Mortgage Options for High Income, Good Credit, Small Down Payment

[Anthony Lacko]

Hi All!

A little background... 

I have been dreaming of investing in real estate for a few years now. Initially, I want to purchase a home for myself first (currently renting), then look into a condo or small SFH to update and rent out. I am an above average DIYer. I paid my way through college by apprenticing plumbing and carpentry. I am also a licensed mechanical engineer. I would like to add some sweat equity to the properties.

My ultimate goal is to own a portfolio of properties that cash flow enough money where I can quit my full time job and go contracting part time throughout the year. I like my job, but I want to pick what, when, and where I work. 

I live in San Diego, CA and my household W2 income is around $150k a year (although most of the last decade it has been just shy of $100k). Last time I checked my credit score it was 790. Since graduating, I got married, paid off the wedding, my student loans, saved up an emergency fund, and was very close to having a nice down payment for my first house.

The issue...

A few years ago I had a medical issue that basically wiped out my savings besides retirement accounts. I am grateful everything is going good now, but I am still a little bitter that all that work saving disappeared virtually overnight. 

I was simply going to bite the bullet and just start saving again, but there are three things happening now that motivate me to explore other options: inflation/rates/policy/etc., FOMO pricing in SD (houses near me are $750k to start), and my first bundle of joy is due in October :)

With no down payment, I am looking for advice on how I should pivot my plans - for both purchasing my primary residence and starting my real estate investment journey! I am hoping there are some creative solutions I just don't know about. 

Thanks!

 

[Dan H.]

Your salary is pretty good and your credit score is pretty good. I fail to see it as a big problem. FHA loan at 96.5% LTV. Save up 3.5% (plus closing costs) or make an offer that will provide a rebate at closing. it does not seem that hard at your household salary

Consider Pivot from your planned two step approach to purchasing a detached duplex with each unit having its own yard space.  A percentage of the rent from the other unit will apply to qualify for the loan increasing the value of the property you can qualify for.   

5% appreciation of $800k is more than 5% of $700k.  In addition, the tenant is paying down some of your equity.  

your challenge seems easily overcome without great sacrifice. Your household income is almost double the median San Diego household income. It should not be a great challenge to save the 3.5% required for an FHA loan.

Good luck