Need Advice Obtaining Mortgage

5 Replies

Help!!!

I am trying to get a mortgage.. $85k max.. originally for investment purposes but circumstances have changed due to a death in the family.

I've tried credit unions, local banks, big banks... no one will approve me without a $60k downpayment due to student loan amounts vs income (debt to income to high). My loans are in deferment until the government decides if they will be forgiven due to school closure. It's been 4 years now with no telling when a decision will be made.

What do I do? I dont want to rent. I want to buy so I can put equity into the house and use for investment later down the road. I have $5k for a down payment, please dont laugh to hard... need some advice.

Go buy a 2-4 unit using an FHA loan. You get to immediately count the rents from the other units, which should help your debt ratio. Hopefully you have enough of a down payment saved up, if not, get a gift from a family member for the remaining amount of the 3.5% down payment you need. Negotiate with the sellers that they pay your closing costs, so the only thing you have to bring to the table is the 3.5% down payment.

Regardless of your student loan debt being in deferment, an FHA loan will count 1% of the outstanding balance as your payment or a payment showing on the credit report whichever is higher?

I hope this helps?

@Melody Stevens You are correct that a lot of banks will not loan due to your high DTI. Here are some suggestions:

- House hack, rent a large house and rent the rooms out to other people. If you are by a college, you can rent two people to a room. With the extra cashflow, save or pay down your debt.

- Have a partner go in on the property with you. Perhaps a family member? A spouse? Use their credit and their income, then perhaps someday refinance and change the name on the title to your name. 

Originally posted by @Ramon Flores :

@Melody Stevens You are correct that a lot of banks will not loan due to your high DTI. Here are some suggestions:

- House hack, rent a large house and rent the rooms out to other people. If you are by a college, you can rent two people to a room. With the extra cashflow, save or pay down your debt.

- Have a partner go in on the property with you. Perhaps a family member? A spouse? Use their credit and their income, then perhaps someday refinance and change the name on the title to your name. 

Good strategy for real life (RL) however lenders, atleast with respect to conventional agency (fannie/freddie/ginnae mae) will not be able to use rental income from non legal units on a 1 unit property in 99% of cases (some limited ones for extenuating circumstances or caretaker who lives with you to take care of you).

In real life you're getting income and yes this is awesome and it helps to cover the payment but from a qualification stand point we'll only be able to use 75% of gross rents if there are legal units. An example would be, a fourplex, borrower lives in one unit, rents other 3 out at 1500. In this example, using a 4plex house hack can generate $1500 X 3 units = 4500 gross income X 75% = 3375 more qualifying income. This income represents roughly 230,000 of purchasing power. 

So how this plays in a real life qualifying example is as follows....

If the Fourplex is 800,000 for example sake, the borrower would only need to bring in sufficient income to qualify for the remainder of the 570,000 from their own sources (job, self employ, other rental cashflow, airbnb, 2nd job, interest note income, K1's from other businesses, etc)