Ready to purchase, but currently stuck in the financing process.

[Jorge I. Pimentel]

Hello,

First and foremost, thank you for taking the time to read my post. I am a new investor in San Diego, CA. My brother and I currently own a SFR in Riverside, CA (fully paid) that we inherited and have been renting for around seven years. We are now looking to buy a multi-family property in San Diego or Riverside County.

However, we are currently in a unique situation. We have around 40k saved for the purchase, our credit is in decent shape (low 700s), however; our employment situation is holding us back. I quit my construction engineering job (currently unemployed) in October 2021 to start a trucking business (still in process). As for my brother, he quit his construction job back in mid-2020 and started doing construction projects on his own. He did not register his business so he only reported his W-2 income for that year. He received better tax advice now, and wants to report 2021 income as self-employed (net income 110k). This could help us for the purchase.

We visited a mortgage company and they gave us two options.

1) Re-do 2020 taxes and show proof of self-employment income (to comply with 2 year of employment history).

2) Purchase with a 20% down payment.

Our original plan was to purchase with a 3.5% FHA or 5% conventional. Our market is very expensive and we can not afford a 20% down payment. Any advice on what we could do? Are there any other alternative options for us or is what they told us the only way?We want to go shop to other mortgage companies for other options as well. I would definitely like all recommendations/advice you have for us. We definitely want to get started this year.

Again, truly appreciate you reading my post and look forward to your advice.

[Brad Sneckner]

Hey @Jorge I. Pimentel! You didn't mention explicitly, but I'm assuming you're looking at purchasing this next multi-family as a primary residence since you mentioned the FHA option, is that correct? If you were purchasing it as a rental, you would have some other options. For example, one product I've used for clients in the past is basically only using the rents of the property as "income" on the property. Essentially, if the property pays for itself, it qualifies. This is NOT a standard conventional mortgage though, so you'll need to be prepared for a higher rate. This is a great option for investment properties when in your specific situation. The other thing you could consider is to take cash out of your free and clear rental house using this product, and then use that money to help make the purchase of the new property as a primary residence.

The need for a 2-year history is not necessarily always applicable either. If your brother can show he's making at least as much now as he was when he was an employee, then he can probably be fine with just a 12-month history with the business. 

Hope this helps you! Feel free to reach out if you have more questions.