Taking Out Multiple Loans

[razorback2009]

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Well, it's time for me to bite the bullet and take out loans for dental school this upcoming fall...

My 5 questions are...

1. Do you just take out one monster loan during your first year to cover the entire 4 years?

2. Do you set it up to where you get the lump sum up front, or monthly checks from your loaner?

3. For state schools, do government loans usually cover 100% of cost, or are additional loans necessary?

4. I have little to no credit history. I do not have "Bad Credit" as far as I know. I have 2 credit cards, and have never made a late payment. How willing are banks to loan dental students money that don't have much credit built up?

5. Say you were wanting to buy a home to live in during dental school...Would you take out a separate loan, or one massive loan to cover everything? (i.e. - You must take out loans for rent anyway...)

6. In your experience, who is the best source of student loans?

Thank you all in advance.

 

[Skygrandpager]

I don't know much about finance and I could be very wrong, but I don't think that you can take out loans to purchase a home and then use other loans to pay your mortgage.

 

[xhamburgersamx]

You can only take out what the school deems to be the adjusted cost of attendance. For instance, with all fees, equipment and tuition, a school may say it costs $50000 for year 1 plus $22000 for cost of living. Therefore the max allowed is $72,000 in the form of federal loans + grad plus. You can get more loans federally but only if the school allows you to go over but in such case can only be applied to housing/food.

The $72000 will be divided equally between the number of quarter/semesters your first year has. So you don't take a lump sum. Just like undergrad loans, the 3rd party lender will directly credit your student account at your school and the left over "credited" amount is your cost of living money for that quarter/semester.

 

[razorback2009]

I think it might help me better understand if I gave a little more information to work with...

I estimate that the cost of tuition for 4 years will be roughly $85k.

As far as living costs go, the average apt. where I'm going costs ~$800/month. ($52,000 over 4 years utilities included).

Which is why I am considering buying an $80k - $120k 3 bedroom home. On which the monthly mortgage payment would be around the same as the cost as renting. I would rent out the other two bedrooms for say $600/month and be able to split utilities 3 ways and actually make a monthly profit.

In all, I'm probably looking at taking out about $160,000.00 in loans!😱

I'm hoping to sell the house back for nearly what I bought it, and basically live rent free.

(Yes, I know, there are alot of hidden costs, and selling the home is not gauranteed. But for the purpose of this argument, lets just say I sold the house back for the cost for which I purchased it after 4 years.)

Even if I lost $30k on the investment, I feel I'd still come out ahead. Am I just dead wrong?

 

[punkin85]

You can only take out what the school deems to be the adjusted cost of attendance. For instance, with all fees, equipment and tuition, a school may say it costs $50000 for year 1 plus $22000 for cost of living. Therefore the max allowed is $72,000 in the form of federal loans + grad plus. You can get more loans federally but only if the school allows you to go over but in such case can only be applied to housing/food.

The $72000 will be divided equally between the number of quarter/semesters your first year has. So you don't take a lump sum. Just like undergrad loans, the 3rd party lender will directly credit your student account at your school and the left over "credited" amount is your cost of living money for that quarter/semester.

It works exactly as said above. You never get a lump sum...just the "excess" for living expenses and that comes each semester or quarter. You may be able to take out a personal loan from a bank and get a bigger sum at one time, but the interest rate will be higher.

 

[razorback2009]

It works exactly as said above. You never get a lump sum...just the "excess" for living expenses and that comes each semester or quarter. You may be able to take out a personal loan from a bank and get a bigger sum at one time, but the interest rate will be higher.

Yeah... trying to avoid taking out any more than is absolutely necessary.

Does this mean that in order to purchase a home, I would have to take out a completely different loan, and pay it off with my monthly/semester stipend from my student loans?

My income during school will be a whopping $0 per year once I start, and I don't have enough in savings to sustain payments for any longer than a few months...

I'm confused.

 

[punkin85]

Yeah... trying to avoid taking out any more than is absolutely necessary.

Does this mean that in order to purchase a home, I would have to take out a completely different loan, and pay it off with my monthly/semester stipend from my student loans?

I'm confused.

Yes, to purchase a home you need to get a mortgage. You pay a mortgage every month (just like a car loan). You can use the excess of your school loans to pay the mortgage. However, don't forget about property taxes, etc. Also, you would want to be assured that you have people to rent the rooms to. Otherwise there's a good chance you won't have enough to cover the monthly mortgage payment.

 

[Aceofspades]

Yeah... trying to avoid taking out any more than is absolutely necessary.

Does this mean that in order to purchase a home, I would have to take out a completely different loan, and pay it off with my monthly/semester stipend from my student loans?

My income during school will be a whopping $0 per year once I start, and I don't have enough in savings to sustain payments for any longer than a few months...

I'm confused.

The problem with your plan is the down payment and mortgage payments. How will you come up with the down payment? Unless you already have the cash laying around you won't be able to get the house. Loan money will not come close to covering this. If you can get a 0% down mortgage then it won't be a problem, just make sure it isn't subprime.

Also, mortgage payments are usually higher than rent payments for the same property. It may be difficult to afford that since your budget can exceed the school's expected budget. However, you may be able to get a waiver from the school to borrow more money.

Another problem will be the tenants. If you are planing to rent out the other rooms it can take a while to get tenants. Even if you do get tenants quickly there is still the problem of constant payments. What if your tenant loses their job and can't pay the rent. You will be pretty much screwed because it will take months to evict them and replace them with a paying tenant. In the meantime your mortgage payments will become backed up and you will be in financial trouble.

 

[razorback2009]

The problem with your plan is the down payment and mortgage payments. How will you come up with the down payment? Unless you already have the cash laying around you won't be able to get the house. Loan money will not come close to covering this. If you can get a 0% down mortgage then it won't be a problem, just make sure it isn't subprime.

Also, mortgage payments are usually higher than rent payments for the same property. It may be difficult to afford that since your budget can exceed the school's expected budget. However, you may be able to get a waiver from the school to borrow more money.

Another problem will be the tenants. If you are planing to rent out the other rooms it can take a while to get tenants. Even if you do get tenants quickly there is still the problem of constant payments. What if your tenant loses their job and can't pay the rent. You will be pretty much screwed because it will take months to evict them and replace them with a paying tenant. In the meantime your mortgage payments will become backed up and you will be in financial trouble.

I am factoring in everything I know to factor in...I already have one roommate lined up. If I'm close enough to the dental school, I would think I'd be able to get a 2nd roommate. If not, I'd still be paying only about $500/month for rent on my mortgage. (Less than the cost of renting).

I would try to stick to students that have loan money coming in just as I do, or parents with a monster bankroll that would have no problem making payments. I would thoroughly interview each possible roommate to make sure that they could afford to make rent each month.

Also, if I wasn't able to sell after 4 years...couldn't I just hire a manager, and continue renting out the property?

Side note... I should have saved up enough money to put about 10% down. Factor that in with the $8000 first time homebuyer's credit and, I'm hopeful that I'll be able to find a lender.

 

[adrift1984]

Also, mortgage payments are usually higher than rent payments for the same property. It may be difficult to afford that since your budget can exceed the school's expected budget. However, you may be able to get a waiver from the school to borrow more money.

That is untrue (do not post opinions).....how would you then consider that a landlord makes money if he is renting out the unit for less than the mortgage he is paying. Rent is money down the drain....OP is correct that while it takes a little money upfront, purchasing a property will save him money. I intend to do the same with my military stipend.

Rent includes the mortgage with a premium that can include managing fees, probable repairs, and a small profit margin. when you pay rent you are paying for peace of mind.....with a mortgage you will save money and get the lovely task of managing your property

 

[razorback2009]

That is untrue.....how would you then consider that a landlord makes money if he is renting out the unit for less than the mortgage he is paying. Rent is money down the drain....OP is correct that while it takes a little money upfront, purchasing a property will save him money.

👍... And if I find a really good deal... say a house in liveable condition for under $80k, my mortgage would only be about $500-$600/month.

With two roommates at $600/month each, that would be $600/month profit. Not to mention the fact that I'd be living rent free.

The only worry I'd have is having to spend time waiting on repairs should anything go wrong, as I will simply have no time to deal with them.

This would have to be understood by my roommates (hopefully other dental students). They would be fixed whenever I found the time to do so. In return, their rent would be $200/month cheaper than most other places they could find down there.

Am I wrong for thinking this way?

 

[adrift1984]

👍... And if I find a really good deal... say a house in liveable condition for under $80k, my mortgage would only be about $500-$600/month.

Considering that this is likely your first property and that you will be in deep with dental school.........I would not risk investing in just a "livable" property. I am not saying to go all out but get something that will not be a headache and likely rent much easier if it is in better condition. Also you may just want to consider a 2 bedroom condo.....instead of an actual home, you may not make a profit...but a good goal in ds would be to stay neutral in housing expenses

Before you make any down payment though do your research and make sure you know what you are getting into.

 

[xhamburgersamx]

👍... And if I find a really good deal... say a house in liveable condition for under $80k, my mortgage would only be about $500-$600/month.

With two roommates at $600/month each, that would be $600/month profit. Not to mention the fact that I'd be living rent free.

The only worry I'd have is having to spend time waiting on repairs should anything go wrong, as I will simply have no time to deal with them.

This would have to be understood by my roommates (hopefully other dental students). They would be fixed whenever I found the time to do so. In return, their rent would be $200/month cheaper than most other places they could find down there.

Am I wrong for thinking this way?

Hey stop dreaming! No way in hell the school is going to issue you extra federal loans so you can buy a house. You also need good credit, and at least 15-20% downpayment on a house these days to even get a mortgage to start paying off the house. I'm not saying your idea is bad it's just that it's probably unlikely unless you have already have a good amount of money in the bank and working, earning an income? Consult with your parents and an 80K house is probably a pretty bad house..lol

 

[razorback2009]

Hey stop dreaming! No way in hell the school is going to issue you extra federal loans so you can buy a house. You also need good credit, and at least 15-20% downpayment on a house these days to even get a mortgage to start paying off the house. I'm not saying your idea is bad it's just that it's probably unlikely unless you have already have a good amount of money in the bank and working, earning an income? Consult with your parents and an 80K house is probably a pretty bad house..lol

Am I wrong to think that the school would issue me money equal to that of what it would cost me to rent an apartment?

If they loaned me an equal amount, I would work my butt off to ensure that I had enough of a down payment to get a loan. The $8000 first time homebuyer tax credit is nearly 8% of a $100k purchase alone.

80k probably is unrealistic, but not impossible...

If I had stopped dreaming about dental school, I would have never gotten in... It just seems silly to me to throw $52k down the drain if it can be avoided. Yes, it will be a major headache from time to time, but I already plan on having a constant major headache from dental school anyway.

 

[adrift1984]

Hey stop dreaming! No way in hell the school is going to issue you extra federal loans so you can buy a house.

many of the schools i interviewed at had 16000 dollars marked as living expenses. So 1300+ a month will easily cover a 700-800 mortgage which would easily be something you would be paying for a 2-bedroom condo. You rent one room for 600 and you are riding pretty good.

As for the down payment that is where you will have to get a little creative. But I am sure if you put your mind to it, work hard over the summer, or find a loving relative you can cover it.

OP is far from dreaming he is actually being intelligent.....funny thing is you will likely pay his mortgage when you room with him LOL.

 

[teh dentist]

I can only speak from what I know and give my opinion with that. My intention isn't to insult OP or anyone else.

1) What school are you planning to attend? In my northeast area, there's no way in hell you can buy a house for 80k, especially around a school or university. I will take that back... YOU COULD but in a complete CRAP area or a destroyed house that needs a load of $$ pumped into it to JUST be able to get a CO. I've heard that home in the midwest are cheaper, but I don't know the area at all.

2) Maintenance. As owner and landlord of the property, you are responsible for everything in that house, including your tenants. You have no idea (i could be so wrong on this) what your tenants are capable of...destruction wise, sanitary-wise, and cost-wise.

3) Time. You will be in dental school. You will barely have time to study all those little nerves inside your neck, do you really want to dedicate whatever free time you have to a this house?

4) you're talking about saving anywhere from a loss up to 50k in the 4 years. You'll make that in one year as a dentist. Why risk it?


Again, I am not trying to step on toes. I love business and love the idea you are presenting, however as a DENTAL STUDENT, it is NOT as easy as it sounds.

 

[xhamburgersamx]

many of the schools i interviewed at had 16000 dollars marked as living expenses. So 1300+ a month will easily cover a 700-800 mortgage which would easily be something you would be paying for a 2-bedroom condo. You rent one room for 600 and you are riding pretty good.

As for the down payment that is where you will have to get a little creative. But I am sure if you put your mind to it, work hard over the summer, or find a loving relative you can cover it.

OP is far from dreaming he is actually being intelligent.....funny thing is you will likely pay his mortgage when you room with him LOL.

Well wouldn't everyone buy/rent out if they had 20-30k lying around to put down on a new house? Good luck getting a mortgage without a job

 

[yuppers]

.

 

[razorback2009]

Well wouldn't everyone buy/rent out if they had 20-30k lying around to put down on a new house? Good luck getting a mortgage without a job

That's another question I have... I am currently employed. When I go to be pre-approved I will be employed. Do I tell the lender my intentions, or simply that I am wanting to purchase a home in _______?

In other words, do they care where my mortgage payments are coming from once I am approved?

No offense, but you don't know my financial position as it stands... maybe I do, maybe I don't have 20-30k lying around. From what I've read, you can get FHA loans, and put down as little as 5% of the purchase price of the home anyway, so putting 30k down does not appeal to me, and would be completely unneccessary.

 

[xhamburgersamx]

That's another question I have... I am currently employed. When I go to be pre-approved I will be employed. Do I tell the lender my intentions, or simply that I am wanting to purchase a home in _______?

In other words, do they care where my mortgage payments are coming from once I am approved?

No offense, but you don't know my financial position as it stands... maybe I do, maybe I don't have 20-30k lying around. From what I've read, you can get FHA loans, and put down as little as 5% of the purchase price of the home anyway, so putting 30k down does not appeal to me, and would be completely unneccessary.

I'm all for you to purchase your first house and rent it out etc. but it's not as easy as it sounds. I don't know your financial situation as well. The thing with FHA loans is that you need to go through a private lender and the gov't will federally assure that mortgage. If your current job generates the desired income level through their calculations then yes you can get the loan. As for how much down-payment you need is up to your lender. The tricky part is after starting school and your income now is 0. Every bank uses a calculation of whether or not they will allow you to borrow from them. There's about 0 chance that you will be able to get a loan with zero income.

 

[adrift1984]

Well wouldn't everyone buy/rent out if they had 20-30k lying around to put down on a new house? Good luck getting a mortgage without a job

Let me think.....oh yeah my 20k sign on bonus and 2000 monthly stipend...you know what I think I'll have no problem getting a condo, building equity/credit, saving money and renting to someone like you....laughing all the way home. (yet another benefit of the navy scholarship)

 

[Aceofspades]

That is untrue (do not post opinions).....how would you then consider that a landlord makes money if he is renting out the unit for less than the mortgage he is paying. Rent is money down the drain....OP is correct that while it takes a little money upfront, purchasing a property will save him money. I intend to do the same with my military stipend.

Rent includes the mortgage with a premium that can included managing fees, probable repairs, and a small profit margin. when you pay rent you are paying for peace of mind.....with a mortgage you will save money and get the lovely task of managing your property

The landlord doesn't always make money. Ask all those money making landlords with underwater properties. All costs taken into account, many landlords are actually losing money yearly. They hope to offset those loses by building equity in a house which they hope gains value over the years.

Buying a house as an investment is a risk which may not turn out, as I'm sure many Americans have figured out by now. I am not saying all landlords will lose money, but many have and still may.

 

[xhamburgersamx]

Let me think.....oh yeah my 20k sign on bonus and 2000 monthly stipend...you know what I think I'll have no problem getting a condo, building equity/credit, saving money and renting to someone like you....laughing all the way home. (yet another benefit of the navy scholarship)

lol why you hating on me so much. Good luck putting down 20% on a 200k house with 20k sign on bonus minus 30% taxes. Hopefully $2000 is enough to survive on buddy. do you have the scholarship already? If yes, cool... If not, keep waiting because the merit list aint moving yo!

 

[adrift1984]

lol why you hating on me so much. Good luck putting down 20% on a 200k house with 20k sign on bonus minus 30% taxes. Hopefully $2000 is enough to survive on buddy. do you have the scholarship already? If yes, cool... If not, keep waiting because the merit list aint moving yo!

Not hating...just responding to your your seemingly assured beliefs that this can't be done......south Florida condo's are a steal right now, brand new 2br are under 100K (20% down payment is totally negotiable).

If you can't survive off of 2K a month for housing and living expenses I suggest you reevaluate your spending habits. Yes I have received the scholarship and feel very lucky to have it.

I know not everyone can afford this....but if you can put the money you do have to work rather than simply pay rent you are positioning yourself to save a lot and possibly make even more.

 

[adrift1984]

The landlord doesn't always make money. Ask all those money making landlords with underwater properties. All costs taken into account, many landlords are actually losing money yearly. They hope to offset those loses by building equity in a house which they hope gains value over the years.

Buying a house as an investment is a risk which may not turn out, as I'm sure many Americans have figured out by now. I am not saying all landlords will lose money, but many have and still may.

Yes there is risk.......yes there are people owing more than the value of their property (most as a result of stretching themselves too thin) but there is no way to think that you are going to pay the landlord less than what he has to. It is all a business and renters pay the premium. Suppliers charge builders who charge buyers who charge renters.

To each his own....some prefer to pay for the ease and peace of mind, but if I have the ability I am not going to pay someone's mortgage when I can simply pay it.

 

[minotaur9]

OMG Razorback2009, I applaud your efforts/ideas about being a wise businessman and wanting to invest your living expenses rather than throw them away, but there are SSSOOOOO many things WAY OFF about the conversation on this idea.

1. You will ALWAYS have to get a mortgage separate from your student loans. You will NEVER get your student loans for all 4 years in one lump sum and you typically won't get one year's worth in one lump sum either, from my understanding.

2. There are NO MORE 0% down loans. There have been way too many foreclosures, the banks have lost way too much money, and they are no longer willing to take the risk of doing a 0% down mortgage. The property could foreclose and they typically are only able to recover 70-80% of the property value when the bank re-sells it after foreclosure.

3. You MAY be able to get qualified with your current income, however they will probably question why you are moving from your current location to the new one and want to see some proof of income for when you move, aka a letter of explanation/job offer letter for your "new job" in the new location. (I'm guessing your current home and dental school are over 100 miles apart). Plus do you make enough considering your monthly income versus your current monthly expenses plus the expense of the property. A rough rough estimate is, let's say with your car loan, credit card (anything that shows up on your credit report) you owe $500, and then the house expense is $500, you would need to make over $2000/month gross income. 50% debt ratio

4. You need to know what your credit looks like otherwise you have no idea where you stand. From what it sounds like you may not have much of a credit history and that will hurt you. You need to look into your credit, see what needs work, and start working on it right away.

4. When you are a landlord, and are in need of a home repair, you can't just "fix them whenever I found the time to do so. " as you say. If I knew this was your attitude as a prospective tenant, there is NO WAY I would rent from you. If you're water stops working, you have to fix it right away. I guarantee, it doesn't matter if you have dental students who have as little time as you, they will want it fixed immediately and so will you. That is what they are paying YOU rent for, so they don't have these little annoying headaches of homeownership.

5. Chances are you WILL NOT make a significant monthly profit on this property. You will get some nice deductions for your taxes but you will have repairs to do, taxes, insurance, appliances to replace, temporary vacancies, and there are very few areas IN THE COUNTRY that have a monthly positive cash flow, and if they do it is typically a small amount. Otherwise, if it was this easy, everyone would be rich real estate investors.

Again, I really like it that you have an idea and you're not being dis-swayed, and that's not what I'm trying to do either, I would love it if you were successful with this idea. I wish you all the luck on this and I hope I'm able to do the same things you're wanting to do, however I have been working in mortgage underwriting for the past 8 years and had disspell all of these incorrect assumptions. I hope this information helps you and you go talk to a few lenders and let us know what happens.

Best of luck!

 

[yuppers]

the 3rd party lender will directly credit your student account at your school and the left over "credited" amountis your cost of living money for that quarter/semester.

Quick question about this left over "credited" amount.
You take out what you need throughout the semester, and if there is some money left over at the end you don't pay interest on it. Right?

 

[razorback2009]

[2. There are NO MORE 0% down loans. There have been way too many foreclosures, the banks have lost way too much money, and they are no longer willing to take the risk of doing a 0% down mortgage. The property could foreclose and they typically are only able to recover 70-80% of the property value when the bank re-sells it after foreclosure. ]

Not planning on that...hoping to have 8-10% ready to put down by the time I move...

Also, I might just be in the market for one of these foreclosed homes you speak of... The risk with them might be too great though. Some don't even allow you to see the inside before purchasing (Red Flag!). Probably better to take the safe route.

 

[razorback2009]

[4. When you are a landlord, and are in need of a home repair, you can’t just "fix them whenever I found the time to do so. " as you say. If I knew this was your attitude as a prospective tenant, there is NO WAY I would rent from you. If you're water stops working, you have to fix it right away. I guarantee, it doesn't matter if you have dental students who have as little time as you, they will want it fixed immediately and so will you. That is what they are paying YOU rent for, so they don't have these little annoying headaches of homeownership.]

There is a major difference between the kind of repairs I'm talking about and the ones you are speaking of. Plumbing, AC/Heat or electric problems... absolutely will be fixed in a timely manner. I was speaking more of minor issues such as appliances breaking and other minor repairs.

I would hope that I would only encounter a "major" issue once a year on average. I'd think I could find time for one of these issues. The "profit" I'd be collecting from 2 renters, ($600/month), should more than cover these expenses.

Don't forget that I would actually be living in the house as well, so anything that I could do to improve it in my spare time, I'd be happy to do. I'd have a very vested interest in making sure the property stays clean and nice.

 

[razorback2009]

2 more questions to add...

1. Is there anyone who has done this? (Either successfully or unsuccessfully?)

2. Would I be required to report the rent received as income for tax purposes?

 

[razorback2009]

Does anyone else know about the income tax implications? Better yet, has anyone else been through this situation?

 

[bfaz]

Borrowing money (student loan) to pay on borrowed money (the mortgage) is never a good idea. You will be paying interest on the money twice! 😱

Also, as others have said, would you rather be mowing the lawn or studying for a test? In my current municipality, if someone's house looks too bad/overgrown and someone complains, he or she could have to pay a fine.

FYI if you look at an amortization table, the first four years on any mortgage (especially a 30yr one which you would probably get to lower monthly payments) goes mainly to paying the interest and not to paying the principal.

IMO, I would wait to purchase a home until you have a paying job so you wouldn't use borrowed money to pay a mortgage.

 

[bfaz]

2 more questions to add...
2. Would I be required to report the rent received as income for tax purposes?

Yes you would. Taxes, however, are very complicated. If you have repairs, for instance, this can offset your income. I would recommend going to a finance blog or website and research the tax issue. Check out http://taxes.about.com/od/taxhelp/a/Schedule_E.htm for a brief overview.

 

[4X4MD]

Borrowing money (student loan) to pay on borrowed money (the mortgage) is never a good idea. You will be paying interest on the money twice! 😱

Also, as others have said, would you rather be mowing the lawn or studying for a test? In my current municipality, if someone's house looks too bad/overgrown and someone complains, he or she could have to pay a fine.

FYI if you look at an amortization table, the first four years on any mortgage (especially a 30yr one which you would probably get to lower monthly payments) goes mainly to paying the interest and not to paying the principal.

IMO, I would wait to purchase a home until you have a paying job so you wouldn't use borrowed money to pay a mortgage.

THIS

unfortunately, it is difficult to build up equity in a home you plan to live in, especially for a short period of time

 

[Dent010]

I'm going to fill you in. You need to put down 20% unless the house is purchased as a first home. To purchase as a first home you need to live in the home, otherwise it must be purchased as second home or investment. In order to do so, you must show a job transfer/offer this way you can prove your ability to handle the mortgage. They are gonig to want 1-2 years tax returns with a debt to asset ratio of no greater than 40% of your readily disposable income. This means the overall mortgage, taxes, homowners (if there is one) would all need to be no more than 40% of your income. Next you would have to prove employment of roughly a year or longer with no intentions of leaving your current job or termination being likely. I know this because i have pursued this option and my father is a real estate broker so i know a little more on this topic. If you can qualify for the home, then sure it is a viable option and can either take you far or make you crash and burn. Good Luck!

 

[razorback2009]

I'm going to fill you in. You need to put down 20% unless the house is purchased as a first home. To purchase as a first home you need to live in the home, otherwise it must be purchased as second home or investment. In order to do so, you must show a job transfer/offer this way you can prove your ability to handle the mortgage. They are gonig to want 1-2 years tax returns with a debt to asset ratio of no greater than 40% of your readily disposable income. This means the overall mortgage, taxes, homowners (if there is one) would all need to be no more than 40% of your income. Next you would have to prove employment of roughly a year or longer with no intentions of leaving your current job or termination being likely. I know this because i have pursued this option and my father is a real estate broker so i know a little more on this topic. If you can qualify for the home, then sure it is a viable option and can either take you far or make you crash and burn. Good Luck!

This will be my first home, and I will be living in it as well as renting out the other two bedrooms.

Is it impossible to qualify if you don't meet these criteria? It seems to me that if I could prove that I was going to receive x number of dollars per month (no matter where it was coming from), why would they care where the money was coming from? It is assured they would receive their monthly payment.

In other words, how is it any different than applying for a loan with a solid job from which you could get fired tomorrow. The loan money is going to be there for sure. Now trusting that I can budget this loan money correctly would be another thing I'd have to sell myself on.

But say I was getting $1300 every month to cover living costs...
Plus $1200 a month from roommate rental rates...

Now assume that the mortgage is $800 a month. It seems to me that the $1700 monthly surplus would look good to a lender. (granted these amounts are just very rough estimates.

What about FHA loans to decrease the down payment percentage?

I am assuming you didn't end up buying, correct?

Please, any more input you have would be greatly appreciated.

 

[Dent010]

U cannot use loans as a source of income. A company will not let you use loans to pays loans... that's why you have to qualify without showing them that you will be without a job and using a loan to pay your loans... I have asked these questions to a couple lenders and it is not possible. Even if it is ur first home, then you have to show income. Not "potentiall" income.

 

[razorback2009]

U cannot use loans as a source of income. A company will not let you use loans to pays loans... that's why you have to qualify without showing them that you will be without a job and using a loan to pay your loans... I have asked these questions to a couple lenders and it is not possible. Even if it is ur first home, then you have to show income. Not "potentiall" income.

No exceptions?

What if I had a solid cosigner?

 

[acs]

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[adrift1984]

Landlords EVENTUALLY make money from the rent: http://www.nytimes.com/interactive/business/buy-rent-calculator.html
Typically they pay more than is coming in from rent money for quite some time before that, though.

That is a great calculator that I had also seen some time back. Although it is not taking into account that I would have 1 renter lowering my mortgage. Regardless though, if you plug in for a 100K condo with a comparable rent of 700-800 dollars it actually comes out ahead to buy over the 4 years if you have an average rate of increase in value of the condo.

 

[twothirtee]

Razorback,
you would have to pay taxes on your rental income, but you would have deductions from your mortgage...any repairs would be deductible at the percentage of the property that's rented, as would utilities and anything you provide for your tenants.
qualifying for the mortgage is going to be your main problem, I think your best plan is to get a cosigner...then you should be able to get the mortgage assuming you have the down payment.
A lot depends on where you're going to school...and how the property values are doing in the area, but I assume you've checked it out.
Good luck, it's not a terrible idea, but only you know how much you can deal with while going to school. You WILL have stuff to deal with that other students won't. It's all going to depend on the property, so I think you should go there with a realtor, and get some facts. Look at some properties and see what the condition/costs are. Also, why don't you call your school and ask them how cost of living expenses would be handled if you bought.

 

[Soda]

It seems there are a lot of opinions here. The best thing you can do is find a solid person who can do your mortgage. Talk to friends or family and ask whom they have used to do their mortgage. Discuss your situation with him.

They are changing the laws constantly. What wouldn’t work a month ago, works now and what worked a month ago can’t be done now.

However, buying a home can still be done! We will be renting out our home in Utah while we are going out of state for school. Currently we are in the process of buying a second home where the dental school is located.

Can it be done? Yes! But it is a bit more of a headache since the recession. Also, I don’t make a lot of money now, and plan on using my student loans for my monthly mortgage payment. Why pay someone for rent, when I can own? We will be using an FHA loan where the only upfront money required is the closing costs.