Early 20s Military First-Time Home Buyer- Need Help!
Hello, this is my first post on here ever. I am very excited to have come across this forum.
I am 24 years old, I am in the military and graduated college this past May. Initially, I was going to wait until next year until I had a larger amount of savings to buy a property, but I qualify for the VA loan now. I live and work in New Jersey and I am looking to stay in NJ for the next 3 years or so. I feel like I have many options, but unsure where to start.
My short- term goals (next 3- 5 years) are to own various MFH (duplex or so) and SFH but expand to PA since property taxes are very high in NJ and tenant laws. I am looking to only have one MFH in Jersey which would be the owner-occupant since my job is here and the rest in PA (or is there a better course of action?).
Here is my scenario: I commissioned as an officer back in May and I am eligible for the USAA Career Starter Loan as well.
Loan amount: $25,000
Interest rate: 2.99 %
Term: 60 months
Monthly payment: $449.11
So having the VA loan and this career starter loan I am looking to see what would be the best option for me to take. VA loan calculator says I can qualify for up to $300,000 (not sure how accurate this is). From the research that I have done this is what I have gathered my options to be:
**I live back home now and I am planning on moving in after BOLC - around next December.
Option 1: Buying a cheaper MFH (2 or 3 units) owner-occupant and using the career starter loan to renovate. Live in one unit and rent out the other(s).
Option 2: Buying a cheaper MFH (2 or 3 units) owner-occupant but using the VA Renovation loan? Live in one unit and rent out the other(s).
Option 3: Buying fully tenant-occupied MFH and moving in next December or a year after buying. My understanding is VA loan only requires 2 months' statements as proof of address.
Option 4: Buying a cheaper SFH or MHF and using the career starter loan to fix and flip (don' think VA rehab loan can be used to fix and flip)
Option 5: Traditional house hack- buy a MFH owner-occupant, move-in ready.
So I don't know what I don't know - if that makes sense. Looking at this, and since I can wait some time until I move in, option 3 seems like the best one. I wanted to post this on here since I am extremely new and most likely missing out on a lot of information that I may not know. The career starter loan seems like a great resource and wanted to see the best way to utilize it- if it even benefits me to use it.
What would you suggest is the best course of action given my situation?
Welcome to the BiggerPockets community!
Glad to have you with us.
@Ashley Perez the VA loan house hack is the way to go! Sure you can use the career starter loan in order to update the home, but you could also use it as the downpayment on a rental, or even put it in an index fund and let it compound for years. Ultimately, i think the VA loan house hack is the way to go, and that is exactly what I would do. Buy a 4-plex, and house hack it!
You can qualify for a larger loan with a house hack too because you can use 75% of the gross rental income from the units you don't live in toward your debt-to-income ration (provided you hire a property manager with more than two years experience)!
@Ashley Perez, this depends a lot on your long-term goals. My long term goal is wealth that allows me to retire from the military and not need to work again. Based on my situation, I would suggest you go with option 1 or 2. However, saying that, sometimes folks get into analysis paralysis so if you think that is going to be an issue, the important thing is just getting started. I like the multi-family option for you for sure. Do what you are comfortable with and you know you will be able to get going. Another option is to buy a multi with the VA loan, get settled, and then use the career starter loan to buy a non-owner occupied investment property. Just food for thought. Good luck!!
Originally posted by @David Pere:@Ashley Perez the VA loan house hack is the way to go! Sure you can use the career starter loan in order to update the home, but you could also use it as the downpayment on a rental, or even put it in an index fund and let it compound for years. Ultimately, i think the VA loan house hack is the way to go, and that is exactly what I would do. Buy a 4-plex, and house hack it!
You can qualify for a larger loan with a house hack too because you can use 75% of the gross rental income from the units you don't live in toward your debt-to-income ration (provided you hire a property manager with more than two years experience)!
Thank you! I like this. So what I am thinking of doing is an FHA loan first (so I can qualify for a first-time homeowner 3.5% down) on a rental property and I have until May 2021 to use the career starter loan, then do the VA loan on an owner-occupant property.
My main concern would be my DTI and employment. I just graduated in May and have 7 months of full-time employment. Before this, I had part-time and internships. I was reading that this can be case-by-case since job security, education, etc, is also taken into account. Would it be reasonable to buy a rental property with an FHA loan and then 6 or 7 months later buy a property with a VA loan which would be owner-occupant? Would that be too much debt accumulated? The other debt I have are 20k student loans and 2k left on car. No cc debt.
Originally posted by @Kevin Hunter:@Ashley Perez, this depends a lot on your long-term goals. My long term goal is wealth that allows me to retire from the military and not need to work again. Based on my situation, I would suggest you go with option 1 or 2. However, saying that, sometimes folks get into analysis paralysis so if you think that is going to be an issue, the important thing is just getting started. I like the multi-family option for you for sure. Do what you are comfortable with and you know you will be able to get going. Another option is to buy a multi with the VA loan, get settled, and then use the career starter loan to buy a non-owner occupied investment property. Just food for thought. Good luck!!
Thank you so much! Very insightful, and this is what I plan on doing. Just backward. Using a career starter loan on downpayment first for rental property ( the offer expires May 2021) and then using VA loan for my actual owner-occupied.
@Ashley Perez I would house hack with your VA loan. Find the absolute best real estate agent in the area that specializes in VA loans and tell them exactly what you want!
Congratulations on taking action to start your real estate portfolio, and keep us updated on your journey!
Thank you! I like this. So what I am thinking of doing is an FHA loan first (so I can qualify for a first-time homeowner 3.5% down) on a rental property and I have until May 2021 to use the career starter loan, then do the VA loan on an owner-occupant property.
My main concern would be my DTI and employment. I just graduated in May and have 7 months of full-time employment. Before this, I had part-time and internships. I was reading that this can be case-by-case since job security, education, etc, is also taken into account. Would it be reasonable to buy a rental property with an FHA loan and then 6 or 7 months later buy a property with a VAloan which would be owner-occupant? Would that be too much debt accumulated? The other debt I have are 20k student loans and 2k left on car. No cc debt
Hey Ashley just wanted to make sure you know for an FHA loan you must owner occupy and live in the property for a year also, so you can't legally use it as just a rental property until after a year, and wouldn't be able to qualify for another owner occupied loan in the same year. As far as your employment goes as long as you have 180 days of active duty service you should be good to qualify for a VA loan provided you are active duty.( It might be a little longer for reservist I am not sure on that one) But because you are military and have a guaranteed job for the next couple of years you should be fine. Also speaking on DTI for VA loans they look at another metric called residual income. Basically how much money do you have left over after all your fixed debt expenses to include the mortgage + estimated utilities . It is a pre set amount based upon how many dependents you have and what location you are buying in, and you must exceed that number by at least 20%. I qualified for a VA loan with a 67% DTI because as a single person in my area I needed to have $443 left over after all my expenses. This makes it a lot easier to qualify, because on any other loan program I would not be able to qualify to my knowledge at least. And if you are house hacking a MF it gets even easier, because you can use the rental income to qualify for more or have even more residual income. AND than you can use your career starter loan to put down on a property, improve your current property, combine it with hard money and savings to flip and BRRRR a property you got a lot of options! Good luck on your journey and let us know how it goes.