First time home owner creative financing strategy??

Question

I'm new to the world of investing and I would love to house hack my first property. I’m curious if I would be able to qualify for FHA loan(ideally) or any loan without a current job. I know that probably sounds crazy but I recently resigned from my job because I was miserable like SUPER miserable.  I have a sizable down payment and cash reserves just sitting in my savings account. However, I’m in no rush to find another W2 job at the moment unless that is the only option as I want to start pursuing real estate. I feel like there are people who are getting financing without verified income (without a business of self employed income) out there but this all could be in my mind also lol. Do I need to simply take on another W2 job just so I can show income that would allow me to qualify for financing?. I believe I read somewhere that if I put 25% down then I don’t need to show proof of income, and if this is correct is there a required cash reserve needed after the down payment in order to qualify. I live in Southern California (Anaheim) any recommendations/ referrals are welcomed. Thank you.

Rahnesha White · Answer

@Ryan Taylor

@Kyle S.

@Armando Fernandez

@James R Dean

@Mitch Larrivee

@Lindsey Johnson

@Chris Tarpey

@Pego Jean-Paul

Great insight I will start looking into these suggestions super appreciative for all the responses!

Kyle S. · Answer

I'm not sure on this but you might be able to do it if you had a co-signer (like parents or something). That might be easiest way to where you still personally get a loan.  If you got the loan by yourself even if you got another job I believe you would have to have that job for 2 years to qualify. I would try the co-signer route if you have someone that has a good job that will do that for you.

Also, then if you did FHA think they have a program that even covers the 3.5% down payment think it's called payment assistance then you can use the cash reserves to survive until you start bringing in income from a new job or what not. If I was in your shoes think this is the route, I would take. Good luck!

Ryan Taylor · Answer

Lot of great ideas in this thread...however...if you do decide that you need to get back in the W2 world to buy conventionally...sounds like you dont, cant blame you...dont forget...in order to use that new W2 as a qualifying factor...it needs to be in the same line of work...or your pushing the reset button and need 2yrs history...DSCR might be a viable option...depending on factors of the property income...partners might also be the way to go...good luck with this 🤙

Kyle S. · Answer

Also, a great YouTube channel on this is Lili Thompson's. She has a series on her first house hack that gives tons of ideas on this as she didn't have a job yet and was just out of college. Might give you some more ideas.

Armando Fernandez · Answer

Hey Rahnesha, I too am sorry about your past experience with your W2 job. You are correct, you are able to purchase with a non-QM program called DSCR which requires no proof of income. The down payment on this program ranges from 25%-35% depending on your credit score and you qualify based off the potential rental income from the property itself. This can be perfect for you if you have the funds available, but if you want to go the FHA route then yes you would have to pick up a W2 job and be able to show some income to qualify with. If you have any questions feel free to message me and i'll be happy to go further into detail.

James R Dean · Answer

@Rahnesha White One way I was thinking is to get a mortgage backer. Someone with enough funds in a 401k or stocks that can back your loan. They won't need to pay out anything if you do what you think you should be able to do, but it gives the bank peace knowing it is covered. It's called "sponsoring"  the loan.

Mitch Larrivee · Answer

You need income to prove you can pay the loan. Even if you had cash on hand to pay the entire loan you still need income (according to my mortgage broker anyway).

You can try for other methods.. try making offers asking for seller financing. You'll be making a lot of offers but this is probably your best bet. There's also hard money but that's usually short term more designed for rehab projects.

I'm following this thread in case a different creative financing method pops up. Thanks for asking and best of luck!

Lindsey Johnson · Answer

@Rahnesha White I am sorry to hear about the W2 situation... but sometimes a bad situation is the kick in the pants you need to make a real change! Real estate is by far the best tool to create the change you hope for. So you're in the right place.

Socal is a tough market to crack into, but I actually think that with your strong down payment you would be able to make some moves. You will just need to add creativity in the place of your W2. You could use hard money, add value, and refinance. You could also purchase with a partner jointly where you bring the down payment, they hold the note, and you all split expenses and income. There are plenty of people on here who have time, deals, and expertise, but not enough money to do it themselves. You might be the missing link they are looking for and vice versa.

You could also get a W2 and be more traditional... but if you're anything like me you don't want to wait for all that to sort out. Let's get creative and make moves now! You got this.

Feel free to reach out with any additional questions you may have.

Lindsey

Chris Tarpey · Answer

Hmm.. to my knowledge to qualify for most loan products you will need to show proof of income.

Your title says creative financing, perhaps that may be the best route to go? Owner financing and subject to are probably the best ways to get into real estate without worrying about bank requirements and W2. You can use your savings/OPM to acquire and fix/rent/sell these deals?

Pego Jean-Paul · Answer

I am sorry about the crappy w2 job. I have not heard that you do not have to show income when you pay 25% of a loan. I am not a loan officer but you would have to prove that you can make future payments on that loan. If you decided to start your own business, it may take a while like 1-2 years of income to use during your loan process. I would suggest to reach out to a lender and see what steps you need to take to purchase a home to house hack. It only usual takes an hour of submitting paperwork and a conversation with a lender to make up a plan.

First time home owner creative financing strategy??

Most Popular Reply