Really trying to get my first deal. Talk to me guys

[Donnell Durden]

Below is the email I've been sending to Mortgage Brokers. To me this looks like a clear deal. Any thoughts? Ideas on how I can get this deal done in my condition?

Hey Liz,

I am Donnell Durden, and I'm interested in investing in my first home. I was recommended to you by a Banker at TD Bank. He also mentioned that I may be a good fit for the 203K Loan either now or in the near future. I have my eye on a 4 family property in New Haven listed at about 95K. I think we could get it for cheaper because from the pictures it needs work. But at least there are pictures so thats a good sign. So I'm assuming with repairs I'd likely need a loan of about 120K

http://www.realtor.com/realestateandhomes-detail/8...

*If you steal my deal I want a wholesalers fee lol*

So here are my stats

Age: 30

DOB: 03/10/1986

Single

Student: Fulltime

Monthly Income: $1600

Monthly Expenses: $950

DTI: 59%

Student Loan Debt: 35K

Student Loans: deferred

Rent: $0

Car Note: $0

Loan amount: 120K (give or take)

Cash on hand to put down: 7K

Credit Scores: TU 666 EQ 625 EX 656

Income: around 20k

A couple of small employment gaps in the past 2-3 years

I can possibly come up with more money for the down payment if absolutely needed. My credit score should jump a bit soon I recently (like yesterday) paid off a large portion of my credit card debt. I will be under 30% utilized really soon. Also I recently interviewed for a full time position at my current place of employment where I'd be making at least 35K. *fingers crossed*Also my employment gaps are due to my entrepreneurial endeavors.

Here are my take on the house's potential. I believe this area will bloom in the years to come. Especially being so close to Yale. I Could live in one of the 2 bd units and rent out the other 3 unit. This could yield over $400 in cash flow after expenses. Heres kind of how I see it and I like to consider the worst case scenario.

Two 1 Br $700 X 2 ($1400)

One 2 br $850

Monthly Projections

Rental Income: $2250

Expenses $1755

Mortgage: $800

Tax: $200

Insurance: $100

Repairs $100

Property Management: $300

Cap Ex: $100

Vacancy: $155

Cash Flow: $495

To me this seems like a great deal. I look forward to being a property owner and land lord. So what does a guy in my situation need to do to get this house? and if it isn't possible to do in my current financial state please inform me on what specific changes I need to make (boost score, bigger down payment) and I will try my hardest to reach those heights. I realize these houses come and go fast so If this deal passes your information will still be greatly appreciated and utilized for I am on a mission to buy a property so I will continue to search for deals. Thank you for your time and consideration. Feel free to email or contact me via phone. What ever I need to do to make this work.

Best,

Donnell Durden

Help me guys! I texted the agent today that was on the realtor.com page she barely seems interested in selling it. It's in a pretty rough neighborhood but I don't mind it. I've contacted banks and some of them have stopped offering 203k loans. TD recommended me to McCue and McCue recommended me to Merrimack... Thoughts? 

[James C.]

Donnel,

Ok... here goes... I haven't done this in a while, so there may be a better way to do this.

You need to calculate two ratios, The "Front Ratio" and the "Back Ratio". Simply put the "Front Ratio" (FR) is how much your housing expenses cost vs your income. The "Back Ratio" (BR) is how much of your income is take up with all your debt. Generally FR should not be more than 28%, and the back ratio 36%. FHA limits are a little higher 29%/41%.

So... from your narrative your income is 20,000 per year (we'll ignore the employment gaps for the moment) so that is $1,667 per month. So, $1,667 * .28 = $466.67 available for a total monthly payment (conventional) or $1,667 *.29 = $483.33 FHA.

Now your BR is more difficult to calculate given what you have indicated, but I'll take the 950 number as all debt, so $1,667 *..36 = 600.12 and $1667 * .41 = 683.47 minus the house loans (600.12-466.67 = 133.45 and 683.47-483.33 = 200.14. Those two numbers indicate the monthly payment of all of your non mortgage debt you can carry. With 35K in student loans (they count even if they are in forbearance) and any credit card debt you are over 200/mo in payments, and the underwriters will say "no" to the loan. Also at 120K you are scraping the minimum cash in for FHA.

The underwriters may not count the income because it's not actual, so you need to support the mortgage on your own, which is not possible given your current situation.

Your employment history is not helping either, but the underwriters could accept your explanation and be ok with it.

Best option: get the 35K job, pay down debt (See the "Afford Anything" blog, I get nothing for the plug), build your down payment, and keep hunting around. 

Other Options: 

Pay off all your debt, or have a family member "gift" you the money (CHECK IRS RULES HERE)

Have a co-signer on the deal.

JV with someone

lease purchase

Hard Money (ABSOLUTE LAST RESORT, they don't like lending on OO properties)

Probably a couple more ideas around...

Good Luck!

Jim