What would you do?

Question

Hey my Name is Nicholas, I'm running into a problem with financing, little bit of a backstory I've recently turned 19 and have been working in solar sales for the past year and before that I was working at a pizza place. I love real estate and everything about and have been listening to bigger pockets for about 3 years now coming up on 4. I am in Missouri right now staying in cheap hotels for work, I got out here a month or two ago and the plan has been to buy a property, preferably a duplex.

I did pretty well selling solar last year and have saved up some cash to use as a downpayment for the first property. I found a really good duplex that checks all the boxes and its at a great price only 120k, the other side is already rented out for 650 a month. I went and did a walk through and am ready to put in an offer I just cant figure out the financing. I have about 50k in crypto stuff, 21k in a Roth 401k, another 11k in some stocks and 9k in a checking. I also have a 740 and a 760 on credit karma. The problem Im running into is my work history. The lenders I've been talking with don't know if its possible just because I've been doing self employed work for only a year now and they want two, I've thought about a DSCR loan but I don't want to commit mortgage fraud. The seller of the property won't accept government loans as well so a FHA is out the window. I'd rather not ask my parents or family members to co-sign either

So the question is what would you do and recommend in my situation

Bjorn Ahlblad · Answer

Just because a lender says ‘no’ does not mean you wii get the same reaction from another. You may need to approach many more to get a ‘yes’. All the best! Congrats on taking action.

Nicholas Stevenson · Answer

Yes I have been talking to Wells Fargo and rocket mortgage ill definitely check out some mortgage brokers. Yes you are right about the crypto I do plan on selling soon to rotate it into safer investments. Is it smart to have 50% of equity rather then putting 10-20% down and then going to find another property and doing another 10-20%?

JD Martin · Answer

Cash out the Crypto and you'll have almost 50% to put down on the house. That level of LTV ought to let you find a lender if you make enough phone calls.

Wesley I. · Answer

@Nicholas Stevenson

Good suggestions to ask the seller if they can carry the note and talk to other lenders.

Also a reminder there will be tax implications when you cash out on the crypto and that you should consult with your CPA before you sell.

Chris Seveney · Answer

Have you spoken to the seller and said look, I am 19 so I do not ahve 2 years tax history. I can put X down and would you seller finance or lease option the rest for a 12 month period or 24 months so I can have 2 years of work history and then get conventional financing?

Kristine Ann · Answer

Just extrapolating from the fact that you're only 19 years old and already have 60k saved up...Yes, go ahead and put 50% equity in if that's the factor that gets you the loan.  I have a feeling you'll be able to build back your savings pretty quickly.  Leverage is great but if you can't get the loan it doesn't matter.

Personally, if I was living in a hotel I'd want to move more quickly too.  Hotels are very uncomfortable.  Once you have a primary residence, I'd move a a lot slower on the second investment property.  You have plenty of time and you don't want put yourself in a situation where you need cash for repairs or vacancies on multiple properties.

Nicholas Stevenson · Answer

Yeah I agree, I think cashing out the crypto is smart, Isn't I'll keep asking around for other lenders!

Nicholas Stevenson · Answer

Sweet I'll definitely keep asking around, Thank you for the advice!

Kristine Ann · Answer

Have you been going into banks?  If so, don't do that.  Go to a mortgage broker that will shop around for a loan for you.  Let him or her find the loans you qualify for.50k in crypto would make me nervous.  I'd sell it on a good day.  There are huge fluctuations in crypto and you don't want to have to sell on a down day.  I agree you should cash it all out and use it as your down payment to get you to 50% equity.  Heck, sell the stocks too and you'll be at 60% equity.  Leave the Roth alone.

As far as employment and still not being able to get financing, maybe you just want to wait a year?  There will always be another deal.

What would you do?

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