Financing Issues - First Time Home Buy

[Nolan Brendese]

Hello All,

I'm looking for a little insight around my first home buy. Long story short, i'm currently in 24, living in Charlotte NC and looking to buy my first home to rent out to a tenant to help pay down the mortgage while I simultaneously build equity in the home so in a year or so I can take out a HELOC and use that as a down payment on my next home.

I've applied to get pre approval from a few lenders and i'm running into some issues. I only have 10,000 dollars to put down as a down payment. I just resigned a lease to my current apartment (so buying out the rest of that lease would be pricey) so I would not be able to obtain an FHA to put 3-5% down and my apartment complex does not allow subleasing. What one of my mortgage lenders explained was the following.

1: Get out of lease and use this house as primary residence: If I were get a loan amount of around $200,000 is about where I would need to be to get Pre-Approved. That is estimating a 30-year fixed rate in the 5% range. I would also need to have about 6 months reserves saved in an account (in the event any repairs should be needed or something unfortunate were to happen), and would need about 2-4% of the Loan Amount for Prepaids (Property Taxes, Hazard Insurance, etc.) and Closing Costs (Title Commitment, Attorney Fees, Application Fee, etc.)....I do not have the extra 2-4% of the loan to afford this. 

2: The pricing on an investment property would likely be in the 7% range. That would be big negative impact to my DTI and I would need to put at least 15% down.

With all that said, i'm curious what other folks with more experience would have to say about how to pivot from this scenario. Thanks to the podcast and my own due diligence i've thought of a few ways to better get started. 

1. Continue saving money (last case scenario)

2. Start smaller: HUD home or mobile home

3. Partnership 

4. Find someone else's money to use. 

If anyone has had a similar situation or knows how to best tackle this problem. I would greatly appreciate the insight.

Kindly,