Less than 2 years of consistant employment

[Nick Cascio]

Hello all,

This will be my first post on BP, and will serve to pose a question to overcome my first hurdle on the road to owning and home and gaining beautiful equity. I'm 24, working in the Texas oilfields, have a Mechanical Engineering degree, and sitting on some cash. I also live at home with my parents when on my off days.

My issue lies here. I have been working my current job for 7 months. Do to the nature of oilfield work, my job pays me hourly + overtime. My hourly rate is very low, and I make most of my income from over time. I've spoken with a few mortgage lenders about FHA and conventional loans. They require 2 years of work before my overtime can be considered 'effective income'. The difference in pre-qualification between base pay vs overtime is significant enough for this to be a deal breaker. From what I was told by a Chase lender, most institutions use the same underwriters, who implement this 2 year requirement.

I understand that private lending could be an option, however, I'm not sure who would lend to me with favorable terms based on my lack of real estate experience. I have trustworthy friends who are interested this and willing to split a mortgage with me (I'm not sure if that's possible either). We'd basically be going half. I've been hesitant to go into business with friends, but it could be a powerful play, and a valuable learning experience. I'm also aware of the hard money approach, but do not know details of how that works.

I'm hoping to gather some community insight on this so please don't hesitate to leave a comment or even reach out directly. Thank you for reading.

[Jason Wray]

Nick,

Depending on what you have for a down payment there are other programs to help avoid the hourly and overtime. You have Non/QM - Bank statement program, if you want to buy an investment home you can use DSCR.

If you need to streth income buying a 2-4 unit can help stretch your income by using the rents to qualify.  Lastly, you can always add a co-signer like a family member or spouse.

[Robin Simon]

Quote from @Nick Cascio:

Hello all,

This will be my first post on BP, and will serve to pose a question to overcome my first hurdle on the road to owning and home and gaining beautiful equity. I'm 24, working in the Texas oilfields, have a Mechanical Engineering degree, and sitting on some cash. I also live at home with my parents when on my off days.

My issue lies here. I have been working my current job for 7 months. Do to the nature of oilfield work, my job pays me hourly + overtime. My hourly rate is very low, and I make most of my income from over time. I've spoken with a few mortgage lenders about FHA and conventional loans. They require 2 years of work before my overtime can be considered 'effective income'. The difference in pre-qualification between base pay vs overtime is significant enough for this to be a deal breaker. From what I was told by a Chase lender, most institutions use the same underwriters, who implement this 2 year requirement.

I understand that private lending could be an option, however, I'm not sure who would lend to me with favorable terms based on my lack of real estate experience. I have trustworthy friends who are interested this and willing to split a mortgage with me (I'm not sure if that's possible either). We'd basically be going half. I've been hesitant to go into business with friends, but it could be a powerful play, and a valuable learning experience. I'm also aware of the hard money approach, but do not know details of how that works.

I'm hoping to gather some community insight on this so please don't hesitate to leave a comment or even reach out directly. Thank you for reading.

 Key question here - are you looking for a pure rental property or investment property project or are you looking for something that you would also occupy (live in at least partially of the year)?

[Brittany Minocchi]

Hey Nick - 

You mentioned an FHA loan, so I'm assuming you're looking at house-hacking....are you open to buying a property that you DON'T occupy? If so, you have options that don't require income and employment history like traditional financing does. Not all lenders require investment experience, but you may be asked to show 12 months of rent payments. That would probabyl be your biggest hurdle for this type of financing, especially if you're buying a property close to where you live currently. That's a red flag for someone trying to use a business-purpose loan for owner occupancy, so many lenders won't allow it.

If you do want to stick with FHA, you'll need at least 2 years of receiving OT since it's considered variable income. This is a requirement straight from HUD/Fannie/Freddie, so all lenders will follow that rule for FHA/conventional financing.

[Dave Skow]

@Nick Cascio thanks 1) if your friend is a strong buyer - going in jointly might be an option ...if you are able to do this - meet with a real estate attorney and get everything hammered out in wirting with the partnership ( eg... what happens if one partner wants to exit the property in the future and the other person doesnt ) 2) consider buying and financing it as a rental property or using a DSCR ( debt service coverage) type loan 3) consider additonal co borrowers that are strong ( relatives ) 4) obtain a new job that has a salary that can be used 5) wait to buy unitl you have the seasoning for the variable income

[Nick Cascio]

Quote from @Jason Wray:

Nick,

Depending on what you have for a down payment there are other programs to help avoid the hourly and overtime. You have Non/QM - Bank statement program, if you want to buy an investment home you can use DSCR.

If you need to streth income buying a 2-4 unit can help stretch your income by using the rents to qualify.  Lastly, you can always add a co-signer like a family member or spouse.

Hi Jason, thanks for replying - I will look into these.

[Nick Cascio]

Quote from @Robin Simon:

Quote from @Nick Cascio:

Hello all,

This will be my first post on BP, and will serve to pose a question to overcome my first hurdle on the road to owning and home and gaining beautiful equity. I'm 24, working in the Texas oilfields, have a Mechanical Engineering degree, and sitting on some cash. I also live at home with my parents when on my off days.

My issue lies here. I have been working my current job for 7 months. Do to the nature of oilfield work, my job pays me hourly + overtime. My hourly rate is very low, and I make most of my income from over time. I've spoken with a few mortgage lenders about FHA and conventional loans. They require 2 years of work before my overtime can be considered 'effective income'. The difference in pre-qualification between base pay vs overtime is significant enough for this to be a deal breaker. From what I was told by a Chase lender, most institutions use the same underwriters, who implement this 2 year requirement.

I understand that private lending could be an option, however, I'm not sure who would lend to me with favorable terms based on my lack of real estate experience. I have trustworthy friends who are interested this and willing to split a mortgage with me (I'm not sure if that's possible either). We'd basically be going half. I've been hesitant to go into business with friends, but it could be a powerful play, and a valuable learning experience. I'm also aware of the hard money approach, but do not know details of how that works.

I'm hoping to gather some community insight on this so please don't hesitate to leave a comment or even reach out directly. Thank you for reading.

 Key question here - are you looking for a pure rental property or investment property project or are you looking for something that you would also occupy (live in at least partially of the year)?

I'm looking for an investment property. I just got off the phone with a Rocket mortgage lender and he stated that any property intended to be used for investment will require 20% down. I don't have that kind of capital yet, so I am looking at ways to obtain a 3.5% down and it seems that FHA is an effective way to do that if I'm willing to live there for a year. I am willing to do so. Perhaps I can occupy one room and rent the rest

[Nick Cascio]

Quote from @Brittany Minocchi:

Hey Nick - 

You mentioned an FHA loan, so I'm assuming you're looking at house-hacking....are you open to buying a property that you DON'T occupy? If so, you have options that don't require income and employment history like traditional financing does. Not all lenders require investment experience, but you may be asked to show 12 months of rent payments. That would probabyl be your biggest hurdle for this type of financing, especially if you're buying a property close to where you live currently. That's a red flag for someone trying to use a business-purpose loan for owner occupancy, so many lenders won't allow it.

If you do want to stick with FHA, you'll need at least 2 years of receiving OT since it's considered variable income. This is a requirement straight from HUD/Fannie/Freddie, so all lenders will follow that rule for FHA/conventional financing.

Hi Brittany, thanks for replying. I'm not sure I understand what you're getting at. Would they want to see 12 months of my current rent payments or 12 months of rent payments being made on the property in question? I don't have rent payments currently as I am living at home with my parents/corporate housing while at work.
I would prefer to use the property solely for investment purposes and Not occupy it. I am however open to occupying it for a year in the case of FHA.

[Brittany Minocchi]

Quote from @Nick Cascio:

Quote from @Brittany Minocchi:

Hey Nick - 

You mentioned an FHA loan, so I'm assuming you're looking at house-hacking....are you open to buying a property that you DON'T occupy? If so, you have options that don't require income and employment history like traditional financing does. Not all lenders require investment experience, but you may be asked to show 12 months of rent payments. That would probabyl be your biggest hurdle for this type of financing, especially if you're buying a property close to where you live currently. That's a red flag for someone trying to use a business-purpose loan for owner occupancy, so many lenders won't allow it.

If you do want to stick with FHA, you'll need at least 2 years of receiving OT since it's considered variable income. This is a requirement straight from HUD/Fannie/Freddie, so all lenders will follow that rule for FHA/conventional financing.

Hi Brittany, thanks for replying. I'm not sure I understand what you're getting at. Would they want to see 12 months of my current rent payments or 12 months of rent payments being made on the property in question? I don't have rent payments currently as I am living at home with my parents/corporate housing while at work.
I would prefer to use the property solely for investment purposes and Not occupy it. I am however open to occupying it for a year in the case of FHA.

Im saying that if you decide to go with an investment property loan and not occupy the property, you may need to show 12 months of rent payments from where you currently live, and if you are living rent free, some lenders will disqualify you. This doesn’t apply to all programs, just something to be aware of if that’s the route you choose. 

[Nick Cascio]

Quote from @Dave Skow:

@Nick Cascio thanks 1) if your friend is a strong buyer - going in jointly might be an option ...if you are able to do this - meet with a real estate attorney and get everything hammered out in wirting with the partnership ( eg... what happens if one partner wants to exit the property in the future and the other person doesnt ) 2) consider buying and financing it as a rental property or using a DSCR ( debt service coverage) type loan 3) consider additonal co borrowers that are strong ( relatives ) 4) obtain a new job that has a salary that can be used 5) wait to buy unitl you have the seasoning for the variable income

Hi Dave, thanks for replying. How common is it for two individuals to go jointly on a mortgage for investment purposes? What are the implications of this? Would it be viable or worthwhile to open an LLC for this purpose?

[Dave Skow]

Quote from @Nick Cascio:

Quote from @Dave Skow:

@Nick Cascio thanks 1) if your friend is a strong buyer - going in jointly might be an option ...if you are able to do this - meet with a real estate attorney and get everything hammered out in wirting with the partnership ( eg... what happens if one partner wants to exit the property in the future and the other person doesnt ) 2) consider buying and financing it as a rental property or using a DSCR ( debt service coverage) type loan 3) consider additonal co borrowers that are strong ( relatives ) 4) obtain a new job that has a salary that can be used 5) wait to buy unitl you have the seasoning for the variable income

Hi Dave, thanks for replying. How common is it for two individuals to go jointly on a mortgage for investment purposes? What are the implications of this? Would it be viable or worthwhile to open an LLC for this purpose?

 @Nick Cascio- thanks ...its common to see partners buy using the LLC format .....its also common to see partners buying in just their own names ....either way you will want to have all the bases covered in writing so there are no major issues down the road

[Jacob Sherman]

Is an investment property what you're looking to get into ? 

[Nick Cascio]

Quote from @Jacob Sherman:

Is an investment property what you're looking to get into ? 

Yes, that's the goal

[Jacob Sherman]

Quote from @Nick Cascio:

Quote from @Jacob Sherman:

Is an investment property what you're looking to get into ? 

Yes, that's the goal

 Would be no issue for investment property . You'll be able to utilize no income no doc programs 

[Brandon Croucier]

12 month bank statement program seems like the best bet. Would love to connect and see how I can assist you a bit further.