Best Way To Purchase A Combo Investment/personal Home?

I'm in college and I'd like to get started early in REI. Since I am only working part-time, my income is fairly low right now.

I have noticed that if I were to purchase a house, I can easily get 3 roomates to pay around $300 or more in rent each, more than covering mortgage payments and property taxes, and allowing me to live essentially rent-free. Obviously there would be more maintenence and whatnot than if I just lived in an apartment, but I am definitely up to the task.

Now for the question... what would be the best way to go about this? I think with my current income level, despite the ability to get roommates, I will not qualify for much of a mortgage loan. The way I see it, I have at least two options:

1) Have parents co-sign on the loan. They have absolutely no problem doing this, but I'm not sure if I would get the best possible rate this way.

2) Put down a down payment and have the loan actually taken out by my parents. I would then simply pay them the mortgage payments. This wouldn't be a big deal, except I would lose the tax benefits since I wouldn't be the actual mortgage holder.

Which would be the better way to go? If I went with option 2, do you think it would be possible for the mortgage to be taken over by myself at some time in the future? Sort of like subject-to, I suppose? I would like to eventually be in this totally on my own without help from the parents.

BTW, I have over $30,000 saved up which I could use for part of a down payment and other costs. I'm looking in the $100K range, and have plenty of time so I am going to focus on motivated sellers so that I can get a better deal.

Thanks for any input you can provide!

Comments(6)

  • bansal9th November, 2003

    If you are employed you can could possibly get a stated income loan, or if your credit is good you could get a 100% no-doc loan (if owner occupied). I can help you with this, send me a private message if interested.

  • makingaliving9th November, 2003

    If you have a good credit score, maybe you could get a NO-Doc financing in your own name, assuming you are of age, and due to the fact that you will be living there. Your $30,000 in savings would be proof enough that you can make the note. No need to tell them about the roommates. The interest rate might be a tad higher, but hey, you'll have roommates. Of course, Mom and Dad's signatures would always work.

  • jmBROKEr9th November, 2003

    Your best bet is to have your parents buy the house as a 2nd home and you pay the mortgage. Keep records of the payments you make, then in about 1yr, have your parents sell to you using a gift of equity. W/ 12mo record of mortgage payment and parents gifting you equity, you could easily apply for a mortgage under your name then and get better rates. Based on your scenario, you would need to put too much down now and have a higher rate, then if your parents would buy and then sell to you in 1 year. Keep the down payment for other investment opportunities.

  • Auream9th November, 2003

    Quote:
    On 2003-11-09 22:18, jmBROKEr wrote:
    Your best bet is to have your parents buy the house as a 2nd home and you pay the mortgage. Keep records of the payments you make, then in about 1yr, have your parents sell to you using a gift of equity. W/ 12mo record of mortgage payment and parents gifting you equity, you could easily apply for a mortgage under your name then and get better rates. Based on your scenario, you would need to put too much down now and have a higher rate, then if your parents would buy and then sell to you in 1 year. Keep the down payment for other investment opportunities.


    Thanks, I was thinking that this would probably be the way to go. In this scenario, even though I am paying the mortgage, would I be unable to gain any tax benefits since the mortgage is not in my name? Conversely, would the parents be able to gain these tax benefits? What about tax write-offs like depreciation, utilities, maintenance, etc. on the portion of the house used as "investment?" Would I be better off not worrying about that until the house is completely in my own name?

    Thanks!

  • Auream10th November, 2003

    Quick bump to this thread....

    Also, does anyone know what type of rate my parents might be able to get if they take out a mortgage on the house as a "second home?" Basically, would it be a lower rate than an "investor-rate" loan?

  • dgtop10th November, 2003

    Yeah second house rates are much better. Only slightly higher than primary.

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