Buying first house

[Lazar Kocev]

Hi, Im new to Bigger Pockets and I came here reading a book presented by Bigger Pockets, "The book on rental property investing". I want to buy my first house in the next few months so I started reading more books about real estate. My criteria its single family home (3 bed 2 bath) in a decent neigbrhood( maybe foreclosere), around 150 000$, which needs small repair and Im gonna live in it and rent the other 2 rooms to 2 frineds. I have a nice, steady job in a restaurant for a while, really good credit and all I have its money for 20% downpayment. As I said I dont mind small repair on the house so it can apreciate a little after the repairs because Im good in Do it yourself things and i think i can save a lot there. Whats bothering me now its the loan. I dont want to spend all my money on downpayment, but everywhere I read I found out that banks are not willing to aprove a loan with 5% downpayment if a house is a foreclosere or needs some repair done and its not possible to move in right  away. If anyone has similar experience and it dealt with it I would really apreciate your time and response.

Thank you 

[Greg Scott]

Here is an alternate way to go.  It requires more effort and is more complicated, so it may be too much for a first deal.  Still, if you can manage it, you may be better off in the long run.  This is how I have been buying single-family houses.

1) Find a house in terrible condition, deeply discounted because a retail buyer cannot get a conventional loan on the place.  The price should be cheap enough that purchase+rehab is much lower than buying the nice fixed-up one next door.  The 70% rule is a good starting place

2) Get a hard-money loan (or private loan) for purchase and much of the rehab.   Get a reliable contractor to fix up the place as fast as possible.   Hard money loans are expensive, often 10%+ with points up-front, so you don't want to stay in them very long.

3) Once the rehab is done put a conventional mortgage in place.  Be sure to talk with a mortgage broker BEFORE you start this process to know you will qualify.  It would be a huge mistake to get stuck with a hard money loan.

By doing the above, it is possible to have a deal where you have 0%-20% "down payment" instead of 25%.  Moreover, you could wind up with thousands of equity from the start.   Also, because you bought it lower, your cash flow will be better.