Getting Started: Personal Mortgage vs No Mortgage History

3 Replies

I've landed an amazing job that pays a higher salary than I previously made while on active duty in the military and it has motivated me to begin my real estate investing journey, but I am still in the information gathering stages and I keep circling back to a thought that I haven't been able to shake. I also have an untapped VA Home Loan that I am still thinking about how I plan to use.

I understand the value (from a credit perspective) of having personal mortgage debt and I currently have very good credit. In my current situation, I am renting in Northern Virginia and have never owned a home. My question is, for a new prospective investor in real estate, would it be beneficial to begin with no personal mortgage vs should I have personal mortgage history and then begin real estate investing?

To take some of the ambiguity out of the question, my curiosity stems from a desire to understand from a taxation/strategy perspective, which situation makes the most sense. I don't have a lot of debt, and my monthly income allows for me to set aside an average of about $3500-$4,000 a month in excess cash.

I am a planner and an over analyzer at times and part of me wants to move from my rental situation to begin paying a lower price for a home I would own, and the other part feels comfortable renting while considering real estate investment. I'd like to get some insight on a smart way to do things considering my situation to avoid any missteps.

@Brandon Small I've always looked at it as if I planned on living in the same location for more than 2 years, and I could find a place to buy that was cheaper than what I am paying for rent I do it. That's my personal take, not sure that would work for everyone. I also try to find homes that need a little bit of work, doing the repairs myself, and then selling when I leave. I've been pretty lucky because that plan relies on speculation, but its worked for me a couple times. I think you could probably swing both. Find a place for $2K a month and put away that other $1.5K in savings towards your investments. VA is really nice because you don't have to put any money down. Good luck.

@Brandon Small - I agree with @Brian Mcmenamin that if you’ll be there long enough go ahead and buy. On these forums and podcasts you’ll find those who are on both sides of the question. So it really comes down to a personal choice. Now, like Brian mentioned you might incorporate a purchase into your flipping strategy. I’ve heard of those who buy a flip, fix it up, and then sell it every 1-3 years and repeat the process. 

As far as having or not having a mortgage history I’m sure some others with more experience will comment but it’s a yes and no answer. If you find a seller finance deal your personal credit probably won’t come into play (but it might). Other types of loans look more at your credit score which partly includes having a variety of credit accounts.

I look forward to seeing what others think as well. Good question!

If your familial situation will allow it, why not buy a 4 plex with your VA eligibility and live in one unit? You will have the best of both worlds! Your VA loan can be used with a 1-4 unit.