How to secure financing for a newbie couple

Question

Hi! My boyfriend and I are both 22 years old and want to buy our first property, hopefully a four-plex, this year (Milwaukee, WI). We are going to try for an FHA loan so we can house hack

The issue I'm worried about is that we are not married, he makes all the money, and I'm the only one with good credit (because he didn't know about a past debt). What kind of issues might we run in to? Is there any way to solve this? How can we go about securing financing within the year?

Since I'm new to REI, I appreciate any advice! I will gladly try to learn from others' mistakes! Thank you so much!

Andrew Postell · Answer

Account Closed some of what you are asking is so specific to your individual case that I would highly recommend finding a lender who writes FHA loan AND that specializes in investment properties to guide you best but here's some general information that may be helpful:

FHA minimum credit score is 580 but you need to have more downpayment.  Banks have the option of making their own FHA credit limit higher if they wanted to though.  So find a FHA lender with no "overlays" for the most flexible options.

FHA does allow a "significant other" to gift their partner funds to buy a home for downpayment and closing costs.  If the two of you are not married you would have to show proof that you are living together to use this benefit.  Your significant other is allowed to gift you a lump sum but you cannot use his/her income without using them on the application.

FHA does allow rental income to be used on the subject property but again, the bank you speak with may not because of an "overlay". Seek out a flexible lender to use this income.

Hope this helps!

Shawn Ackerman · Answer

Hi Account Closed congrats on getting started.  I'd suggest finding  local lender and see what pre-approvals you may be able to get.  If you are not pre-approved the lender will tell you the reason(s) why and you can use that information to begin the building process.  Most important factors to a lender are Employment(income), Debt and Credit.  With you having one and your boyfriend having the other you should be able to make something work.  Persist and you will WIN!!!!

Brian Truman · Answer

Hi Account Closed,

Congrats on getting started in REI! That is a great way to get started. I'll share with you my observations of others who have done the same thing as you, so please understand that you need to do your own due diligence, and not take my observations as fact!

I believe you may count, under the FHA guidelines, the income of the property you are looking to buy if it is fully rented, and you plan on occupying one of the units... I do not know if there is still an FHA program for such a purchase, so make sure you have a good mortgage broker or banker that knows the ins and outs off the FHA program. Happy hunting!

Brian

Account Closed · Answer

Thank you so much everyone! All of this advice has really got me thinking. I will definitely do plenty of shopping for lenders and see what they offer. I had no idea that great credit wasn't required. I will do my best to make this happen for us. Thank you again!

Mike Flatow · Answer

I'm wondering how much you are planning to spend. You can definitely get a loan on 4 plex through FHA but the qualifications are more stringent than traditional loans. There will be a loan limit on what you can borrow even though they are higher than one might expect.  I would consider cash flow on the property and the amount of money you plan to put down before the credit issue.  He can fix his credit without any cost in around 6 months if his past debt you mentioned isn't a huge glitch.  Might be better to clear up the credit stuff before you leap into an investment simply for the ease and cost of getting a loan. I wouldn't have considered FHA as a first option but I like how you are thinking at such a young age.

Marcus Auerbach · Answer

Hi Sarah, perfect credit is a common myth for a primary residence. It's great if you have good credit, because it gives you a broader choice of programs, but there is a program for almost any credit situation - maybe fewer choices. One of my favorite lenders has done a very good job with similar situations in the past. They actually have in house credit repair/counseling (for free) and we have seen specacular results with clients who are motivated to work on the issue. I will PM you the contact information.

How to secure financing for a newbie couple

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