What are my options?

Question

Hi everyone,

My girlfriend and I are looking for a duplex to house hack. I just became a real estate agent in February and I have done ok so far. Combined, my girlfriend and I should have enough for a duplex within the next couple months, but we hit a roadblock. My parents won't cosign and neither will hers, and we can't qualify because of the 2 year income history that you need. Hard money lenders have too high of an interest rate, is our best bet to try to search for seller financing? Any advice helps thank you!!

Craig Anderson · Answer

In my reading the Wall Street Journal in the last 60 days, to this Aug. 16th, 2020; a few articles in it, say that U.S. banks are currently tightening their lending standards & even reducing the amounts of money they are now lending, as these banks face the in 2020 the U.S. is in a Recession, & a Recession which likely to worsen in 2021. Hence, you present difficulties in getting a loan, are likely due to the present concerns by U.S. banks, for who they are making loans to, the risk involved in each new loan, depending on the type of loan, & the amount of money involved in each new loan. Much of these considerations, by U.S. banks, are getting their spread sheets & accounts books looking in better order, as they face the the FED is now asking banks to be able to pass stress tests, in case any financial crisis, like occurred in 2008-2009, might flare up in late 2020 or in 2021. What I suggest is not to be in such a big hurry, in hopes to own a duplex/or any Rental, & to do your best, as you wait out the next few months, to see what will happen with U.S. banks, as well as the U.S. economy. And in the mean-time, you could be saving money toward a larger down payment on a duplex you might want to buy. And banks are happy with large down payments on houses they mortgage, & which are down payments that banks can seize in the value of an house, if payments fail to be made on the mortgage as agreed.

Daniel Kong · Answer

Seller Financing is definitely an option. Another is to call around different lenders and see if they would be more lenient on the 2 years of income history. Depending on your situation, there may be lenders willing to take a shorter time frame of income, assuming that there are reasonable circumstances for it (just graduated college, etc). I could be wrong, but I dont think the 2 years is a hard fannie/freddie rule. So if you could find a lender that would be willing to work with you on that.

Randall Alan · Answer

Hard money lending is intended to be short term.  You could go hard money and then refinance once your income history got good enough to qualify to refinance.  With the other side of the property paying for your mortgage anyway, surely it couldn't be too crazy of an additional expense in the short term to accomplish your longer term goals?

I would personally have some concerns about the "boyfriend / girlfriend" part of this equation... which is not to throw any shade, but to simply question, "What happens if the two of you go separate ways in a year, etc."  As you know being a realtor, it costs thousands of dollars to both buy and eventually sell the property.  You wouldn't want to make an investment only to turn around and have to sell it if things went sideways  (relationship wise) and then you end up losing money in the long term.

Brandon Ribeiro · Answer

I second seller financing. That would give you the option to get into a property that you wouldn’t traditionally be able to get because of the lack of proof of income. One thing you could try is finding properties that are for rent, and talking with the owner to see if they would consider a seller financing option. Facebook market place is full of properties for rent, they even have a dedicated page on marketplace for that

Odie Ayaga · Answer

Since you're looking to house hack hard money wouldn't be an option. Hard money is only for non-owner occupied properties.

Alice Huang · Answer

@Aaron Signore

Hey Aaron,

Not sure where you’re located so can’t tailor the advice more. Would you consider BRRRR with HML and then refi after seasoning. This way, it’ll buy you some time to work toward those two years as well.

Joe Villeneuve · Answer

Lease option.  The lease will get you control over the property of choice.  The option will "buy you" the time you need in order to qualify.

Shawn Mcenteer · Answer

@Aaron Signore local small banks may offer more lenient options, they tend to be more beneficial for investors compares to larger brand names banks that cater to ABC primary home buyers.

Aaron Signore · Answer

Oh!! I didn't know that some lenders were lenient on that, I thought it was pretty standard across the board! Thank you :)

Aaron Signore · Answer

Ok! I will check out some hard money lender terms... As for my girlfriend and I, we are getting married soon, we just don't know when yet. I don't think I would make a decision like this with anyone else, she is the one!

What are my options?

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