I am a newbie to the real estate game. I am looking to buy a townhouse as a rental property but of course i would need to finance the deal. I want to know if i can purchase the property with a traditional loan(15,30year) or is that not possible for investment properties?
You can get conventional financing but you'll need 20 - 25% down (single family vs multi family) and you'll pay about 1% more than OO, about 5% fixed for 30 years. After you hit 4 properties the downpayment goes up 5%.
I wish to buy a duplex in Santa Barbara, rend one half and live in the other. In this case what kind of mortgage I should be looking for ? Will the lenders who finance a SFH also finance duplexes or are their special lenders for multi-family ?
Thanks for your help. Newbie here and first home purchase.
Gaurav
Gaurav, because you plan to live in it (OO), and because its 4 units or less, it should more or less be exactly the same as buying a single family house. You should qualify for the best rates dependent on your credit, in the range of 3.875% fixed for 30 years, the same down payment programs like 3.5% for FHA or even the $100 down programs through Homepath.
The biggest thing is you may qualify for more homes. I believe, but you'll need to double check this, the lender will allow you to use part of the projected rent for the other half of the duplex to qualify for the loan. Essentially, if you qualified for a $200,000 single family on your salary, you may qualify for say a $240,000 duplex because of the additional income from the rent.
I found a great chart from Aimloan that lists the different "risk based add-ons" and maximum LTV's. I'm not necessarily recommending them because I've never used aimloan, just pointing to the nice chart they have up: http://www.aimloan.com/programs/cf.asp
Does anyone know if you as an investors can borrow more than 4 loans now?
The FNMA guidelines allow up to 10 per person these days, but many banks still have underwriting overlays that only allow 4 per person. So, the answer is yes, you can theoretically get more than 4, but may need to shop around to find a lender who can/will do it for you.
Another reason why portfolio lenders are the way to go...they aren't held to FNMA restrictions, so they can do as many as they want.
Does anyone know if you as an investors can borrow more than 4 loans now?
We did it back in late 2009, but it required 25% down, higher reserves, higher rate, and higher credit score. I recently talked to a lender who does do the 5-10 loans, it's a local bank, and he told us it is still possible. Finding the lender is the tough part as we've found the big banks and credit unions won't do more than 4.
Thanks Nathan. So if I wish to get pre-approval for purchasing a multi family property do I need to mention that to the lender at the time of pre-approval ?
Also, I live in Santa Barbara and might purchase a property in Ventura(40 minutes away). Would you pick a lender in Santa Barbara or Ventura for the transaction or does it not matter ? Sorry for the newbie question.