Help with getting a mortgage for low income person

11 Replies

Hey guys I need your kind help and expertise!

Here is the story:

I have 90K cash

I'm looking to buy an investment property for cash flow

My credit score is great (above 800)

I don't have any debt

It's the first house I'm buying

Trying to get a mortgage

The problem: my income is low, 25K a year.

In this conditions the banks wouldn't give me a mortgage since they say that my income minus my current rent and other expenses doesn't leave me any cash for a mortgage payment even that I would be renting out the property I'm buying and that would cover the mortgage.

Any ideas how to get a mortgage with those numbers assuming I'm not going for primary house?

Thank you!

Your best bet may be to start by house hacking a 2-4 family. This would remove your rent payment and has the added benefits of getting you more doors and a lower interest rate.

Did you look into any first time home buying programs? I typed "First time home buying programs in Brooklyn" into google and got quite a few results.

A 2-4 family loan is not commercial and the lender will take the income from the other units into consideration but it will still be hard with your lower income. Surviving on 25k/yr anywhere is tough, nearly impossible in NY so a lender is probably wondering how that is possible for you and how you have 90k in cash. And that is why you are getting turned down. 

Hi Peter,

Yes I totally get the mechanism but if I have 90K and getting 80K from the bank at 5% I can buy something for 170K, monthly mortgage is $420, taxes and home insurance around $350 total.

For that kind of house I can easily get $1200, so I don't see any problem with that deal, but still the bank has it's own rules. I don't want to move to the property because I live in Brooklyn and I'm planning to buy somewhere else so it wouldn't be "First time home buying programs". 

The question is, is there anything else available?

@Assaf Kehati One thing to think about, instead of figuring out how to get a mortgage with a low income, focusing on raising your income. There is usually a reason if most lenders won't lend to you.  Probably not the answer you want, but building up your income and personal balance sheet will give you staying power during tough times. Good luck.

Chris

Thanks Chris, 

As self employed I deducted certain things such as home office, business trips, etc. so the income is actually higher, but on the paper it's low.

Originally posted by @Assaf Kehati :

Hi Peter,

Yes I totally get the mechanism but if I have 90K and getting 80K from the bank at 5% I can buy something for 170K, monthly mortgage is $420, taxes and home insurance around $350 total.

For that kind of house I can easily get $1200, so I don't see any problem with that deal, but still the bank has it's own rules. I don't want to move to the property because I live in Brooklyn and I'm planning to buy somewhere else so it wouldn't be "First time home buying programs". 

The question is, is there anything else available?

 if you are not moving into the house, then you are back to square one where your income is not enough to support the mortgage. The benefit of buying a 2-4 family house is that you can move in, and its easier to support the mortgage because you now have no rent payment. you also get more favorable loan terms, which means a lower payment.

Your only option right now is to get with a mortgage broker and see how much you are pre-approved for. With your income, anything will be difficult. If you are unwilling to move, your best bet is to work on increasing your income.

you could probably buy out of state for $90k, but then you cannot refinance to get your cash back out. Leaving all your cash in a property is a great way to lower your return to almost nothing. I also don't think out of state is a great idea for beginners. If I were in your shoes, I would invest in a Vanguard tracking fund (an ETF mutual fund) and focus on increasing my income until I was capable fo securing bank financing.