Best Financing option when you have enormous student debt

5 Replies

Hi all, I am new to real estate investing. I have been doing a lot of research and I am serious about starting my real estate profile. I have >200,000 in student loan debt because I went to pharmacy school. But I do not want to wait anylonger to find my first investment property. I am looking either for small SFR or multi-family houses in the Utica/Rome/New Hartford area. I have found potential places to look at but I don't know what the best financing option for me would be...to do an FHA loan or try to get a hard money lender. Any thoughts or ideas?

Another central New York resident! I went to school in Camden, New York which is about 30 minutes from Rome.

Like you, I am also someone with student debt who has recently applied for a loan to purchase property. Do you have a full time job? And what is your debt to income ratio? The answers to those questions are more important than the fact you have $200k in student loans. One lender told me that they use the equation below to determine lending eligibility: 

Monthly student loan payment + (potential) monthly mortgage payment + other debts < 45% of your monthly income

I am not lender of any sort, and am simply relaying the information given to me. If you now work as a pharmacist, then you may have the right debt to income ratio to get a mortgage. 

In terms of which mortgage option is best, I would advocate for an FHA loan or the FHA 203(k) rehab loan to take advantage of the 3.5% down payment. However, be mindful of the other requirements and fees including PMI (principle mortgage insurance)

I grew up in Rome! Small world, I went to oriskany though. FHA would only work if I lived in the house though correct? I currently own my own home so this would be a flip to either resell or rent. I wish I could do a cash purchase which is why I have been looking into a hard money lender.

@Megan Serley you're correct about FHA requiring the borrower to live in the property. If you find a MFH where the income will support the loan itself, you'll be able to get financing.