Negotiations Tactics for First Time Home Loan

7 Replies

I'm sure a question like this has been answered but I wanted to formulate the question on my own.

I have been working since I graduated college and work for a defense contractor and I feel its a job that could take me all the way to retirement (who knows though!). I make a descent middle class wage, fund a 401k, a ROTH IRA, as well as expect social security to come in.

All in all, after doing some finical calculations based on projected earnings and average retirement account/401k growth over the next 30 years, I should actually have a healthy retirement. However, for now, I am 32 years old and all the projections assume I am continually employed, etc.

Now all that said, I do live in San Diego where homes can be $500k at their cheapest, if not $1+M. However, when you look at my projected income through retirement, I should have that money made in my lifetime. 

Is there a way I can negotiate a loan that uses the fact that:

  • I make a consistent wage every 2 weeks
  • I expect to have a IRA + 401k + Social Security that will pay $X/month in retirement
  • I have a Roth IRA which can act as a down payment
  • I am also an FHA candidate.

To create a loan that is:

  • Not tied to exactly 30 years, but could be (maybe) 45 years or a loose end
  • The goal would by that my monthly payments would be about 25% of my income
  • Also, I am interested in quadp-lexes where I could rent out 3 of the units. These can cost $1-2+M I think... so I would definitely need a loan which is creative and accommodating.

Basically, I have been looking into homes and seeing the need for either an outrageously large down-payment or extremely high monthly payments, all while trying to fit in that 30 year window. Can I negotiate beyond 30 years and have the lender take into account my projected retirement income.

(I know this may sound very risky - in all honesty, my goal is to keep my monthly payments reasonable. If I can, I would most likely refinance the loan as soon as I am able to ensure I don't have any payments while I am actually retired)


It is unusual to try to negotiate on home loan.  Usually people just shop around.

If you do find a bank that can provide you a longer amortization, you probably won't like the interest rates.   Why? The 30-year fixed loan that most people get is subsidized by US Gov agencies Freddie and Fannie.   If you get a non-conventional loan, interest rates will almost certainly be higher.

@GregScott - this is why I'd probably re-finance as soon as able, however in Southern California, I don't see any other way to buy property unless I win the lotto or get family to help, somehow... The numbers just won't be there till much later in life.

I just pulled up thr San Diego area and limited my search to under $200k and there are hundreds of properties. I then looked at multis under $500k and 15 came up. 

Buy a property you can afford instead of trying to figure out how to buy a $2 million property.

You should probably talk to a lender and have them walk you through how they come up with the pre approval. Like mentioned if you went outside of gov backed loans you're looking at interest rates that would probably make your payment worse. You can always offset higher payments by putting more down... however to some the security of cash in the bank is more comfortable than saving few hundred mo.

I hear you guys, and yeah parts of San Diego can be less than $500k, true. However, I noticed those "good" deals tend to be in areas I am not interested in. Obviously if there is no wiggle room in these negotiations, then I guess I'll have to suck it up and live in bad areas, but I was thinking maybe there are negotiation techniques that could help. 

@Eric Sender Your situation doesn't sound so different than mine before I began acquiring property, and we both live in the same City.  So, maybe my journey will be helpful.

The first property I bought was a small 2bd/2ba in a gritty, higher crime area of town called North Park.  I had to deal with junkies climbing over the side yard fence so they could shoot up in the dark privacy of that yard.  Today, it's a totally different neighborhood, story, and - of course - value.

Over the following years, there were purchases of SFR, duplex, and triplex properties ... and, 11 years after that first property, a fourplex. As you said, it was in the $1M+ range. In that process, I had to learn the ins-and-outs of getting attractive financing (SUPER important in our high cost market), the motivation and mechanics of lending, P&Ls, how to efficiently operate those rentals, all the maintenance skills, and a bunch of other stuff I didn't anticipate mastering.

Also along the way was the 2007/2008 housing crash to deal with.

My point is just that if there's a fourplex on the market, and you and I are both looking at it, I have a pretty serious advantage over you in getting that property.  Multiply that by X number of other people competing as well.

My journey is by no means the only or best way to go, of course ... but you likely don't know what you don't know by trying to jump straight to that fourplex house-hack.  If you find the opportunity, JUMP ON IT, but be sure you're open to other, more incremental, opportunities as well.

Related to what @Justin R. indicated there are a lot more duplexes than Quads in San Diego. A duplex should cost just a little more than 50% of a quad so they have lower entry costs than quads and typically cash flow better than SFR (home or condo).

My recommendation for newer investors house hacking is a self-managed detached duplex referring to yourself as the property manager. It provides you the advantages of a SFR and the advantage of a duplex.

SFR advantages: own space including yard. Not too close to tenant.

Duplex advantage: typically better cash flow than SFR. learn the ropes with close proximity to the rental.

Good luck

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