Low Income, High Loan - Will It Work

4 Replies

We have applied with 2 different lenders waiting to hear back from them but instead of harassing them for updates, Id like to see what you guys think.

I'm working with my retired dad to attempt to get him into a 4plex for extra income. His retired income is $34k, no debt. We are attempting to get a loan of around $350k with using the rental income $750 - $1000 per unit which have leases.

Taxes $6000 - $7000

Insurance $1800

Does this sound like a situation that will work?

For a lender, this might be squeezing it kind of tight. It all depends on the bank and your relationship with them. What I would suggest is if neither of these are willing to loan, move on to another one. Someone will say yes because the numbers are there. 

Another option would be a co-signer. Have you considered that?

Do it as an FHA loan with 3.5% down, counting the existing rents on the other 3 units. I crunched the numbers and he should end up with a 49% debt ratio. You can go up to 56.9% so he should be okay with that debt ratio. He needs to show enough in rents to cover the whole mortgage payment. Its going to be close on that part?

Negotiate that the seller pays your closing costs. Buy down the rate to lower the payment and make sure the payment is less than the rents. You will be required to have money as reserves. Its a squeaker, but its do-able with the correct adjustments.

I hope this helps?

Originally posted by @Kevin Romines :

Do it as an FHA loan with 3.5% down, counting the existing rents on the other 3 units. I crunched the numbers and he should end up with a 49% debt ratio. You can go up to 56.9% so he should be okay with that debt ratio. He needs to show enough in rents to cover the whole mortgage payment. Its going to be close on that part?

Negotiate that the seller pays your closing costs. Buy down the rate to lower the payment and make sure the payment is less than the rents. You will be required to have money as reserves. Its a squeaker, but its do-able with the correct adjustments.

I hope this helps?

 Yes this helps thanks. Many things I read say just apply and try it. Great to see some reasoning on why this could possibly be a success.

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