How does a 19 year old get approved for a loan asap

Question

Hello! I’m 19 years old, and I just started my first full time job at a Jeep dealership. I’m doing great so far, but obviously my  real goal is in real estate. I want to get into rental properties in Grand Rapids Michigan. Right now I’m living with my dad and saving up money, for a down payment on a rental property. I’ve talked to a few lenders and they all say that lenders want to see at least a year on the job, and established credit. My question is, what can I do to ensure in a year or so that I will get approved for a loan. I’ve never taken out a loan, I have a credit card and am on my parents cards as an authorized user. Is there anything else I can do in the mean time to better myself for an approval? I don’t have access to a co-signer ( unless someone in the Michigan area wants to work with me ) Thank you!!!

Michael DeLaMarre · Answer

Hey Denver, I'm new to this too. My wife and I just closed on a duplex in March and are renting the other side out. A lot of lenders will let you count part of the projected rental income towards your income for the purpose of being approved. This might help.

If you intend on living in the property you can use an FHA loan to buy anything from a 1-4 unit property. FHA loans let you put as low as 3.5% down and have less strict credit requirements. You should also talk to your lender about first time homeowner programs. You may qualify for grants or other special programs that are only available to first time buyers.

If you haven't already, start a pre-approval with a good lender so they can see your credit report and help you identify ways to improve your score over the next year. Talk to them before doing anything that can impact your credit score, like opening or closing credit card accounts or making big purchases.

Make sure you pay off your card every month religiously. Depending on what your limit is, it could actually help to open a second card (just don't be tempted to spend more). This decreases the percentage of your credit that is being used, which can help your credit score. Just ask your lender first!

Last tip: go to as many lenders as possible, especially local community banks. Find a bank where you can build a relationship with the loan officer. If one lender says no, keep asking the next lender. You'll hear yes eventually.

If you have any questions direct message me. Always happy to help!

Michael

Cory S. · Answer

Credit score or FICO score can get you approved. No big deal getting approved, the real fun starts after you find a property and then they want...

W2 tax returns

Pay stubs for two full months

Two months of statements for the accounts you will use to fund the loan.

List of assets and debts

Statements from the accounts to be used to fund the loan

Money in accounts need to be seasoned, showing no large deposits that will be questioned.

Cash reserves

Property appraisal

You’ll need to do at least 25% down to even find a conventional loan.

Then pay more for the credits to get a low interest rate on the loan.

Denver Borst · Answer

@Michael Argento thank you. I needed to hear that today! I will continue going strong!

Ryan Evans · Answer

Keep in touch with your lender and let them guide some of your financial decisions over the next year. You can just ask them straight up what you should be doing to get yourself in the best position. They're the ones who are going to be judging your financials at the end of the day, and they have incentives to get you to the point where you can become their customer.

Karen F. · Answer

Ask your parents if you can put one or more of the utility bills into your name, to help establish your credit more quickly, and of course pay it on time.  Take out two no-annual-fee credit cards, spend small amounts each month, and pay it off in full each month.  Ask for increases on your credit line as allowed, but do not use it!  Never carry a balance.  Get a second job, if you can, or if you feel that you can earn more at the dealership, increase your hours there to the max, so that you are ALWAYS there.  Earn as much as you can.  Put every paycheck straight into the bank, and minimize your spending.  Find cheap or free ways to have fun.  Car salesmen don't have to wear suits.  Jewel-colored crisply ironed shirt plus contrasting tie, crisply-pressed slacks, shined shoes look good, and don't cost that much.  On your day off, start looking at real estate.  If I were you, I'd start off with a multifamily in a working class (but not dangerous slum) area, preferably a 4 plex with 2-3 bedroom units, and plan to buy one like this, rent out the other 3 units, and get a roommate or two for your own unit.  If you have time on your hands, it helps to learn to do minor plumbing, electrical, carpentry.  If you don't have family or friends who can teach you these skills, local home improvement stores may offer free classes in it.

Maria Bakaj · Answer

@Denver Borst There are Conventional Loans that allow for 3% down.  Not every lender has the option, but it does exist.  Don't go crazy opening new accounts and avoid making any large purchases (i.e. don't go out and lease a car).  Get on credit karma so you can keep an eye on your score and pay off your cards in full every month.  Good Luck!

Bradley Padula · Answer

Hey Denver, good for you thinking this far in advance!

You're on the right track already by asking a few lenders questions. Keep that up and talk to as many lenders, credit unions, anyone you can. Ask them specifically about loan options that will work with your commission income job and what specifically the timeframe requirements are for each loan and how they were. Here is a high level link from a quick google searchhttps://www.ovmfinancial.com/commission-income/

I'd be very hesitant to have a lender do a hard credit pull in this situation since you're trying to build credit and are at least 1 year out from buying. You can use free services like experian to see your credit report and then you can give the lender your estimated credit score. The lenders usually want to make sure your credit score is over a certain threshold to even entertain certain loan options in the first place. Once you get closer to buying, then credit score will be a more crucial factor as it affects the interest rate you'll get which in turn affects how much you can borrow.The length of employment requirement often depends on your type of income, primarily salaried jobs vs commission income. Depends on the bank / type of loan you do. Research online to find the available types of loans and the timeframe requirement they require for commission income. For example if you had a salaried job, there would generally be no one or two year requirement.

Also as you save, don't just think you need to save the down payment. Anticipate closing costs as well as reserve funds for unexpected repairs.

Owner occupant loans offer the advantage of lower down payment needed and lower interest rate. As mentioned above, FHA is the "cheapest" way to get into a 1-4 unit property that you'll occupy for a certain period of time. If you are looking at a single family house, you can generally find conventional loans with as low as 5% down. Sometimes you'll see people to a conventional 5% loan on a single family and "save" the FHA for a 2-4 family down the road. Conventional loan down payment on 2 units are generally around 15% minimum, so you can see the FHA advantage in terms of down payment.

If you're trying to qualify for the largest loan possible (DTI ratio is based on income and debts), you may want to consider getting a second job you do after work and on the weekends. An extra 2k, 5k, 10k you can make each year will not only help you save more money but come loan time you'll be able to qualify for a larger loan amount. Now is NOT the time to buy a flashy car, buy clothes on credit, buy a fancy watch etc. Use your age and energy to your advantage and keep grinding.

Dillon Dale · Answer

@Denver Borst talk with a mortgage broker. I had plenty of banks tell me the same thing, that I would need one to two years at a job, but that's simply not true. Keep asking around, my mortgage broker was able to find me a lender right after I got a full time job

Anthony Angotti · Answer

Cory S had some good points.

I would recommend an owner occupant house hack as your first deal. It will be easier for you to qualify for.

Is your current job mostly commission? That may make things a bit more difficult, just a heads up.

Bradley Sriro · Answer

Hey @Denver Borst, first off I think that its great you are interested in building wealth through real estate investing at such a young age. Aside from what others have already mentioned, I would recommend making sure that your employment history is consistent. Don't leave your job unless it is for a higher paying job that offers stability. Also, I would recommend you explore house hacking for your first property if you haven't already considered doing so. House hacking is a fantastic way to start out as a young investor. Finally, don't try to rush anything... As long as you continue to educate yourself and save up, you will be in a great position to make your first purchase when the time is right. Best of luck!

How does a 19 year old get approved for a loan asap

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