Obstacles While Trying To Buy My First House

[Steven Rodriguez]

Hello everybody, I've saved up $14,000 at the age of 19 and I've built up my credit score to 780, however, my plan initially was to get a credit card, build my credit, and save up some money. With the money saved up I was planning to pay a 5% or less down payment of a multi-unit house and rent it to make some passive income while getting the unit paid off at the same time, however, the things that concern me are:

One thing I learned with time is that I need to get pre-approved by a lender who will give me an official verdict on my home buying budget which depends on my credit score and income. Although my credit score is good, it has limited credit history meaning I've only had ONE credit card since August 2020 and I've recently in August 2021 starting paying for a car which I had to co-sign with my dad because my credit alone was not enough to make me qualified for a car loan. Another issue is my income because houses in Miami are expensive and the cheapest that I can find are single family homes instead of multi-units and require a mortgage of around $1,200-$2,000/ month ($200-000- 350,000) which is a lot to pay with the little income I make from my W-2 job but it's not impossible, however, in the eyes of a lender it will be seen as risky and insufficient income. 

What do you guys recommend I do regarding my credit score to improve my chances of getting a good loan with low interest rate on a house? Should I save more money for a bigger down payment or simply find a better paying job? Are there areas in Miami with new markets that I'm not aware of with cheaper prices? I have a lot of questions and any advice on what to do will help tremendously. Thanks!!!

[Jody Sperling]

You probably don't need to reinvent so much. Just change your target. Go for the single family home instead of the multi. If you have to explain to your dad why you're asking him to cosign on a home loan, give him a promissory note and let him know he is backing your wealth so that he will never worry about your future.

Once you have a home picked and you're going through the closing, post a room or two for rent. Sharing a single family house with strangers can be less than ideal, but it's safe and financially powerful. If you get a 3/2 and find two renters, you can cover the entire mortgage and 2/3rds of the utilities. By the end of just one year, you can find a third renter, buy a multifamily and repeat the process.

And at that point, you'll have naturally increased your income with rent coming in, plus added twelve months of credit history to the car, a house, and a credit card, making you a desirable borrower. Best of luck! 

(If your dad won't cosign, find someone who will. Maybe you have to put a deposit down on a cosigner and give him or her a fee for helping, but if you're creative, you can get it done well and safely.)