I have what can only be defined as an obsession with becoming successful in the future, and I realize the best way to do this is through real estate. I’m currently 20 and have roughly 4k of credit card debt with a total of a 6k limit across 3 credit cards. I’m in the process of paying this off, my loan officer said if I get it below 40% I should be able to get a VA loan (Air Force vet). I’m paying off roughly 1k per month, and can get my total debt down to $2500 in a few weeks.
My plan is to try to close on a house by April to get the 8k tax credit and to get out of my apartment. I’m then planning on going halves with a friend later this year. The house would be in his name, but I would be a silent investor. The idea would be to hold onto the house for a year or two (I have friends who I could rent it out to) and sell it when prices go back up.
Does this sound reasonable? I have a wife who works and 2 room mates which makes things easier. My credit card debt is from when I didn’t have a job for awhile. I now make $15 an hour, which isn’t great but is enough for someone my age, consider I live with 3 other people and my wife also has a job. I can easily afford a house as well as the 50% I’d be paying into the investment property, the only difficulty is securing a loan since I have debt and literally no money for a down payment.
After I got out of the Air Force 1 1/2 years ago (only had a year of service, which still qualifies me for a VA loan), I became a bus boy for a year. I then moved to Vegas (Where I used to live as a kid) and became a supervisor for a show/attraction on the strip. I talked to a couple loan officers who say that it could be difficult to secure a loan without 2 years of working in the same field of work. The loan officer I’m talking to now says it shouldn’t be a problem as long as I get my debt ratio low enough.
Is there anything I’m overlooking? On a $100-$130k house what kind of money will I need for closing? Should I be able to wrap all of my costs into the VA loan? If I do a balance transfer on my card in the middle of the closing to pay for costs, and then pay it off before I close, will that raise any flags, or do they only check my credit at the beginning and end of the process? I have a general discharge with honorable conditions, and was told when I was discharged that I would be eligible for all VA benefits including a VA loan.
I’m determined to get a house, so if anyone could offer some advice of point out any obstacles I may have overlooked I’d appreciate it. On a side note, my mother is also a real estate agent and would most likely give me a kickback on her commission after closing.
Well I do not know about VA loans but you have a debt to income ratio you need to fall into and most loans are still under 45% DTI. This mean all your bills, credit card, mortgage, taxes, ins, student loans(anything showing on a credit report plus the taxes and ins on home) must be less thn 45% of your Gross Income. Also, you can not include the rental income if your buying owner occuppied which you are.
Seek out some experienced loan officer or better yet, goggle VA loan requirements or post a question on here for them.
2 years same field of employement is very important these days
Getting a house at a young age is great. Go for it, but remember you need to be able to afford it.
Thanks for the info. Combined with my wife, if we had a mortage of $800/month all of our bills and mortage would total roughly 40% of our income.
I’ve been thinking of starting off investing in mobile homes to get a feel for real estate investing in general, but the $8,000 tax credit (Which would require a larger purhcase to qualify for) seems too good to pass up. Is it really as good of a deal as it seems? Or do you think real estate prices will be higher for the next couple months because of the large number of buyers trying to qualify? Would it be better to forget about the tax credit and just start investing in mobile homes, try to build a positive cash flow, and later this year purchase a house as a primary residence assuming that there will be less competition after the first time home buyers tax credit deadline has passed?
When researching it I read something that roughly said when buying an eligible property, you could recieve the tax credit before buying the property in the form of a loan which can be used as a down payment. Can anyone explain this?
I am a Mortgage Loan Officer/Real Estate Investor so I think “out of the box”.
Previous posters are correct, your current monthly payments plus proposed PITI cannot exceed 45% of your gross monthly. You have a few things working against you, your lack of a stably job history (including 1 yr in the military) and complete lack of funds. You can always propose a “seller pays closing costs” and tack on an additional $2500 to the price of the property if the appraisal amount is above the asking price.
VA simply guarantees the loan (up to a certain amount) to the lender should you default, you still have to qualify based on fairly normal criteria. Many people with VA eligibility still chose to apply FHA.
You don’t want to start floating credit cards in the middle of the qualifying process. Even if you pay it off before you close that info may not update on your credit report immediately. This will halt your closing while you solicit the credit card company to update the information or verify the card is paid off. They have 30 days to respond.
No money is a huge handicap padwan (star wars term for apprentice) . If I were you this is what I would do. Do you have a tax return coming? What a gentleman said in another post was a great idea. You can buy a used mobile home in a nice trailer park for 3K to 5K and own it outright. Then you only have to pay the space rent $150 to $250 mo. Live there and SAVE MONEY like a fanatic! When I was younger I tripped upon many amazing deals that I could have done if I had JUST A LITTLE BIT OF MONEY! No money at all disqualifies you from most. With cheap overhead you can use most of your money to start buying/selling real estate. You can even rent the mobile for $250 $300 a mo. and generate positive cash flow if you don’t want to sell it.
I have never heard the tax credit being used as a loan for costs.
Wow, how did you only have a year of service. I enlisted in the Navy as Nuke Electrician…I would have loved to have gotten out after a year. Submarines suck! and being a Nuke sucked!
Usually that’s under a General Discharge for something like and Admin Sep. I escaped Nuke world to fly… Going Officer, misbehaving, or riding out your time is about the only way out of it.
just make sure you have a way out of whatever you get into.
business partners can be a real pain.
ask yourself this question on a regular basis… “what if this doesn’t work, what will I do?”
You asked about obstacles you may have overlooked and one big one is inexperience.
Before signing off on a loan and with limited cash and rei experience, I would highly recommend, starting off small and with limited risk.
Work the kinks out of your system by wholesaling (locking up houses under contract and flipping them to other investors who will close on the property).
If investors like your houses- you know y ou’re on the right track and can think of holding properties yourself.
If no one wants to touch your properties, arent’ you glad you didn’t risk your credit and limited cash on the deal? You’ll only be risking a nominal amount in the form of option consideration.
Go this route and you won’t regret it
You are all balled up. Everything in one big pot. Buying a house to live in is separate from buying a house for investment. A house to live in is not an investment issue it is a lifestyle issue. If you want to live in the house because it has the park down the street and the school is in walking distance and you just love the big tree in the front yard and you really want to own that house then buy that house to live in. Use your VA for that and you get the $8k credit. If you are buying a house as an investment (which I recommend) buy the house for investment. Use the money you make from the investment house to pay for the house you want to live in. You can’t buy an investment house with a VA, you can’t get the $8k credit on an investment house.
If you buy a house for an investment and say it is to live in that would be fraud.
As far as going into business with your friends, I recommend that you use my rule. Don’t go into business with anybody you can’t sue. If you have no problem taking your buddies to court if you need to or evicting your friend then by all means go ahead. If that won’t cause you a problem at the next cook-out or Christmas gathering then you can go into business with them. Friends come to you because you have affinity for each other. They usually don’t come to you because they have a certain set of business acumen. You pick business partners because of what they bring business wise to the table not because you like them.
- Pay off all the debt quickly and look into how to maintain and increase your credit score
- Save up 5-10 thousand
- go for the silent partner deal for first property (don’t waste your credit on this one)
- since you are essentially doing a rooming house (by renting to your roomates & gf) you will have a lot of revenue
I would set it up so that you pay a very low monthly obligation while the other tenants pay off most of the costs). Then continue to build your capital
until you can do a 2nd project by this time hopefully your credit situation will be excellent since you paid off all the debt in the beginning and [continue to pay off your cards on a monthly basis]. complete the 2nd project in your name. make sure its cashflow positive.
Now you are living rent free and have 2 properties paying themselves off.
These are the precaution that you should keep in mind while buying house:
–Choose reputed companies to help you buy house.
–Plan a budget before venturing to buy house.
–If you want a loan for buying house then find out more about banks providing you loans to buy house.
check out SONYMA…
they’ve got incredible programs right now.