Step 1: BUILD YOUR CREDIT. This is one of those steps that you can do NOW. If you’re watching this and you don’t already have a credit card
Step 2: SAVE YOUR MONEY. The reality is that you can’t invest in real estate with no money down, no income, no credit it just doesn’t happen.
UNLESS YOU’RE A VETERAN
If you’re a veteran, you can buy a home with no money down. Please see this link for how that works. https://www.benefits.va.gov/homeloans/
Step 3: SHOW YOUR INCOME on a tax return. This means that you can’t just have one great month on Shopify and then expect to use that as a down payment…lenders want to see consistent, stable income before they give you a loan. In the military this is called an LES, and you can find it on https://www.mypay.gov.
Step 4: Get pre-qualified. It’s as easy as going to a few lenders, having them run your credit, giving them your tax returns, bank statements, and some other information…and they will give you a pre-approval amount based off those numbers. Now, lenders don’t like this, but you can then take that pre-approval and shop that around a few other banks, getting them to match or beat those terms.
Step 5: what is your exit strategy? Sell or rent out? I always recommend keeping a property as long as possible because while you’re making mortgage payments on your loan balance, you are building equity. That being said, if you’re coming in with zero money down, while you’ll qualify for it, and even with a really good rate if your credit is good, your mortgage payment will almost definitely be more than the market rent for the area. So you’ll want to do one of three things:
1. Rehab your place. Increase the value.
2. Make as many extra payments on your mortgage as you can to get to at least 20% equity
You can refinance for a lower mortgage payment – ideally below market rent so you can cash flow when you transfer
3. If you decide to sell, the value added from the rehab will cover your closing costs and allow you to make a little profit to take with you to your next duty station.
Step 6: LOOK AT EVERYTHING IN THE MARKET YOU WANT TO BUY IN. Do your research. Find out which areas you feel are undervalued and where you feel people will be moving to. Drive around on weekends through every street and neighborhood. See every open house on a Saturday and Sunday within your price range, plus maybe a few hundred-grand so you know what’s out there. The more you see, the better you’ll be able to recognize a good deal when it comes up.
If you get a realtor – which I recommend, you can have them run customized searches on your behalf that aren’t possible with Zillow.
Make offers on places you feel are a good deal. Know your price, know what it’s worth, and have patience. It’s more important to get the right property at a fair price than wait years trying to find the unicorn of a deal. You’ll have your pre-approval from your lender at this point, so focus on what your mortgage payments will be, what rents go for in that area, and find a place in that
Step 7: Do your inspections. I always pay for my client’s inspections, and I also negotiate for a seller credit – so that, combined with the fact that the seller actually pays realtor fees – not the buyer – my clients actually make money when buying with me vs renting. This is also your “out-clause” for any reason.
Step 8: Close on the property. In the interim here, you’ll be speaking with your lender, getting in all the information they request from you, do an appraisal on the property to make sure it’s worth what you’re paying, and you close. Once the property is yours, this is where the fun begins!
Step 9: Do minor renovations. Most people ask “what do I fix first?”
That’s it! Please comment below on what you would like to learn more about!