Newbie question from a first-time investor

[James Z.]

Hi all - I'm just getting started in real estate investing. I have not yet attempted to buy my first property. I understand mortgage basics, but the most real-world experience I have with loaned resources is my car loan. I suppose I would like to give some basics of my situation, and see if any of you seasoned veterans are willing to give me a general sense of what I might be able to do with it.

I'll be investing in Washington, DC. Properties here are expensive...most 1-bedroom units that I have looked at (that aren't entirely dilapidated) are running between $200-300k. I have about $200k or so in assets that I intend on pouring into real estate investing. However, my primary concern is that my income from my day job is very meager....around $40k/year. I have decent credit, but it's only from paying off credit cards (no debt) and my car loan on time - and I'm not sure if the source of my credit is considered more than the score itself.

If I go to my community bank with a well-drawn out business plan and proof of my considerable assets, will I be able to get a mortgage on a property in the range described above, 200-300k, if I am able to put down the 20%? Or is the tiny number on my bi-weekly paycheck going to kill my chances?

Also, I should say that I'm not set on 1-bedroom condos, they are just what I'm most familiar with. If you have examples of other things that could be done with that money, I'm all (wet) ears.

[Jesse Gonzalez]

I'll answer the questions.

1.and I'm not sure if the source of my credit is considered more than the score itself.

The source of credit doesn't matter, the score is what the lender will base maximum loan to values off of and also the pricing of the loan.

2.If I go to my community bank with a well-drawn out business plan and proof of my considerable assets, will I be able to get a mortgage on a property in the range described above, 200-300k, if I am able to put down the 20%? Or is the tiny number on my bi-weekly paycheck going to kill my chances?

Lenders are only concerned with debt to income ratios these days, the other assets you have won't matter unless they sit in a bank account and will be used as down payment funds. For instance, the bank doesn't care if you have a bentley worth 150K paid off or a honda civic worth 2k paid off, they don't care about that stuff. I ran some prelim numbers for you, I don't know what the property tax rates are in your area, and I also don't know anything about your other monthly debts that show up on the credit report. With 40K annually you can be very safe to say that your total monthly payments cannot exceed $1,433.33 per month, this includes principle/interest/property taxes/and home insurance. It also includes all other payments that reflect on your credit report. I'm not going to get into the possibility of offsetting monthly debt with rental income because that's more than I care to do here. With a 200K purchase price and a 20% down payment you'd be looking at a monthly principle and interest payment of $810.70 per month. As long as the other items I just mentioned above do not exceed an additional $622.63 per month then you should qualify for that loan.