Buying a house I can't afford? House hack?

Question

26 years old, $150k salary, would be first-time home owner, $800k house

Wondering what you more savvy folks would do in this situation. A relative of mine is selling her $800k 5br single-family house in Merrifield area, walking distance to Mosaic District. I really love the house and area. They are able to successfully rent it for about $4k/month.

They asked if I was interested in buying it from them, but I don't think I can afford it. I'm aware of that no more than 3x your income rule of thumb, but what if I was thinking of it being my first house hacking with FHA 3.5% down loan, living in 1, renting out 4 of the bedrooms? Is that any more feasible?

Any advice would be greatly appreciated!

Mark Brogan · Answer

You already know the answer

Jerry Padilla · Answer

@Andrew Leung

As mentioned, FHA has limitations on maximum loan limits.

There are portfolio loans that require only 5% down when you are above the conforming limits for single family primary residence.

The issue as you mentioned as well, is being able to qualify for that high of a purchase price. You can’t count border income with most conventional and portfolio products. So counting rental income for the other bedrooms isn’t going to count with your scenerio.

I think you will have to focus on another property. Maybe a 4 unit property? You could use the rental income from the other units at 75% to help qualify. You could still rent out other bedrooms in your unit, just not count the income for qualifying purposes.

Maxwell Fontaine · Answer

@Andrew Leung If in the worst case what would happen if you could not get it rented? Have you asked about owner financing the property? But if you are asking for a convincing response you already know you are not comfortable with it. If you do take that deal down and need proof of insurance on it i will be happy to help you out and keep your cost as low as I can on that property.

Good Luck on this one!

Tim Johnson · Answer

Here is the link to look up loan limits for FHAhttps://entp.hud.gov/idapp/html/hicostlook.cfm

Dionte Robison · Answer

Fha loans typically go up to $300k

Theresa W. · Answer

@Andrew Leung, It's tempting to try and make a family deal work, especially if it's off market or an exclusive.  If it were me, I'd pass on this one, because if you're planning to buy more properites in the future, this may put your debt to income in an undesirable range for future loans.  I'd also guess there's other deals out there to be had where you can owner occupy/house hack and get closer to the 1% rule.  Have you run the numbers for this area and know how this compares to other potential investment deals ?  Rather than tying up so many resources in one home, perhaps look for other deals that get you into a house hack situation, but still preserves your future potential for the second, third and fourth doors.  Best of luck!

Jacob McAllister · Answer

@Andrew Leung I would say talk to a loan officer and see what your options are. I do not believe FHA loans go up to 800k I can not remember off the top of my head what the cap is but I’m almost positive it doesn’t go to 800k. I would talk with a loan officer and see what your options are it does sound like a cool house hacking opportunity though. If you can’t make this one work I’m sure you can find another opportunity :)

Buying a house I can't afford? House hack?

Most Popular Reply