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I currently have insignificant income due to the fluctuations of my line of work -- entrepreneurship.

I do not have any steady income and can't guarantee minimums always -- but I have done some calculations and found a way where I could put a fair down payment and manage to make the minimum mortgage payments per month. I can round up about 50% down -- then I could make the ~$500 a month payments minimum guaranteed. The problem is that no mortgage company will work with me since I have unsteady income; no valuable tax info that suggests my earnings are currently significant enough; work for myself and thus don't have any employers; and I don't have much collateral to give -- not even $10,000.00 worth. I tried 7 companies and none will help me.

I know you're going to say "go lower," but they still won't work with me for the same reasons -- so I figure the price of the property is zilch if no company wants to give a mortage w/any property at all.

The reason for the discrepancy is that I'm seeking a condo property -- and none run over 100K that are at least a livable size. Any condo under 100K would be exactly the same size as a closet.

Apartments are too ratchet for < 100K and most houses where I live are falling apart < 50K.

The reason I don't care about price is because the companies don't care because I don't have steady proof of income -- so I decided I don't care about property price either, assuming I can afford it (which I can). What options do I have? As stated, any stated-proof of income lenders want massive collateral -- like 50% or more of the entire property's value -- and they want massive interest rates on top of that, which would kill my ability to pay decently. Also, no mortgage company will even help me out with properties ~$75K. It's unfortunate that I'm self-employed.

I have great credit, but that's still not good enough for the companies I've tried. Keep looking??

I'm trying to improve my financial condition greater, but that won't help me right now when I'm in need of a property. I could rent, but that's throwing money away. What options do I have?

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    If you can round up 50% down now, can you save up a while and then come up with 100% down? – Joe Strazzere Sep 5 '17 at 1:20
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    Renting is not throwing money away, any more than paying mortgage interest is throwing money away. – DJClayworth Sep 5 '17 at 1:27
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    I'm confused - you can't come up with $10k but can put 50% down on a $10k condo? – D Stanley Sep 5 '17 at 2:29
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    Even if you had reliable income (in lenders' eyes), 12-14x your income puts your debt to income ratio beyond the FHA limits, that ties many lenders hands. Even if you can put 50% down and only need to borrow 6-7x your income, that's still an unacceptable DTI. – Hart CO Sep 5 '17 at 3:56
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    "so I decided I don't care about property price either, assuming I can afford it (which I can). " I don't understand - how have you determined that you "can afford" a property if you aren't looking at price? Typically you determine what you can afford first [based on your down payment + ability to make future monthly payments + consultation with a bank about getting mortgage pre-approval], and then use this price range to look for properties. You can't just assume that you'll be able to afford anything at any price. This may be why banks are not helpful - you don't want a price limit. – Grade 'Eh' Bacon Sep 5 '17 at 13:06
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It is your choice to have "insignificant income", and that has consequences. One is that you cannot borrow money to purchase a home independent of your credit score. In order to purchase a home you must also have the ability to repay in addition to a good history.

IMHO your question suggest that you have a unrealistic outlook on life. If you cannot come up with 10K, how can you afford a home? What happens when the HVAC system goes out? While I certainly hope you meet and exceed your goals, you can change your whole world by simply getting a job at a fast food restaurant. When you are not working you can then do the entrepreneurship thing.

Life is often a choice of priorities. If you choose to "back-burner" the entrepreneur dream, for a time, and choose to focus on earning the best possible wage. Then perhaps you could afford to purchase a place of your own.

  • I don't think the OP is unable to come up with $10k. In fact he says he can put 50% down. He just doesn't have $10k of assets to use as collateral. – DJClayworth Sep 6 '17 at 16:56
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    @DJClayworth Wouldn't $10k cash be better than $10k worth of collateral assets? I'm very confused by the OP's statement that he has ~$50k cash for a down payment but doesn't have $10k collateral. – Nuclear Wang Sep 6 '17 at 20:14
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    Is there a typo in the question? Did he mean "If I can round up about 50% down -- then I could make the ~$500 a month payments minimum guaranteed."? – Phil Sandler Sep 6 '17 at 20:42
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What options do I have?

Realistically? Get a regular full time job. Work at it for a year or so and then see about buying a house.

That said, I recently purchased a decent home. I am self-employed and my income is highly erratic. Due to how my clients pay me, my business might go a couple months with absolutely no deposits.

However, I've been at this for quite a few years. So, even though my business income is erratic, I pay myself regularly once a month. In order to close the deal with the mortgage company I had to provide 5 years worth of statements on my business AND my personal bank accounts. Also I had about a 30% down payment.

This gave the bank enough info to realize that I could absolutely make the payments and we closed the deal.

I'd say that if you have little to no actual financial history, don't have a solid personal income and don't have much of a down payment then you probably have no business buying a house at this point. The first time something goes wrong (water heater, ac, etc) you'll be in a world of trouble.

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You need a cosigner.

Someone prepared to repay the mortgager if you should fail to. Needless to say this is going to have to be someone who knows you and trusts you very much.

One way is to find someone prepared to share a house with you. Buy a bigger house than you would otherwise need. You would own half each, and the sharing agreement would specify that if one of you defaulted on their payments the other would get a larger share according to how much extra they end up paying.

The other way is to find a silent partner, who doesn't live there. They put up no money unless you actually default. They would almost certainly have to be part owners, but you can structure the agreement so that you end up with the whole house if you succeed in paying off the mortgage, or miss no payments until you sell. Parents sometimes do this for their kids.

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    Horrible idea to convince someone else to take on your financial risks without any benefit to themselves. Never become cosigner with anyone but your spouse. – Glen Pierce Sep 5 '17 at 3:56
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    @GlenPierce The 2nd paragraph outlines a fairly common scenario that does include benefit to the co-owner. Also, parents frequently take on financial risks to benefit their children, there can be benefits that aren't financial in these situations. It's not a decision to be taken lightly, but neither of the suggestions is horrible. – Hart CO Sep 5 '17 at 3:59
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    @HartCO it is horrible. If someone wants to buy this guy a condo, then sure do so. Doing it as a cosigner is just everyone fooling themselves. The buyer also needs to budget for maintenance costs. – Pete B. Sep 6 '17 at 16:23
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    @PeteB. In both suggestions this 2nd party person would own the property too, and in the first scenario would be living there. co-owning can be messy, and obviously shouldn't be entered into lightly, but it's not outright horrible (maybe horrible in case of OP's financial situation?). Backing the loan with no ownership in the property would be horrible. – Hart CO Sep 6 '17 at 16:29
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There are several "rules of thumb" you should know. Assuming you don't have massive monthly payments for debt service (car notes, student loans, credit cards, etc.) you can usually qualify for 3.3 times your annual gross income. Example: You can prove you make $50K per year and your monthly debt service is no more than 1% ($500.00) of that. You would be able to borrow $165,000. If you pay 20% down you get to avoid Private Mortgage Insurance. This is insurance on you, not for you and it does you no good other than making the lender comfortable doing the loan. Avoid it if possible but don't borrow the down payment. The cost of PMI decreases in steps and goes away entirely when you put 20% down. Minimum down payments run from zero (VA and FmHA rural areas) to 3.5% (FHA). Conventional loan down payments vary but 5% down is commonly available.

There are three primary factors lenders look at: Credit Score, Income, & Down Payment. In general, you have to be strong on two of these. Most mortgage banks originating loans sell them to wholesale lenders, Freddie Mac, or Fannie Mae. Avoid using a "Mortgage Broker". They can be extremely expensive for the unnecessary hand holding they provide.

Length of time on the job can be a problem for people beginning a new job without experience. This varies somewhat. A "qualified professional" (someone who earned a diploma of some sort that is required for the job the borrower got). Sales people generally are required to show two years of tax returns to establish their provable income. People who cheat on their taxes find out they have hurt themselves when it comes to qualifying for a loan. This is IRS karma.

Many mortgages involve two wage earners which greatly juices the home they can buy. They do not have to be married or related. There are no moral qualifiers to the process. I oversaw a transaction recently that had two unrelated women and a husband of one as buyers. All had jobs, good scores and low debt. A preacher at a mega church (who is too busy to be careful about paying his bills on time) may find that he is denied a loan that the manager of an adult video store qualified for. That is what "no moral qualifiers" means. It is about credit score, income, and down payment. Nobody cares about your personal greatness. Some people complain about credit scores hurting minorities but this system benefits them if they can handle their money. Credit scoring is great for minorities because it does not consider race (or occupation, gender, sexual appetite, etc). Only those who cannot be satisfied consider credit scoring to be unfair.

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