I have money for a down payment but poor W2
New to Real Estate · Nashville · Member since 2023 · 6 posts · 2 votes
I have money for a down payment but poor W2
Most Popular Reply
Cory J ThorntonBusiness Member
Real Estate Agent · Raleigh, NC · Member since 2021 · 240 posts · 281 votes@Zane Landeck - Please take the following at face value. Some of this may apply, some of this may not, but hopefully something will prove helpful. You have $30k in savings, which is an awesome step in the right direction!
- The biggest thing you can do is increase your income. Every decision has a trade off. When we talk about investing and goals, every person will have different targets and will be comfortable with different decisions. If your income is based on a 40 hour work week, can you find a part time job to pick up another 20-30 hours or can you pick up extra shifts where you already work? Work/life balance isn't something every person is supposed to have. Work/life balance is a choice with a trade off. Working more has a trade off and is right for some people. Working less has a trade off and is fine for other people. Each decision has a trade off.
- Is there a certification you can work towards quickly or a position you could apply for to increase your income at your current job?
- Start calling local banks to learn about their lending programs, what requirements they have, and if they have any first time home buyer grants available. As a first time home buyer usually there is an incentive out there somewhere for your to leverage. I found a bank last week in NC that was giving first time home buyers $7k at closing to either put towards closing costs or to use for purchasing a better rate.
- Since you already have $30k stashed away, I would guess that you've already developed some great habits around creating a budget and sticking to it. If not, then I highly recommend planning your personal expenses a month in advance, refuse to exceed the expending limits unless absolutely nessisaryily, and then continue to build your downpayment fund.
Starting off with a house hack is a fantastic strategy! I really wish I had been open to this type of move when I was 24. Whatever work and sacrifice you make right now, to start a house hack, will be something you are glad of in a decade.
Keep us all posted on your success!
13 Replies
- 3yCory J ThorntonBusiness MemberReal Estate Agent · Raleigh, NC · Member since 2021 · 240 posts · 281 votes
@Zane Landeck - Please take the following at face value. Some of this may apply, some of this may not, but hopefully something will prove helpful. You have $30k in savings, which is an awesome step in the right direction!
- The biggest thing you can do is increase your income. Every decision has a trade off. When we talk about investing and goals, every person will have different targets and will be comfortable with different decisions. If your income is based on a 40 hour work week, can you find a part time job to pick up another 20-30 hours or can you pick up extra shifts where you already work? Work/life balance isn't something every person is supposed to have. Work/life balance is a choice with a trade off. Working more has a trade off and is right for some people. Working less has a trade off and is fine for other people. Each decision has a trade off.
- Is there a certification you can work towards quickly or a position you could apply for to increase your income at your current job?
- Start calling local banks to learn about their lending programs, what requirements they have, and if they have any first time home buyer grants available. As a first time home buyer usually there is an incentive out there somewhere for your to leverage. I found a bank last week in NC that was giving first time home buyers $7k at closing to either put towards closing costs or to use for purchasing a better rate.
- Since you already have $30k stashed away, I would guess that you've already developed some great habits around creating a budget and sticking to it. If not, then I highly recommend planning your personal expenses a month in advance, refuse to exceed the expending limits unless absolutely nessisaryily, and then continue to build your downpayment fund.
Starting off with a house hack is a fantastic strategy! I really wish I had been open to this type of move when I was 24. Whatever work and sacrifice you make right now, to start a house hack, will be something you are glad of in a decade.
Keep us all posted on your success!
- New to Real Estate · Nashville · Member since 2023 · 6 posts · 2 votes3y
Quote from @Cory J Thornton:
@Zane Landeck - Please take the following at face value. Some of this may apply, some of this may not, but hopefully something will prove helpful. You have $30k in savings, which is an awesome step in the right direction!
- The biggest thing you can do is increase your income. Every decision has a trade off. When we talk about investing and goals, every person will have different targets and will be comfortable with different decisions. If your income is based on a 40 hour work week, can you find a part time job to pick up another 20-30 hours or can you pick up extra shifts where you already work? Work/life balance isn't something every person is supposed to have. Work/life balance is a choice with a trade off. Working more has a trade off and is right for some people. Working less has a trade off and is fine for other people. Each decision has a trade off.
- Is there a certification you can work towards quickly or a position you could apply for to increase your income at your current job?
- Start calling local banks to learn about their lending programs, what requirements they have, and if they have any first time home buyer grants available. As a first time home buyer usually there is an incentive out there somewhere for your to leverage. I found a bank last week in NC that was giving first time home buyers $7k at closing to either put towards closing costs or to use for purchasing a better rate.
- Since you already have $30k stashed away, I would guess that you've already developed some great habits around creating a budget and sticking to it. If not, then I highly recommend planning your personal expenses a month in advance, refuse to exceed the expending limits unless absolutely nessisaryily, and then continue to build your downpayment fund.
Starting off with a house hack is a fantastic strategy! I really wish I had been open to this type of move when I was 24. Whatever work and sacrifice you make right now, to start a house hack, will be something you are glad of in a decade.
Keep us all posted on your success!
Thank you so much for your kind response! Very Helpful!
- Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes3y
You don’t always have to buy a house to house hack. You can always rent an entire house from a landlord and ask them if you can sublet the rooms out to an individual tenant. Live mortgage free first and then save up for a bigger down payment amount while improving your W2.
- 3yRyan ThomsonBusiness MemberReal Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
@Zane Landeck I completely agree with @Cory J Thornton. Wise words. Here is some more advice.
You need to talk to a couple lenders and see what they could qualify you for. We don't know what you make and your financial situation. There is no way for us to tell you if you can qualify.
A Co-signer could absolutely help you qualify for a loan. I would be real sure that you have a good plan and can present that to someone who trusts you enough to co-sign.
The Assumable Guy544 Reviews - Lender · Seattle, WA · Member since 2022 · 482 posts · 768 votes3y
You can bring in a co-borrower to help boost your qualification in terms of the income side. For any governmental/conforming loans, lenders would allow 45%-50% of your gross income to qualify a mortgage.
- 3yTanner PileBusiness MemberReal Estate Broker · Colorado Springs, CO · Member since 2019 · 388 posts · 326 votes
@Zane Landeck Best thing to do is find ways to increase your income or maybe through a side hustle that you like. Co-signers can definitely help. One thing that your co-signer should know is that if they plan to buy a primary residence of their own they will have to wait 1 year before they can get a loan for a primary residence. Good luck!
Tanner Pile4.931 Reviews - Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes3y
@Zane Landeck DSCR loan
- Investor · Fort Lauderdale, FL · Member since 2020 · 1k+ posts · 755 votes3y
@Cory J Thornton gave the best advice here! 30K in savings is great! If you can be trusted to manage a home, tenants and any issues that could come up, I would try to get a co-signer for a house hack or duplex. That being said, in the meantime, figure out ways to increase you income. The time to do the work is now because it could take a while and you want to try to get a second investment property alone.
- Real Estate Agent · Member since 2023 · 19 posts · 4 votes3y
A lot of good information here already!
A cosigner would definitely help. You may want to look into a THDA loan to go along with your FHA. As of me writing this reply they have great rates- better than most products. They give you 6% of the purchase price to go towards closing cost and down payment (its a down payment assistance loan). Now this doesn't necessarily fix your income and qualifying concern but would greatly decrease your cash out of pocket and allow you to use that cash else where.
If we are able to negotiate to have the seller pay for closing cost, you could actually walk away from closing with a check as opposed to writing one. Just did this yesterday actually! Client walked away with title writing him a check for $2650. Now there are obviously some restrictions but sounds like you wouldn't have a problem with them.
Feel free to reach out if you have any more questions! I live in Nashville as well and would be more than happy to grab coffee or a beer - Real Estate Agent · Nashville TN · Member since 2018 · 35 posts · 15 votes3yThere are DSCR loans- Debt Service coverage ratio-- so the loans would be based on an income producing property not your income.
Quote from @Zane Landeck:
I am 24 years old currently renting in Nashville. I have 30k saved up, but do not have strong W2 or 1099 income right now. Will this effect me pulling a FHA loan? Would co-signers help pull the loan? I have read the House Hacking book and plan to do just that when my current lease is up. Any thoughts on what the smartest thing to do here is and any plan of actions I should take?
Also, I would consider partnering in with people -- verified and qualified builders/ or flippers who have a track record of successful flips. And even some failures. you want to partner in with someone who isn't going to sell snake oil-- but rather have real world experience.
You can leverage your cash on projects and then you can make money on your money until you build up enough capital to purchase something in cash or split your cash into multiple partnerships and deals at once.
Like you can lend someone 30k for a flip charge them 10-13% APR simple interest and charge 5 points to use your funds for 120 days to get through the project. you file a promissory note and personal guarantee on the proejct with the borrower to pay you back and file a lein with the title company on the property.
Then you would make 1.5k on your money from points and $1,300 from monthly payments from the borrower on interest payments and then you are walking away with a sizable return for no work whatsoever.
No income needed. but you need to lend to trustworthy people, have documentation of the loan, agreement to pay it back and a lein to make sure you get paid back in the event of default. sounds difficult -- took less than 1 day with the title attorney to set up. so not a difficult process.
Call me / Direct message me if you want other ideas but this one requires the least amount of effort and will make you more money on your current dollars within 4 months than you would if you purchased a cash flowing property over a year with your current down payment. - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3yyes it will impact getting a loan. you would need a cosigner to most likely get a loan unless you meet the lenders DTI
Quote from @Zane Landeck:
I am 24 years old currently renting in Nashville. I have 30k saved up, but do not have strong W2 or 1099 income right now. Will this effect me pulling a FHA loan? Would co-signers help pull the loan? I have read the House Hacking book and plan to do just that when my current lease is up. Any thoughts on what the smartest thing to do here is and any plan of actions I should take?
7e investments53 Reviews - 3yStephanie P.Pro MemberWashington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votesNot sure where you are in this process, but a couple of paths you should take come to mind. Lenders look for three things; collateral, credit and capacity. Collateral is the property you're trying to buy, credit has to do with whether you've paid your bills on time and whether you're over leveraged and capacity or the ability to handle the debt you're trying to accrue. If any one of those things are below acceptable thresholds and the other two are weak, you won't get a loan. You have enough money to buy a house using FHA (depending on its value), but if you don't have the capacity meaning a job that pays enough to handle the debt, you won't get the loan.
Quote from @Zane Landeck:
I am 24 years old currently renting in Nashville. I have 30k saved up, but do not have strong W2 or 1099 income right now. Will this effect me pulling a FHA loan? Would co-signers help pull the loan? I have read the House Hacking book and plan to do just that when my current lease is up. Any thoughts on what the smartest thing to do here is and any plan of actions I should take?
The reason for the three C's is simple, lenders want to get paid back and they don't want to create a losing situation for you. Work on your income however you can and get that squared away. It doesn't have to be for a long time. If you're a W2 employee, getting paid more in your field is okay even if you have a weak W2 from 2 years ago. Even changing jobs (in the same field) is okay if you're moving for more money.
At this point in your real estate journey, DSCR is not a good option for you. House hack a multi family property first and then either do it again using FHA or conventional financing, but DSCR should only be used once you've exhausted ALL of your conventional and government options. - Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes3y
I have not had the chance to read everyone's responses, so I apologize ahead of time if something is on repeat.
There are a couple of factors to consider:
1. Buying a 2-4 unit will help because lenders will count 75% of the rents towards your income. They won't count bedrooms in your personal unit.
2. Co-Signer will help.
3. If you have a "weak" income, is it smart to buy? I understand that you want to jump into it, which is great, but many forget that what you qualify for is based on GROSS income, not NET (what you take home). Yes you will get income from the tenants, but really hone in on the numbers. Nashville is becoming a more expensive market. I haven't analyzed from a house hacking perspective, but I would imagine you will be coming out of pocket a little bit. If the numbers were to work at 3.5% down, why wouldn't an investor putting 20% down just buy it?
Nashville is a great place (I own a fourplex there). However things have gotten expensive and the numbers haven't been working for the traditional investor on some of the deals I'm analyzing. This is a good opportunity for you since you don't have to pay points and you get a lower interest rate.
You are on the right track and look forward to seeing your success.
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