How To Buy A House With Low Income
Just because you aren’t making much money now, doesn’t mean you have to wait years to buy your first home! On this week’s episode we will discuss a few tips to help you buy your first home, even with low income. Check out the full episode and if you have questions about how to get started with Homeowner Prep, be sure to reach out to us or drop your question in the comments.
What You’ll Learn from this Episode:
- Why renting is easier than buying
- How your debt can be holding you back
- How to use appreciation to buy the home you really want
- And much more!
Watch The Full Episode On Our YouTube Channel
Highlights:
00:00 We Know Saving Money Is Hard…
00:10 Intro
00:32 Welcome To The Homeowner Prep Podcast
01:10 Renting Is Easier Than Buying A Home
02:05 How Your Debt May Be Hurting Your Income
03:43 Just Get In The Door… For Now!
04:36 Use Appreciation To Buy Your Next Home
05:29 Find A Way To Earn More Income
07:10 Getting Started With Homeowner Prep
07:54 Connect With Us On Social Media
08:22 Outro
“You have to just get in the door!”
Eric Hellon
Full Episode Transcript:
So you wanna buy a house, but you’re not making a lot of money. On today’s episode, we’re gonna cover a few tips that you can use to help you buy a house even with low income.
Welcome to the Homeowner Prep Podcast, where every week we educate and encourage inspiring homeowners to help them buy their first home faster. If you aspire to own a home, you’re in the right place. So enjoy. Do us a favor and leave a review, a rating, and be sure to subscribe. Now, let’s get to this week’s episode.
Hello and welcome to the Homeowner Prep Podcast. I’m your host, Eric Hellon, and on today’s episode we’re gonna cover a very hot topic, something that’s brought up quite a bit when we sit down with our clients, and it’s something that’s actually searched online quite a bit as well, and that’s how do you buy a house with low income?
You know, there’s a lot of people who can afford to rent in places like San Diego, LA, San Francisco, but they can’t afford to buy in those areas. So we’re gonna talk about a few things that you should do if you’re not making a lot of money, but you wanna get your foot in the door and buy your first home.
The first thing to realize is that when you’re renting a house, it’s oftentimes easier than actually buying that house. And that’s because when you’re renting, a landlord is looking for you to earn maybe two or three times the monthly rent, and then they’re looking at your overall credit score, typically from just one credit bureau.
And so when they do that, it does become a little easier because they’re just looking at your income and your credit score. When you go to buy a house, they’re actually looking at your income, your debt, and then they’re looking at all three credit bureaus to figure out what your mid score is.
Now, your mid score is going to be the middle score between all three of the credit bureaus. So let’s say you have a 600, 625 and a 650, the way that a lender is going to look at that is you are at a 625, so they do take the middle of the three and use that as your qualifying credit score. But the biggest difference is going to be your debt. When you’re looking to buy a house, they’re looking at your debt to income ratio, oftentimes referred to as your DTI.
And so what that does is compare how much you make on a monthly basis, gross, before taxes and before all the deductions compared to the monthly debt obligations that you have, whether they be credit cards, car payments, or maybe even student loans. So when they take that ratio, your debt to income ratio, they’re gonna be looking at 50% or lower.
Most qualifying mortgages are gonna be looking about 43%, maybe even 36. So when you compare your income to the debt that you have, it may be more difficult for you to actually buy than to rent because the lender is looking at all of that information in order to qualify you. So my advice is to get your debt as low as possible, especially student loans.
Now, I know it can take years to pay off student loans, and yes, you shouldn’t wait until all your student loans are paid off before you buy a house, because obviously homes will appreciate much faster, but you should be looking at your total debt and figuring out ways to get it down as quickly as possible.
Speak with a credit repair professional or company, and if you don’t have one that you can refer to, we can definitely connect you with one in your area. The faster you can get that debt down and the lowest amount that you can get it to will actually help you qualify for more home, because now it’s all income, very little debt, and your debt to income ratio will be right where it needs to be for you to buy your first place.
The second tip that I have when it comes to buying a house with low income is to just get in the door. I know you may want to buy a detached, five bedroom, three bath, on an an acre lot and all these different things, but chances are, if you have low income right now, you need to get your foot in the door and get into a home, and it may be a condo or a townhome. It’s gonna be a starter home, because you may be on starter income, maybe your income is not as high as it can be either in your career field or even at the company that you’re working for.
So think of it as if you’re an entry level and you’re at entry level pay, then you need to get into an entry level home. That way you can take advantage of one, the tax benefits, but also the appreciation over the years of having ownership as opposed to renting that entire time. By getting your foot in the door as quickly as possible, you’ll make sure that you can take full advantage of home appreciation, and that way you can use that appreciation to put down on your next home, bringing that mortgage level down even further
There are loan programs that will help you get into a home, whether it be no money down for VA or 3.5% down for FHA, or 3% conventional even. So there are some low down payment programs that you can take advantage of as a first time home buyer, you just gotta show that you can pay that monthly mortgage for 30 years.
So yes, your income may be low right now, but does it have potential to go up over the next year or two? That’s really the question that you have to ask yourself. So if you can afford a mortgage on a smaller entry level home, now get your foot in the door by that place and then move up as your income grows.
The third tip that I have is actually one of the hardest tips, and that is you gotta find a way to make more money. We live in a time right now where we have the gig economy and we have all these different ways for you to earn additional income, but you have to realize that when it comes to buying a house and you trying to qualify with low income, you’re gonna have to figure out a way to increase that, and if it’s part-time work or it’s some gig economy work, it may take two years for that to qualify as stable income. So keep that in mind.
Either way, if you’re not making the income right now, in order to buy the house that you truly want, you have to ask yourself what are you willing to do so that you can get into that home, and that may require you to work a second job or a part-time gig economy job to earn that additional income.
I know that’s not easy. I know you probably have a lot on your plate already, but again, it comes down to how bad do you want it. When we sit down with our clients and we look at their income, we look at their debt. Even if they have no debt and they’re just not earning enough money, we have to find a way to help them earn more.
What is the likelihood that you’ll get a promotion? What can you do to increase your talent or your skills on your job? And if that doesn’t work, what are you going to do in the meantime, whether that’s part-time, second job, or like I mentioned, a gig economy job that’ll help you qualify in the next two years.
Two years may sound like a long time, but trust me, it’s gonna fly by. And in those two years, just think about the amount of appreciation that you could be missing out on. So the quicker you get started in figuring out a way to make more money, the faster you’ll get into your first home.
If you wanna set up a free consultation with Homeowner Prep, we can go over some of these tips and look at your unique situation, figure out how to help you qualify to buy a home, even if it’s just a starter home, even if you have to figure out a way to pay down your debt as quickly as possible, or if we have to figure out a way for you to earn additional income.
So definitely don’t hesitate to reach out to us. The fastest way to get ahold of us and set up that consultation is to text us at 619-848-3700, or you can visit us on our website at www.homeownerprep.com/start from there, you’ll be able to set up a free online consultation. We’ll get you started and get you on your way to buying your first home.
If you just have a quick question or a scenario that you wanna run by us, the easiest way to do that is to reach us on social media. We’re on all social media platforms, but we tend to get the majority of our questions on our Instagram account @HomeownerPrep, so feel free to reach out to us on there as well.
I hope you got some value from today’s episode, and I hope that you will implement some of these tips to help you buy your first home even with low income. I look forward to providing you with some more great content on the next episode, and until then, be blessed.
If you’ve enjoyed this show and got some great value from it, please be sure to rate and review and if you’re checking it out on YouTube, please be sure to subscribe. That really does help us to continue the show and bring in some great guests to help you on your home buying journey.
Connect with Homeowner Prep:
Want to buy a house, but not sure how to get started? Visit our Start Page and we can help you, no matter where you’re at on your homeownership journey. If you enjoyed this episode of The Homeowner Prep Podcast, be sure to subscribe on iTunes and leave a review. It means so much to hear your feedback and we’d love for you to help us spread the word!
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