I have about $7000 in my stock broke account. I work part-time(20 hours a week) earning $1360 a month. my FICO is 601 ( and will go up in a few months )
Since i live in California Bayarea, i cannot invest in anything here. everything is over priced. I met a REO Director from Huston, Texas. We found a property that is about $10K below market price ( asking price $102K ) .
When i try to get a loan, Loan officer said i do not qualify for a $100K Loan. ( He said this is an investor loan, we need 20% down, blah, blah)
Please let me know how would you guys approach this situation.
HERE IS WHAT ONE OF THE LENDERS SAID. Please tell me if this is true.
Thank you for your inquiry,
I must assume that you would not be purchasing this property for owner occupancy. As a non-owner occupied property, most lenders will require a 20-25% downpayment. There are some lenders who will finance up to 90% on non-owner occupied properties, but the interest rates will be higher and the qualifying income will be tighter.
This is an example of what would be required to qualify for a loan on a $102,000 property as a non-owner occupied borrower.
Down payment $25,500
Loan Amount 76,500
Closing costs (approximate) 3, 570
REQUIRED INCOME $26,912
Your Income $16,320
Unfortunately, even if you had the required down payment and closing costs, you would not qualify for a loan with your current income. If you could increase your income by another $10-12 thousand you would then be more likely to qualify for this property.
If you lived in the house it would take an income of Apx. $33,000 to qualify for a $100,000 loan with $2,000 down and closing costs of Apx. 3,600.
I hope this information is helpful in planning to achieve your goals.
It is true for that lender. Lenders usually want you to have some of your own money invested in the deal for fear that you may just walk away when you hit a financial crunch. From their own experience, lenders have learned that foreclosure rates increase as the borrower’s equity decreases.
All the advice above about lenders and such is good, however I am more concerned about what you said about living in California and the REO guy.
You say you can’t buy anything where you are… So if someone was in pre-forclosure on a 250k house and said they would just GIVE you the house and all you had to do was find someone to live in it and lease to own or find a buyer in 30 days or less you wouldn’t try?
When you really look at it all REIs can’t AFFORD these properties, because we don’t want to have to make the payments. We want someone ELSE to make the payments for us or we have enough cash to make a few payments while we find a new buyer who will cash us out.
Also you mentioned this REO guy in Texas…
I would like to know him too! heh (seriously I would!)
Was this property in Texas? Not good to be buying property far away as a beginner, how can you take care of things? fix things? etc.
10k below fair market value (FMV) is hardly an investment. More like a discount for a couple looking to own their first home.
I don’t know what your monthly obligations are but you will either need a stated income or no doc product or you debt to income ratio will never work. This is where you are running into the most difficulty.
With a 600 score, you should have no problem getting 90% on an NOO property. Based on your down payment and price of desired property, negoitate for a 6% seller concession and find a loan officer/broker knowledgable on stated/alternative doc programs. You should have no problems