Buyer Report

You’re eyeing duplexes in the $350K–$400K range in areas like Farmington, Milton, New Durham, and Rochester. Here’s how we can make this work:

1. Financial Snapshot

  • Annual Income: $39,070 (~$3,256/month)​
  • Savings: $7,000 + a bit more in a high-yield account​
  • Total Available: Approximately $10,000​
  • Assumed Student Loans: $20,000 with a $200/month payment​ (assumed)
  • Credit Score: Around 700 (good standing and assumed)

2. Debt-to-Income (DTI) Analysis

  • Monthly Income: $3,256​
  • Current Debt Obligations: $887.50 (including rent and student loans)​
  • Maximum Allowable Housing Payment: 43% of $3,256 = $1,400​
  • Available for Mortgage (PITI): $1,400 – $200 (student loans) = $1,200​

    PITI stands for Principal, Interest, Taxes, and Insurance.

3. Financing Options

  • FHA Loan: 3.5% down payment​
    • For a $350K property: $12,250 down​
    • For a $400K property: $14,000 down​
  • Conventional Loan: 5% down payment​
    • For a $350K property: $17,500 down​
    • For a $400K property: $20,000 down​
  • USDA Loan: 0% down payment (property must be in a USDA-eligible area- this is actually easy enough to do)​

4. Rental Income to Boost Qualification

Lenders might consider 75% of projected rental income to boost your loan eligibility. For instance:

  • Projected Rent: $1,500/month​
  • 75% of Rent: $1,125​
  • Adjusted Monthly Income: $3,256 + $1,125 = $4,381​
  • New Max Mortgage Payment: 43% of $4,381 = $1,884​

5. Market Overview

  • Price Range for Duplexes:
    • Farmington: $350K–$400K​
    • Milton: $340K–$390K​
    • New Durham: $350K–$400K​
    • Rochester: $360K–$410K​
  • Rental Rates: $1,500–$1,800/month per unit​

6. Cash Flow and House Hacking

  • Mortgage (PITI) on $350K: ~$2,100/month​
  • Rent from One Unit: $1,600/month​
  • Out-of-Pocket: $500/month​

By renting out the other unit and taking in roommates at, say, $700 each, you could cover the mortgage and even pocket some cash.

7. Down Payment and Closing Costs

  • FHA Down Payment on $350K: $12,250​
  • Closing Costs (2-5%): $7,000–$17,500​
  • Total Needed: $19,250–$29,750​

Phil, with your current savings of $7,000, you’re not there yet for the down payment and closing costs on a $350,000 property. It’s time to ramp up your savings efforts.

8. Alternative Strategies

  • House Hacking: Live in one unit, rent out the other. If you move later, hire a property manager to handle things.​
  • PhD Funding: Look for programs offering assistantships to avoid more debt.​

9. Action Plan

  • Boost Savings: Aim for an extra $15K to comfortably cover down payment and closing costs.​
  • Explore Financing: Dive into FHA loans or local programs that offer down payment assistance.​
  • Target Markets: Focus on areas with affordable duplexes and strong rental demand.​
  • Implement House Hacking: Offset costs by renting out units and taking in roommates.​
  • Plan for the Future: Keep building your real estate portfolio, aiming for properties in desirable locations like Dover.