump into all this.  it takes time and a focused effort to get into this.  but here's the catch!

if you honestly focus and believe you can become a successful real estate investor/businessman - you will.  if you do the work and do not shy away or become frustrated with the amount of things you must learn and do not become too afraid to get involved, you'll be able to purchase investment properties.

now, you may screw up.  there's the other catch.  don't be fooled into thinking that it is easy or that you will not actually screw something up.  but it is your ability to use your rational mind to figure solutions for what ever the obstacles are that can and will present themselves.

good luck and get started...