First Time Home Buyer Programs - True Story
A Fast Track to Be A Millionaire
Lady J. came to my real estate MeetUp to learn about home inspection two years ago. She was planning to invest in real estate since the housing price had been picking up rapidly.
At that time she was working multiple jobs in the food and hospitality industry trying to save up enough money for the downpayment.
Instead of looking for a fixer to gain the potential extra equity appreciation, I suggested that she look into buying a 2 - 4 unit multi-unit single family home. The benefits are -
- As a first-time-home-buyer she can qualify for a low down payment home loan, as low as 3% - 5%, for the 1- 4 unit property. 3% of a one million dollar property is only $30,000 which is a reachable saving goal for her.
- As a multiple family property, she can live in one unit and rent out the other units. And 75% of those rental income can be used as qualified income for a higher loan amount. Plus, the rental income can pay for part of the mortgage payments and help her building up the equity.
I consulted her according to lending guidelines, and together we for over one year. She paid off some credit card debts and got the credit scores up. She turned her 1099 contractor job into a w-2 employee job and still works at 2 other part-time jobs which she had been working there for two years.
While she was saving for downpayment, increasing her total monthly income, and looking for potential property to purchase; I was running the home loan numbers and letting her know whether the particular property she interested in was a financially fit for her at the time.
We balanced among required down payment, qualified income, potential rental income, total expenses, and the current interest rates.
Twisted and turned. Hoped and prayed.
Through determination she finally brought a 3 unit property at the price of $730,000 in 2019. She lives in one small unit and rents out the other two larger units. And the numbers works out great -
Purchase price = $730,000
5% down payment = $36,500
Title + Escrow + Prepayment = $8,913
Seller credit for some repair = $5,000
She bought the $730,000 property with less than $45,000 cash.
With a 30 years fully amortized fixed interest rate at 4%, her total monthly housing payment is about $4,375. Which includes principle, interest, mortgage insurance, property tax and home owner insurance.
The total income for the 2 unit 2 bedroom apartments in Los Angeles is $2,000 x 2 = $4,000.
Her net monthly housing payment is $4,375 - $4,000 = $375.
Consider the tax benefits of owning a property, Nicole said the property is paying for itself.
Suppose she keep the property for 30 years and housing value appreciates 5% each year. She is destined to be a millionaire for sure!
She was an immigrant to California, a single woman at the time and without any family financial support. But she held on to her dream and work hard. In just 1- 2 years her made her dream came true. I am so proud of her, and so thankful for Fannie Mae, Freddie Mac and FHA for those low down payment programs helping first time home buyers.
Recently I sent her a happy birthday note, and she replied that she is saving money to buy her next dream home.
“America The Beautiful”. I love to sing the song.
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