Keep Saving or talk to a Lender?

Question

I am looking to get into REI, I was originally looking to save for my first home but quickly realized the my tastes far exceed my budget.  I am now looking to house hack.  My goal is to find a duplex to begin this journey and grow from there. I am currently paying down some debt while also saving.  Should I continue to pay down debt or contact a lender to determine what I qualify for?  Any guidance would be great.

Cooper Raines · Answer

@Lauren Smith Hi Lauren, I don't think that it would hurt for you to talk with a lender. Even if you don't qualify for what you'd hoped, a good lender should be able to help you figure out ways to make yourself a more appealing borrower. Best of luck!

Tyler Sample · Answer

Depending on how much (bad) debt you have and what you are approved for, this may be that rough spot/time to sacrifice for a couple of years in order for you to really start on that financial freedom. So if that means getting an older single family 3bd/2ba (maybe not exactly in your dream neighborhood either) and renting out the other two rooms and still only being able to pay down 75% of the mortgage, I would consider it, I mean, it would make you that much closer to owning a home and almost not having to pay for it, ya know? I'm not far from San Antonio, I used to live in Universal City actually. There are tons of college students and young professionals everywhere you could vet through an application process and get some good tenants in there with you. I would also focus on deciding what expenses you could possibly cut back on. Focus on savings rather than income. Because once you cut expenses and become frugile, that is when the opportunities really start to arise.I hope that helps!

Lauren Smith · Answer

@Stephanie P. Thank you! I would qualify for them, however the numbers tell me I need to keep saving.

Lauren Smith · Answer

@Bryant Belden  Thanks Bryant!! I took your advice and got pre-approved! Yay!!

Bryant Belden · Answer

I agree with Cooper here. Talking with a lender should at the very least provide you with a better idea of how much more you will need to save, and hopefully some other actions to start taking to get better prepared for financing.

Lauren Smith · Answer

@Evan Tom. Thanks for the advice!

Lauren Smith · Answer

@David A Lisowski

Hi David these a such great questions and I was forced to answer them recently.

I looked at my DTI, it is much high that I thought.

I need more for the down payment.

All things considered, now is not the right time for me.

I’m currently exploring other options until I’m in a better financial situation. I appreciate

David A Lisowski · Answer

@Lauren Smith

You have two different things going on here.

Will you be more limited by your down payment and closing costs?

Or will your debt-to-income ratio limit your purchasing power?

If you spent the money saved on down payment and closing costs (and possible reserves), would that be enough for what you want to purchase?

Paying off debt frees up debt-to-income ratio which is a qualifying factor for mortgages. You'll probably be capped at 45% with the new debt.

I can explain more if you'd like.

Evan Tom · Answer

I definitely agree with Tyler in those regards. Figure out what your goals are and strive to hit them. First, analyze what your debts are. Are they high interest debts (6%+), medium interest (4-6%), or low interest (0-4%)? Lenders use a Debt to income ratio to calculate how much money they are willing to let you borrow.

In the event that you have your debts squared away, consider househacking (duplex) OR room rentals. Both are valid options. Different people have different tolerance thresholds. Frame this in a context of sacrificing your comfort and convenience NOW to live a better life in the future.

Good luck!

Evan Tom · Answer

I definitely agree with Tyler in those regards. Figure out what your goals are and strive to hit them. First, analyze what your debts are. Are they high interest debts (6%+), medium interest (4-6%), or low interest (0-4%)? Lenders use a Debt to income ratio to calculate how much money they are willing to let you borrow.

In the event that you have your debts squared away, consider househacking (duplex) OR room rentals. Both are valid options. Different people have different tolerance thresholds. Frame this in a context of sacrificing your comfort and convenience NOW to live a better life in the future.

Good luck!

Keep Saving or talk to a Lender?

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