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Updated over 7 years ago on . Most recent reply

Any advice for someone with low income to find their first home?
Most Popular Reply

Hi @Sergey Pshenichkin, here are my thoughts.
Go for an FHA, a regular FHA, no 203k. The 203k portion requires that all the work be done by an approved general contractor, so she wouldn't be the one doing the work anyway. However, there would be a requirement that the work be completed within a certain amount of time (6 months I believe), so there would be some pressure to find a contractor and get that work done.
Find a property that she could reasonably live in. Maybe it needs a little cosmetic work, but let's assume it's all things she can do on her own as she felt like; no need for the 203k. I don't know what home prices are in your area, but if you were able to find a duplex in the $90,000 range, you would only need $3,150 down ($90k * 3.5%). What about closing costs? Ask for seller concession in the offer to cover the closing costs. The seller concession limit on an FHA mortgage is 6%. All of this essentially means you are financing in the closing costs, so the closing costs wouldn't be cash out of pocket. Here is how it would look:
Purchase Price: $90,000
Plus 6% Seller Concession: $5,400 (this means $5,400 of the closing costs would be covered; no cash out of pocket by the purchaser).
Minus 3.5% Down Payment: $3,339 cash out of pocket
Total Financed: $92,061
P&I Payment at 3.5% interest (FHA offers pretty favorable interest rates): $413, then add PMI (probably about $55), taxes, and insurance onto this to get your total monthly payment. You will pay PMI any time you put down less than 20%.
Theoretically, in the situation above, the purchaser only has to come up with $3,339 out of pocket to purchase this house. The $5,400 seller concession should cover most, if not all of the closing costs. The trick here is to find a multifamily that will cover the mortgage, insurance, and taxes for her. You can use an FHA on up to a 4 unit residence. If she has kids and is really busy, she may want to consider finding a duplex where once side rents for $750 or $800/month. There are of course other hurdles here: debt to income ratio, credit score, cash in the bank, etc. But you will encounter those hurdles with any mortgage application.
Hope this helps.