Student Loan and Conventional Financing

[Liz Mojica]

Good morning everyone!  

I've recently started the venture of real estate where I'm looking to buy a multi-family property to avoid paying a $1,350 monthly rent I've been paying for 1 year. To me it's time to move on and start generating some cash flow.  I am struggling with conventional financing because of my student loan (roughly 200K). 

The properties around the area I live are between 100K-200K and rents vary from $900-$1,800. I want some advice on what my next step should be to find other options for financing. I love reading, so any book advice is welcome.

A brief explanation of what the lenders have told me so far.  

#1- I do not qualify for the first time home buyer program or FHA loan because of my student loan.

#2- According to them I do qualify for conventional loan of $140K with 3% down but ONLY for a single family home (reason why I don't feel this is right for me is because I want to move out of state after year 2 and I also need a place to live. 

#3- Other option is for $140K with 5% down, 6 month reserves plus closing cost.  (I don't have that much in hand at this time) 

I've read and listened to the webinars and podcast regarding the creative financing. But I feel that I don't know where to start.   

[Victor N.]

@Liz Mojica, I also live in Meriden CT and own a few rentals in town. 

There is so much in your post  to talk about that I’m not sure where to start. It’s gonna be a long response!

First,  I commend you for trying to find ways to invest and pay down your debt. The honest truth is that with a $200k student loan debt it’s going to be very very hard. So buckle up and don’t give up because you can do it!

Regarding the student loan, even with your 48k income, I think that it is a HUGE mistake not to make any payments right now because interest will continue to accrue and before you know it, that 200k debt will become $250k. I believe that there is a 10 year repayment plan based on your current income. If your income increases in the future so will your payments. And after the 10 years, the unpaid balance is forgiven. Please look into it. There was even a podcast on this issue ( sorry I can’t remember which one because it was a long time ago ). 

Before I continue, I have to mention that if you came here for some advice then I’m assuming that you are open not only to creative financing ideas but also to some Hard Truths. The 200k student loan is one thing that’s  already done, no way for a redo but I question why you CHOSE to pay $1350 in rent in a town that has a lot of cheaper options? I live in town so I know that there are cheaper options. Going forward, all your financial decisions should help you get out of that $200k debt. Sorry, not trying to bash you but hard truths from a stranger can sometimes be a great motivator so I hope you take my words that way. 

Your combined income of 88k with your husband is good. We’ve heard about the student loan, the car loan, the child support and I suspect there might be more liabilities like maybe credit cards just like the rest of us. So it might be worthwhile to speak to a financial advisor who has the full picture of your total income and liabilities and who can best advise you.

Now how do you get out of the current situation? 

Step 1, Buy a large single family with the intention of doing some SERIOUS HOUSE HACKING ie: rent rooms in the house for extra income. You lose some privacy but it's a must in your situation. Btw, I did it in the past and it's allowed in Meriden. 4 financial institutions already told you that a SFH is the only property that they will finance so go with what's offered to you. You need to start somewhere and house hacking is a great place to start.

2- start making payments on your student loan based on the 10 year income based repayment plan. The goal is to be done with it after 10 years ( if that plan still exist).

3- work on paying off the 7k balance on your husband student loan.

4- If possible, give up your husband car lease and buy a very very cheap car cash. No more monthly payments: his debt to income ratio will improve. This is a big sacrifice but it’s for a good cause and it’s  only temporary.

5- keep working on your credit to improve both your debt to income ratios. for ex paying off small credit card balances etc can help.

Well Im not done but need to stop here because my response is already way too long. Feel free to pm me. I’m willing to meet with you and your husband and share ideas that might help you!