Let’s start with my truth and my reality.
Yes, I absolutely was $120k in debt when I started this process. Take a huge bowl of student loans, pour in a regrettable car lien and poor credit card decisions and bake for 4 years. Yum. Well, I had all that I can eat, and I was ready to shed this extra weight if you know what I mean. So I started eyeing ways to do so in a matter of years, not decades. One of the things I came across while speaking with family, friends, and Google, was house flipping. Get a property that didn’t require much work, live in it while doing the repairs, sell and repeat. After a home or two, I would have made enough to make a couple years worth of payments at once.
Now all the research will tell you that, you have to be in the right place financially in order to buy and succeed in owning a home. You have to have perfect credit, you have to have 20% saved, emergency funds, etc. etc. I looked at it very differently.
I was spending $1260 in rent every month on time every time. I don’t make six figures, but I make good money. I had reliable roommates lined up that put me in the position to afford up to $2000 comfortably. Plus the way my hustle is built, I was confident that I could maintain my monthly payments if I were to lose a roommate. I am no stranger to picking up an odd job here and there… braiding hair, cooking etc. The way I see it if I can afford to pay that rent I could afford to pay a mortgage. It was just a matter of getting into a home. After 9 months of looking, my contract was finally selected. I dove head first into the process and this is what I learned.
Large Lump Sums Are Not Your Friend
Ask about me. I’m a hustla homie. Seriously though. I had lump sums all up and down some of my bank accounts from my various side hustles. This is no bueno. Its the auditor’s job to question EVERYTHING. So be prepared to have explanations for all large deposits and overdraft fees that aren’t tied to your paycheck that go back 3-4 months. Next time around, I plan on keeping a checking and savings account with simple direct deposits from my job. I will let the money for my earnest deposit, down payment and closing cost accumulate there. Any large sums will have been deposited at max months before I plan to seek financing to avoid any problems.
Know Your Student Loans
My mortgage company needed to see fully amortized loan payments. Meaning they wanted a statement that showed fixed payments for the life of loan. I was on an income-based plan which had my payments in a reasonable place. An income-based plan is not amortized because my payments would fluctuate based on my income. So my choices were to either keep my current plan and let them use 1% of my loan balance as my monthly payment at $830 or capitalize $10k in interest and change to a fixed plan at $580 a month. I chose the latter since it didn’t kill my DTI (Debt to Income Ratio).
The Truth About Credit
Raise your hand if each semester or year you’ve had student loans reports as separate accounts on your credit report. Raise your hand if life happened and you’ve missed a payment or two. If both your hands are up then you know my pain. Long story short, my credit was and is garbage because those two missed payments is reflected as me flaking on 6 different accounts. Yea my credit was going nowhere fast! I managed to claw my way to 630 credit score that qualified me for a 4.5% interest rate. On top of that I received a credit from my mortgage company! With that credit I wiped out the remainder of my closing cost (after the seller pitched in) and a portion of my down payment.
The Dirty Truth
Research can’t define your reality. If you are interested in a home contact a mortgage broker. They know the banks they work with and can help you determine a strategy for approval. They will also be able to tell you how many homes you can afford and how much money you need to bring to the table.
Where There Is A Will There Is A Way
Ask questions. Think outside the box. I happened to find a great home for me to start my flipping journey, but I could have lost it if I accepted “No”, or “hmmm but” as an answer along the way. There are ways to a destination that no one is aware of until a question is asked and policies are reviewed. Get a good realtor and broker behind you and get busy.
T-DUB is a fertile-minded, multi-passionate 30 something in a career she doesn’t care for trying to get these hustles off the ground. You can find her looking like she has her s**t but actually being a hot mess on a regular basis. Learn from her mistakes.