What option is best?

[Manuel Diaz]

Hello BP!

I have been around the forums and podcasts and looking through all the wonderful resources here learning a lot from you all in the past few weeks. I have decided to take it a step further and this is my very first post.

I have always been interested in owning real estate (primarily multi-family units) but I am not quite set up for it yet. I'm going through a debt settlement program and my credit is not where I want it to be. Hopefully by next year I will be in a good enough position to make this dream a reality so I am leaning as much as I can until then an formulating my plan of attack. Could always use another opinion on how to go about it.

A little background: I am an army veteran. I served active duty and national guard. So the VA loan is available to me. I am currently making $300 monthly payments into the debt settlement program as well as saving $500 monthly set aside just for investing. Once that debt is paid I will be setting aside more to my house fund. The sooner the better!

Option 1) VA loan

Low or no money down. No PMI. Sounds good to me but I believe there is a requirement that the home I buy can not require much in repairs. Is this true? I'm hoping to buy a fixer upper and force appreciation at least a little so I can live in the property over a year, refinance, gain some equity ( I think I read somewhere that most banks need you to have at least 20% equity in order to be able to refinance?), and try to do it again.Also, buying at the higher end would also mean a higher monthly mortgage payment, and with limited funds at this time it might not be the right move. But I guess if it cash flows, it might be worth it. One other thing, I believe there is something called a fund fee? Don't know if that's for all VA loan lenders or all lenders in general. Can anyone elaborate on this?

Option 2) FHA loan

3.5% down but since it is under 20% there will be PMI. There's also closing costs to consider. With an FHA 203 loan the repair costs can be rolled into the loan. That would probably fit best into what I want to do with my buy an hold strategy.

Option 3) NACA

Neighborhood Assistance Corporation of America. They are an organization that helps people with low income or credit problems (which I have) to get a home loan. No money down. They say no closing costs but there I will probably have to pay some in inspections and things. I have found other BP members have dealt with them with mixed reviews. I believe the best part about this program is that it is not based on your credit score I believe they do however go through all your credit history and try to get a better picture of your situation. The process could take a while. I will be attending one of their workshops tomorrow morning to check them out more in detail.

Option 4) Conventional loan

Easier process but I would need at least 20% down which I'm not sure I could do on my own. Maybe a strategy left for some time down the line after I have a few properties.

I know I have probably taken a lot of your time and I don't have any definitive numbers yet since I'm still working my credit issue but I just wanted to get my ideas out there and maybe some others would pop up. Thanks for reading and please reply with any thoughts on how I should proceed. Much appreciated.