Should I use the $155k loan I'm approved for now or wait a year?

Question

I met with my credit union and then I met with a mortgage broker.  If I wait until next year when my credit rating is 700 and I have a few more debts paid off then I can get a zero down conventional loan from my credit union. If I want  to buy something now, the mortgage broker got me pre-approved for $155k and downpayment assistance (if you new and don't know what that is, its is a secondary loan that becomes due in 30 years or if you sell the property).

I asked the mortgage broker what it would take to get approved in the 300k range and she said I would need $6000 a month in income. I'm at about $3,300 right now. I'm looking into creative ways to increase my income like taking in a foreign exchange student, doing side jobs, etc. I'm already driving uberEATS 2 days a week for around $500 extra income per month. I also do websites, graphic design, logo design and social media marketing but I haven't been doing a lot of that type of work lately because my day job as a Community Manager takes a lot of mental energy. The uberEATS driving turned out to be a great stress reliever!

I checked my local real estate listings and there is not a lot in the 155k price range that would give me the ability to get rental income. Since this has to be my primary residence, I don't want to just have a two bedroom with a roommate. That's a little too close for comfort and a lot of eggs in one basket. I was hoping for a 3 or 4 bedroom so I can have some flexibility and do things like airBnB and roommates. The only properties that I found like that were foreclosures heading for the auction and I don't think I can buy at auction with this type of FHA loan. What I actually wanted was to buy a multifamily like duplex, triplex or 4plex but that doesn't seem possible for me unless I seriously increase my income. I was also considering single family homes that have a second unit like a mother-in-law apartment or a tiny house or something but I haven't seen anything like that in this price range.

I am willing to wait a  year and save up more money so I have some safety net and capex but a friend pointed out to me that that would mean one whole year of pouring my money down the rent drain.

Am I missing something? What advice can you give me?

Michael Cohen · Answer

In order to be able to use secondary income - income from a secondary source - you must have a 2-year uninterrupted history of working a 2nd job. Unless your W2 income doubles to the $6,000, you still would not qualify after only 1 year.

Angela Jossy · Answer

I'm currently looking at multifamily (duplex, triplex, 4-plex) because a friend of mine who is a lender alerted me to the fact that the income from the current rent being charged in the other unit(s) will increase the amount I am approved for. I will lose my DPA but I think I can come up with 6k between my Roth IRA and some money owed to me. I also recently almost bought a 3 bedroom house from an investor who is older and is divesting of his rental houses and didn't want to pay capital gains on it because he already sold one this year. He was willing to owner finance for one year but it turned out that he owed $180k and he decided that he didn't want to gamble on the fact that I could get financed for that much next year. So that deal didn't happen but it showed me that there are other routes to getting my first purchase. I really want to get to $5000 per month cash flow so I am looking a this first purchase as a strategic one. I want to scale to at least 4 doors as soon as possible to offset the risks and then grow from there. I am open to partnerships as an option too because that might be best for my education and gaining investment experience. I think that my property management experience would be a good balance for someone else's experience with renovations and financing.

Ike Hobbs · Answer

As an agent in this area I would say it's going to be difficult to impossible to find a property more than 1 bedroom that would meet the FHA guidelines. 3bd/1bath in the area is running 210+ and 3 bed/2bth is over the 230mark, and that's if you don't care about location. You're probably better off waiting, and searching for an owner finance situation in the meantime. Sounds like you've already been researching it but sometimes sellers are willing to finance if they can get more than market value in exchange for the loan or other such negotiations. Sound's like you're hustling hard, keep it up!

Nghi Le · Answer

@Angela Jossy

Couple options I can see, other than what has already been mentioned:

1.  Find a property with a lease-option term.  Similar to seller financing (except you don't own the property outright), but maybe ask for 2-3 years to qualify for the financing.

2.  Since you mentioned you were willing to do AirBNB, check out Loftium.  They assist with down payment on purchases as long as you promise to AirBNB out at least a room and share that income with them.

Angela Jossy · Answer

@Jornel Lugo Yes, that is exactly what I was saying. The rental income the property is already getting (minus one unit that must be my primary residence) can be counted toward my qualifying income. @Michael Macklin and

@Jeff Schechter : The loan I have now is an FHA so I have to use one unit as my primary residence. Since my job as a Property Manager is here in Tacoma I don't think my first purchase can be out of state.

Jack Bobeck · Answer

@Angela Jossy Wow, good for you! You know what you want and are working to get there. With all you do and the people you meet, is there anyone that could act as a Private Money Lender? Someone who is willing to take a 2nd position on a property? Its asking a lot for someone, but that would be the fastest way I could see you getting into a property, this year.

I am glad you know what you want and have a roadmap of how to get there. Keep looking at finance options. There may be a duplex, tri or quad where the owner wants out and you could take over payments and live there for a time, build some equity and then do a refi on your own. You never know what people are willing to do, until you ask. Best of luck to you in your search!

Should I use the $155k loan I'm approved for now or wait a year?

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