First Time Buyer Seeking Help to Find Creative Financing

[Ben Tilbury]

This morning I met with a local mortgage broker here in San Luis Obispo, CA in order to get an idea of what I might need in order to qualify for my first mortgage. I am searching for a multi-family property within my area although since prices are outrageous here ($650k+ for multi-family properties) I am also looking out of state. As a first time buyer, I figured a FHA loan might suit me in order to keep the down payment smaller. I went into the meeting with an open mind knowing that since I haven't filed tax returns in the past few years that I would not be at the stage of applying for the actual loan, it was solely my goal to find out the requirements and more facts on the best loan option to suit me hopefully in the near future, as its my goal to purchase my first property by the end of the year. The first thing she said was that a 2 year employment history (in the same field) with tax return filings is a necessity in any loan application. This was not a huge surprise but already I could not supply these since I have been doing under the table contract work the past few years and working on a start up which shows no profits currently. I did just start another job to supplement my income but its a serving/bartending job at a well known establishment which still doesn't pay enough to qualify me for a loan even if I was working there for the past 2 years. As a sample loan we ran the numbers for a $400k conforming loan with 5% down and a high 7% financing fee; which after taxes and property insurance came out to around $2900 a month. Now considering most banks require you to make at least 2X and sometimes 3X the cost of the payment that would mean my taxable income would have to be around $6,000 (which it is not). I have heard that the potential income generated from the other units of a multi family rental property may be used in adding it to ones own income on the FHA loan application? Another factor she brought up was that if we did go the route of FHA (which she recommended against) the insurance premiums on the FHA loan were recently raised to 1.75% in the past year (and tend to be constantly changing) as well as the annual premium of around .85% which makes a large difference which must be paid monthly until the end of the loan. Although I have a very positive mindset this has me thinking that I will have to find a different route to getting financed and eventually purchasing my first property. If anyone can lend some helpful information or describe their first purchase if it was under similar circumstances then I would be grateful. Thanks for reading! I look forward to hearing many of your experiences and out of the box techniques to finding financing for an investment purchase, I appreciate your help and time. ~Ben