Low income, 200,000 loan?

Question

I'm a first time home buyer I would like to buy a multi unit property... Making about 30,000 a year  have good credit (700) and have saved up enough for a few months of mortgage payment and a 5% downpayment on a 200,000  FHA loan. No debt. I was wondering would banks consider future tenant income for the loan? I can easily afford the mortgage when renting out to family.

Ricardo S. · Answer

Congrats man on saving up that much money on so little income. Here are my thoughts.

NEVER...EVER rent to family or even friends. If you have to evict because they cant pay you'll drive a wedge between your family and friends.

A better idea would be to find a distressed multi family property in a neighborhood that you can see yourself living in for under $155k. Finance it with a FHA 203K loan. This will give you these advantages;

1. Cheaper downpayment (only 3.5%)

2. Renovation costs built into the loan (30k or more). (So your new home will be practically brand new)

3. The market value after all renovations will be more than your loan giving you equity.

Then after living there one year you can refinance and cash out some equity to buy another investment or refinance to a conventional and remove the pmi.

@Jonathan Sanchez

Dan Schwartz · Answer

@Jonathan Sanchez  based on what you shared, yes, you probably can get a loan. Maybe one of the brokers here would help you. If you have 5% saved up $10,000), then I suggest looking at conventional loans. FHA loans have very expensive mortgage insurance attached to them. Look at conventional and FHA side by side to see what's better for you.

If you have no other debts, the DTI I am familiar with for conventional is 43%. That's $1075/mo available for the debt service on your income. A $190,000 loan at 4.5% has a payment of $962.70. You'd have $112.30 left over for taxes, insurance, and PMI. That's probably not enough. You'll have to get a smaller loan.

But seriously, sit down with a banker or mortgage broker and ask them to prequalify you. Before I owned any property, I too thought it was impossible for me to get a mortgage. My dad told me to "just go talk to someone."  I did, and I got qualified. I would have never known if I didn't ask someone.

Note: don't take the max loan someone is willing to offer you. Take what you can afford. No more.

Kevin Izquierdo · Answer

But Im actually on the same boat as you, My debt to income is too high. I was told to find a co signer and ask a local bank for a loan

Kevin Izquierdo · Answer

I dont have the knowledge to amswer your question, but im going to repeat what Jeremy said. Renting to family is a bad idea.

Jeremy Tillotson · Answer

@Jonathan Sanchez just saying renting to family is a BAD idea