Let me summarize my situation and see if I might be being too hopeful. I’m a 28-year-old male and the elderly man who owns the house I’ve been renting is offering to sell it to me. I really like the house; it’s split into two units, which means I could rent out one or both. He’s asking $250,000, but I’m currently working on paying off debt and I’m unsure if I’d even qualify for this opportunity given my current financial situation.
Here’s where I stand:
- Credit score: ~670 (Experian)
- Credit card debt: $11,000 out of $15,000 limit
- Personal loan: $5,000
- Savings: $2,000
- Car value: $4,000
- Annual income: ~$45,000, with a potential increase to ~$50,000 soon
I’m thinking about buying this place, renting out one unit to cover my costs, and possibly renting both units for a profit in the future if I move to cheaper housing. However, I realize my financial situation isn’t ideal right now and I lack substantial knowledge in this area. I’ve seen that a Debt-to-Income (DTI) ratio of up to 36% is generally acceptable for mortgages, which gives me some hope. I wanted to get advice from the knowledgeable members of r/Debt who have helped many others.
Extra details:
- My family might help with a $10,000 down payment.
- My brother has shown interest in investing in property with me. Can we buy the house together if I can’t get approved on my own, or is that only for married couples or businesses?
I had consolidated my expenses and was looking for a second job to pay off my debt more quickly, but the timing might not work out within the 2-month window I have.
Am I aiming too high, or is there a possibility I could make this work?
offered a house but was not in a good enough position to profit.
This is a gravely flawed concept.
You owe money. First, pay it off before acquiring a home. You owe money on your debt—35 percent. That does not include your utilities, rent, car, insurance, etc.
If you decide to purchase this house, your $2000 in savings will be used as the down payment. When something fails or you can’t get a tenant to pay on time, how much money will you have saved?
You don’t want to live in poverty, dude. Based on your present income, you should be making approximately $120,000.
To be honest, you’re talking about keeping your automobile, which is a lower end/beater, and your debt in check. With your income and lack of business expertise, I’m not sure whether you can get a loan to rent the other half. particularly if you lack the confidence to perform the maintenance on your own.
If you think it’s possible, apply for a USDA loan after researching house loans and determining whether you can even qualify for one based on where you live. If banks believe you can handle it, they will essentially give you the go-ahead, but based on what you’ve described, I believe there is now little possibility.
Owning a home is often romanticized, but there are some important points to consider:
If you have a mortgage, you technically don’t fully own the home. The deed is held by the bank as security for the loan, making the house collateral. In this arrangement, you’re the mortgagor, and the bank is the mortgagee. The term “homeowner” is used casually, but legally, a homeowner is someone who owns their home outright.
In addition to the mortgage, you’ll need to cover property taxes, insurance, and various maintenance costs. This includes utilities like water, trash, internet, gas, electric, and sewer.
Any repairs or replacements are your responsibility. If the roof needs replacing, you’ll need to come up with $10,000-$20,000. If there’s an issue with the foundation or sewer, those costs are also on you, often running into thousands of dollars and needing proper repairs.
Given your current financial situation, getting approved for a mortgage, including an FHA loan, might be challenging.
You likely can’t afford this house on your own and may not qualify for a mortgage by yourself. You don’t have the funds for a down payment and borrowing the full amount isn’t an option. Additionally, you lack the financial cushion needed to handle being a landlord, including potential vacancies, non-paying tenants, and maintenance issues.
Consider whether your brother might be in a stronger financial position. If so, you could explore buying the property together as an investment. However, since you’re not married, you’d need an attorney to draft a formal agreement.
Make sure to thoroughly research the costs involved, including the mortgage, property taxes, and insurance, so you fully understand the financial commitment you’re considering.
If I could, I would settle the debt first. A year and a half ago, I paid $160,000 for a house, and I earn $52,000. The monthly mortgage payment is the highest amount we could comfortably afford. It is highly possible that you would not be approved for a loan, and if your brother has better credit and financial resources, you would need to co-sign. Without a doubt, consider your selections to determine which is the most sensible for you and the most economical.
I appreciate your time and thank you for the insight. These are definitely topics to think about.