Need Advice from Investors

[Devang Teewar]

Hello Investors,

I jut got to the bank for my mortgage pre-approval to see how much I am qualified for. And to my surprise as with the new rules, they do the stress test or qualify at 5.14% interest rate and looking at my salary and debt ratio, I am only qualified for 200K!!

So demotivating as I was qualified for more than 350K before the rules changed! :(

Now with the existing rules, I need your advise how to proceed further as I am also looking to have my personal house.

1. Buy the house for investment with the qualified mortgage amount and rent

2. Buy the house (late 80s) and do house hacking until I build the equity to refinance and buy other house and renting the first one?

Please advise

Thanks

Devang

[Jacob Perez]

@Devang Teewar The mortgage rules have made it really challenging on everyone. If you're putting less than 20% down, the rules shouldn't have really impacted your approval. With that said I'll give you a few strong tidbits that will help you. If you want to investigate this a bit offline I can see if the bank is missing something (they usually are).

Whether you're house-hacking or buying an investment & renting, it won't make much a difference because when you apply for the next purchase you can factor in the rental income you'll eventually receive from the unit you're currently living in.

I would focus on two things:

1. Try to find something that rents for twice the amount of your mortgage payment (might be hard at 200K but I don't know your market). The reason for this is the good lenders typically offset the mortgage payment with 50% of the rent, not the full amount so if you rent for $2000 & your mortgage payment is $1000. On the application that will be a wash, and you'll qualify for the same amount on your next home.

2. Try to find something you can force appreciation on right away through reno. If you buy something, add renovation & can boost the value enough to refinance  and pull down payment to purchase your second (given the ratios work) you can get to your second house fast.