What are some mortgage loans that I could potentially qualify for with a small income? So i have an awesome lender helping me out but I was told I could only potentially get approved for mid $200,000! My income of $3000 is stopping me from getting a loan for more. I have a credit score of 718. And because LA market is so high is there any loans out there that could help me get a potential mortgage that’s in the $400,000?
I will have roommates but only I and possible 1 friend will be on the loan together. If that could help to qualify for more. Thank you!
@Theresa Harris yes it’s 36k a year and I have been looking into cheaper areas. But for loan approval for more is it not possible? Especially if I have a decent down deposit I saved up?
Most banks will cap the amount you can borrow based on your debt to income ratio. They don't care how much you have saved as long as you have enough for the down payment.
Do you have any other debt (car loan, student loans, credit card)? This will impact how much they will loan you.
The more money you have saved for the house, the more house you can buy, but not the larger mortgage. Assuming you are not living in the house, the $200K mortgage and $40K down payment buys you a $240K house. Now if you had $100K saved up, you could buy a $300K house ($200K mortgage and $100K of your money. You also need to keep some money for closing costs and unexpected expenses (what if you can't rent it right away, what if something breaks). The more you save, the more you can buy because it is added on top of the $200K mortgage and your down payment.
I'm going to guess that is $36K per year. Try increasing your income, or looking elsewhere. In expensive areas, some people buy rentals in a nearby, less expensive town and rent those out. It allows you to get into the market and earn some extra money.
@Theresa Harris yes it’s 36k a year and I have been looking into cheaper areas. But for loan approval for more is it not possible? Especially if I have a decent down deposit I saved up?
@Theresa Harris yes it’s 36k a year and I have been looking into cheaper areas. But for loan approval for more is it not possible? Especially if I have a decent down deposit I saved up?
Most banks will cap the amount you can borrow based on your debt to income ratio. They don't care how much you have saved as long as you have enough for the down payment.
Do you have any other debt (car loan, student loans, credit card)? This will impact how much they will loan you.
The more money you have saved for the house, the more house you can buy, but not the larger mortgage. Assuming you are not living in the house, the $200K mortgage and $40K down payment buys you a $240K house. Now if you had $100K saved up, you could buy a $300K house ($200K mortgage and $100K of your money. You also need to keep some money for closing costs and unexpected expenses (what if you can't rent it right away, what if something breaks). The more you save, the more you can buy because it is added on top of the $200K mortgage and your down payment.
@Theresa Harris Thank you! Makes sense. I've got my debt to income very low to a $500 a month on debt that needs to be paid and I'm just wondering if this will be the same with some programs out there like NACA and other lenders that help with low income
How much is the actual debt though. $500 a month could be regular payments or minimum payments (based on your savings, I am guessing it isn't the latter). I would start by looking at your debt and how much interest you are paying on that. Also talk to your loan officer and ask how much you could borrow if you had no debt.
Pretty much you are stuck with any conforming loan. One key sticking point is showing that you can pay back the loan which requires you to show income. $200k on a $36k annual income is pretty good to begin with. Get yourself an amortization table. At 3% 30yr, its about $425/mon in PI for $100k in loan. The system scales. So, if you have a $200k loan its $850/mo.
So, you need to decrease your other debts and/or increase your income.
Lender · Frisco, TX · Member since 2019 · 546 posts · 270 votes
5y
You may need to look into an Investor Cash Flow Qualification loan... it looks at the rental income for the property in relation to the PITI. Doesn't look at personal income at all
Gilbert, AZ · Member since 2020 · 14 posts · 4 votes
5y
@Elise Marquette Are you able to assist in AZ? Would you also be able to provide more information about this if you are? I’m looking to add another unit very soon!
Every side gig, second job, raise bonus and overtime for the next 24 months will be critical. Google “Ramit Sethi negotiate raise” and “briefcase method”. Important will be to keep income on paper as banks can’t qualify you with off books income.
@Kris H. Yea exactly. I do have a small business I own but I don’t really draw money from it. Unless I really needed to for something so I know I can’t show that unless I consistently draw from it to pay myself. I’m looking in partnering with someone
What sort of legal structure is your small business? Unless you have a C Corp, you don't need to "pay" yourself a salary to show income. Every other business structure is a pass-through entity so whatever your profit that you show on SchC is your profit, ie. income.
@David M. I’ve have it under sole proprietor! I don’t make much from it to make a big difference but I would pull out from it just for the down deposit potentially
Well, I don't know how you are doing your taxes or reporting it at all, but if would be on your SchC as part of your return. Its not the amount of money that you pull from it, but the effective profit that is reportedly yearly. If you have already obtained a solid pre-approval, then they should already have your tax return and taken it into account.
Rental Property Investor · Watertown, MA · Member since 2019 · 14 posts · 8 votes
5y
@Christian Kama
If you have a sizable savings, which it sounds like you do, I would throw it at your debt so you don’t have that $500 a month debt payment and then your debt-to-income ratio looks better already and congrats you are now debt free 🍻 You can now focus that previous $500 towards restoring your down payment balance, have a better loan terms and crush it on your first deal with no debt hanging over your head!
By the way, lenders will tell you that they will only lend you a mortgage amount where the payment is a certain percentage of your income. For me recently, a lender gave me 41% was their max loan payment to income ratio. So if you make 3,000 per month, then the most your mortgage payment would be is $1,230.. and honestly that is OK because figure they are trying to protect themselves but I wouldn’t want a fixed payment of a higher percentage either on my end. But that’s just me.. good luck brother!
@Alan McDonald Hey thank you so much!! Yea I’ve recently paid off $15,000 of debt to clear up my debt to income ratio and I’m still working on it! Thank you that does help with understanding it a lot 👌🏽
@Brett Tvenge enlighten me on my foolishness then? Why not because I’ve heard a lot of podcast from bigger pockets themselves that it’s a good starting option to consider. Plus he’s like my brother
Investor · Fresno, CA · Member since 2020 · 25 posts · 10 votes
5y
@Christian Kama I have a personal banker I use and he has a lending channel. He will look at your numbers and tell you if he can do a deal through one of his capital partners. If they don’t work he can give some options. I just requested to connect with you so message me if you are interested.