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Author Topic: How to buy a home in law school when you don't have an income or any assets?  (Read 2370 times)

aggieJD

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I would like to purchase a condo or home during law school instead of renting. I am married, but my wife won't be working because she will be watching our young daughter. Does anyone have any advice or experience on getting financing when you can't show an income? Are there any places that will finance based on future earnings? Thanks for the help.

pappy13

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If you are working currently, you might want to secure financing with a lender (possibly stated income) and as long as you're making the payments while in LS you should be ok.  Stay away from interest only or short term ARM's.

Duner

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It's pretty easy to buy a house....as long as you do it well before enrollment. The mortgage broker only cares about your past credit/employment history and that you can come up with the down payment....because as soon as he o.k.'s your loan and you close on the house, he punts everything to the bank and you become their problem, not his.

I closed on my house in may before my first semester. It was the best financial move of my life.(I did pay the 20% downpayment to avoid the PMI though, which would've otherwise added about an extra 10% to my mortgage payments) But my monthly living expenses for a new home 2 miles from campus, are roughly equivalent to what most of my classmates pay for a decent 2/3 bdrm apt. There really is no downside either, even if the market crashes, there's always a high demand for rental properties around any major university, and you could just rent the house when you're done with school. 

If your concerned, just pay the $50 fee most brokers charge, and apply for a mortgage. If he rejects you, just see what the reason was, and then apply with another broker and fudge whatever details caused your original ineligibility. From your screen name, I'm assuming you're heading to D.C....if that's the case, you're biggest hurdle will likely be the downpayment, or the commute you'll be forced to live with to find a reasonably priced home.

reverendlex

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Realize that you might want the flexibility to leave town after you graduate. And there's the whole housing bubble thing....



Stephon Devante

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Good luck... I applied for a mortgage and was working... I was quitting one of my jobs on May 1 and my wife was starting her new job which pays more on May 15... so we have steady income. Yet the bank said that since I was quitting, my wife hadn't started, and my other job was a personal business.. I have no "verifiable" income and wouldn't lend me a dime...

My credit score is something like 727 mind you...

Totally uncool. So good luck if you can get them to do it, let me know how you did it.
Paradiso: Vanderbilt ($$), UNC ($$), Wake Forest ($$$$), William & Mary ($$)
Purgatorio: Duke (WL), Northwestern (WL)
Inferno: Texas, Michigan, Penn, Cornell, Virginia


http://www.lawschoolnumbers.com/display.php?&cycle=0506&user=sdevante

giraffe205

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If you do decide to purchase a home before starting school, I would definitely recommend staying well below your budget, esp. considering that your wife will not be working and financial aid budgets are extremely skimpy.

You can file an appeal w/ your financial aid office for them to raise your total cost of attendance due to your mortgage payment so that you'll be able to borrow more for living expenses.

Another thing that you may want to consider is at what interest rate will you be borrowing to pay off a mortgage somewhere between 4-9% (depending on your credit score). If the school loans are less, than it doesn't seem that bad. However, if your school loans are at 8% and your mortgage is 4.25%, this would be a bad investment.

Renting a house is probably your best option in my opinion since there is too much risk when neither of you will be working. Hence, that's why most lenders wouldn't touch a deal like this if they knew these circumstances.

John Galt

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Not to be a Debbie Downer, but it probably isn't a good idea to buy a house without any verifiable income. There is a reason legitimate lending institutions require it. Home ownership is definitely more advantageous then renting but there is also very little room for financial error. One late payment, even just 15 days late, can have credit score implications. Also if any major repairs need to be made (roof, hot water heater, major plumbing or electrical etc...) it could cause a spiraling effect economically.

Another concern would be interest rate. Your rate is going to be based primarily on your credit history and verifiable income. Without verifiable income, even a pretty good credit score is only going to get you a prime plus loan, a pretty lousy number. While this would have been manageable years ago when interest rates were going down and you could refinance at a lower rate when you secure a job, now the interest rate may be higher when you have a job and a refinance may not help. 

That being said, it is not impossible to do. But I would suggest only doing it if the price is a steal and affordable and the financing is a good deal. I personally bought a house when I had verifiable income and there were still some dangerous months financially when I really had to sweat it out. You don't really realize the cost of home ownership above and beyond the mortgage and standard bills.

Kazzzzzzzzaaam

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Depending on the market you are in, I would look into renting a condo with an option to buy at the end.  I know several people involved in Real Estate investments, and many have condos solely for rent to let them appreciate in value.  If you could find someone who would agree to have between 20-30% of your total payments over the 3 years you are in Law School be deducted from the cost at the end, when you will agree to purchase the property, you will be in an ideal situation. 

The best part with condos is that they then cannot inflate their sell price to swallow this deduction, as all of the other condos in the building will give you a fair market value.  Additionally, they will be assuming the risk of the housing market fluctuating.  This benefits them because as a speculator, their mortgage will be most likely nearly fully covered with your rent, while they will be holding the property in the belief it will appreciate in value for them over the next 3 years. 

Your best option for finding an arangement like this would be to look into commercial real estate, or construction attorneys, who often have the option to invest directly at the ground level of a project.  Oftentimes they will have a multitude of such properties.  In addition, try and find a building that is at most 5 years old.  Someone who invested in such a property before breaking ground most likely has already made a landfall, and if they are an attorney may well be sympathetic to your position, and like the idea of a guaranteed buyer after 3 years.  They will most likely calculate the appreciation the property will have worth taking a discount from the sale price, and meanwhile their mortgage is covered by you.  Basically, it will be a mix between buying at todays rates, less the possible market risk, and allowing your rent to work for you.

I know a couple dozen people who invested in a condo project that has not even broken ground yet, where the units were selling for $250K for the base units.  Assuming 10% down from the bank, they have placed $25k down so far, and paid their montly mortgage although it has not been constructed yet, and demand for the units has made the entry level price $500K as of this weekend.  When they do break ground, they will be renting them out, or selling them upfront, although several have already sold the rights.  Doubling an investment in any situation is incredible, but especially when its only on paper.  Find a similar situation and I imagine you can make out very well, and have substantial savings to counter "throwing away" your money in rent.