Young Beginning Investor In Need of a Creative Lenders Advice

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Young Beginning Investor In Need of a Creative Lenders Advice

Jonah White
Milwaukee, WI · Member since 2017 · 4 posts · 1 vote

I've been doing everything I can over the last two years of my life to prepare me to buy my first property this year in 2018. From the day I turned 18 I began creating credit for myself to make this happen. My short term goal is to purchase a duplex and house hack it for the first year until I'm able to purchase another next year. Over the last year I have saved the cash for a down payment, have been reading plenty books and articles, listening to countless podcasts, and have finally started reaching out and creating connections with other local investors. I'm know that I'm ready to buy. I know that this is the next big step in becoming financially independent. 

The current issue I keep running into is that I work a base pay (12/hr) + commissioned (avg 8/hr) job the bank is requesting a two year employment history. I currently have a year and a half total with the same company. The Friday I graduated from high school the following Monday I was already working full time in sales, so I could get started as soon as possible. 

My question is what can I do to get my first deal funded? I have excellent credit, 10K in cash saved and $0 in debt. I'm not wanting to buy a whole lot of house, only about $100,000 or possibly less for my first deal. 

Is there a way to just use my base pay of $12/hr to qualify now?

Would one and a half years of employment history be enough to use just the base pay of $12/hr? If not, could I use the case of being in high school for the other 6 months of that?

What can I do to get this ball rolling now?

Is my only option to wait until I have two years of history?

I'm getting itchy to pull the trigger and invest. I've spoken with a few lenders locally and I've noticed that they've had less of an interest in helping me when they find out that I'm 19, don't have 2 years of history with the commission, and don't want to give them my social to begin qualification. I feel stuck and don't know where to go from here to get this going. Any advice is gratefully appreciated. Please let me know if additional clarification on anything is needed.

I'm in Milwaukee, WI.

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Pat Parrillo
Realtor · Milwaukee, WI · Member since 2014 · 147 posts · 73 votes
8y

Jonah, great to hear you're on the path to getting started in the exciting venture of real estate investing. Sounds like you're doing most of the right leg work to get started. 

You mentioned you don't want to give the banks your SSN to start the process. Is there a reason you don't want to provide them with your SSN? You can ask that they do a "soft check" which will get the process started and won't affect your credit score like a "hard check" would. 

 Without the bank being able to perform any pre-qualification with a credit check, or soft credit check, you may be at a stand still. I want to help anyway possible and I think one of the first questions you can ask the lenders is if it's a hard or soft credit check and they can give you an answer on where you stand. As for 1.5 years vs 2 years of employment you can either have a family member or someone co-sign, as it sounds like you're very responsible and you may have friends or family willing to vouch for you. Also keep in mind you may not find the property that's right for you in the next 6 months either, no guarantee, especially in this competitive market. So it may be worth staring to learn and do your due diligence about they type property and neighborhoods you want to invest in no matter what the lenders say as even if the worst case scenario is that the banks say you need 2 years of employment so that in the meantime you can get to know where you want to invest and what a good deal looks like and in 6 months you'll be able to pull the trigger right away even if you have to wait for the 2 years of employment to take effect. 

Keep educating yourself and making connections and don't let yourself or the lenders stand in the way of your success. Keep contacting different lenders and you may be pleasantly surprised at the lenders responses once you provide the information their requesting. Best wishes! 

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  • Justin Marshall
    Real Estate Agent · Ankeny IA · Member since 2015 · 89 posts · 34 votes
    8y

    If you have never used any bank local or nationally for a loan how do you expect to have any repor with them?  Starting is the hardest part and every bank you go to will want to run your credit.  If you have had the same job since high school I'm going to assume that you have direct deposit as well as a savings account somewhere.  I would start with that institute and let them run your credit.  Have them get a pre-approval going for when you find a deal.  Beings that its your first deal and you are planning on being owner occupied you should be running into the same type of lending from most any bank.  3-3.5% down 3.75-4.75% interest on a 30 yr fixed term.  Once you move past the owner occupied I would say is when the game changes and you will be looking for a bank that will lend more on the property and risks involved beings it will be a true investment from the banks perspective.  If you cant find a lender currently wait out the 6 months and see if you can buy something on contract currently and then refinance it with a bank in 6-8 months or even a year.  You will pay a little more but it will give you some experience as a home owner as well as land lord.  Good luck hope this helps.

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  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    8y

    @Jonah White  Sounds like you are ready to pull the trigger. This is easier than it might look to you right now. Banks are very different and they have very different programs. Let along state and gov sponsored programs you can use. Your experience is like going into one store to buy a great pair of yeans and they dont have your size. Let me check with my lenders and PM you.

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  • Pat Parrillo
    Realtor · Milwaukee, WI · Member since 2014 · 147 posts · 73 votes
    8y

    Jonah, great to hear you're on the path to getting started in the exciting venture of real estate investing. Sounds like you're doing most of the right leg work to get started. 

    You mentioned you don't want to give the banks your SSN to start the process. Is there a reason you don't want to provide them with your SSN? You can ask that they do a "soft check" which will get the process started and won't affect your credit score like a "hard check" would. 

     Without the bank being able to perform any pre-qualification with a credit check, or soft credit check, you may be at a stand still. I want to help anyway possible and I think one of the first questions you can ask the lenders is if it's a hard or soft credit check and they can give you an answer on where you stand. As for 1.5 years vs 2 years of employment you can either have a family member or someone co-sign, as it sounds like you're very responsible and you may have friends or family willing to vouch for you. Also keep in mind you may not find the property that's right for you in the next 6 months either, no guarantee, especially in this competitive market. So it may be worth staring to learn and do your due diligence about they type property and neighborhoods you want to invest in no matter what the lenders say as even if the worst case scenario is that the banks say you need 2 years of employment so that in the meantime you can get to know where you want to invest and what a good deal looks like and in 6 months you'll be able to pull the trigger right away even if you have to wait for the 2 years of employment to take effect. 

    Keep educating yourself and making connections and don't let yourself or the lenders stand in the way of your success. Keep contacting different lenders and you may be pleasantly surprised at the lenders responses once you provide the information their requesting. Best wishes! 

    2Reply
  • Jonah White
    OP
    Milwaukee, WI · Member since 2017 · 4 posts · 1 vote
    8y

    @Justin Marshall 

    To clarify why I don't want to run my credit yet -

    When I first turned 18 I went to a car dealership to purchase a car, of course just starting out with no credit they ran my credit over 35 times with different lenders. I learned a valuable lesson at an early age on this one. Every time I've had my credit ran since it's dropped nearly 20 points. I've been hesitant to run my credit for anything to say the least, considering that I've had to take a 500 beginning score to a 700+ score in less than two years with no history.

    I initially started with my primary bank. After 3 minutes speaking with someone they asked for my social over the phone. 5 minutes later, when I asked the questions I needed to, I found out that I wouldn't be able to qualify yet and she wanted me to comeback in a year. I don't think it would have made sense to have them pull my credit at that time. This is my problem with the lenders I've talked to. If I can take 10 minutes to explain my situation and the lender says everything looks doable then I'd have no problem giving out the social. 

    Purchasing something on contract isn't something that I've looked into a lot. It's a great recommendation and something you've gotten me to consider. I'll be sure to do some research on the subject. Thank you for the help! 

    0Reply
  • Jonah White
    OP
    Milwaukee, WI · Member since 2017 · 4 posts · 1 vote
    8y

    @Pat Parrillo A lot of great and constructive information in your reply, thank you for that! I often forget that soft credit pulls are a thing. It'll definitely be a question that I add when talking with potential lenders. As you pointed out maybe taking the next couple of months to learn even more about this venture would be beneficial if it was something that had to happen. Thank you again for the motivating message. You've given some great insight!

    1Reply
  • Aaron Mikottis
    Architect · Joliet, IL · Member since 2015 · 207 posts · 119 votes
    8y

    It may be possible to get your first deal with seller financing or you can partner with somebody with cash.... Remember that banks are just 1 way to close on your first investment. 

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