House Hacking with DPA??

Question

I am wondering how house hacking with a DPA would work? I make 60k/yr and only have $15k saved up which I know could really only cover a down payment for duplex currently. So for that reason I am wondering if there are any disadvantages to using a DPA? It seems to me I could get into a deal sooner and not deal with the headache of saving up for the down payment + repairs, reserves, etc. If someone could please enlighten me on this it would be greatly appreciated. Thanks

Andrew Postell · Answer

@Harry Shmelts thanks for the post.  @Joe Funari thanks for the mention.  Hopefully this will help @Jason Urquhart as well.

House hacking with a "First Time Home Buyer" program or "Downpayment Assistance Program" is EXACTLY how I got started.  I could not have purchased my first home WITHOUT assistance from a program.  I used the program on a single family home and then rented out each room separately.  It was an awesome time and I lived practically rent free.  In Texas, there are several different types of programs available.  Some will be income based, some will be based on geographical area, some won't care.  Some WON'T allow a duplex...and some will.  There are so many choices and so many differences it just important to speak with a loan officer that offers MULTIPLE different programs so you can see which one fits you best.

Keep in mind that FHA will only need 3.5% down for a duplex.  This is often a significantly better option as compared to "conventional" loans since they would require 15% down.  Seller concessions can also be used to help you get closer to the finish line.  Again, just important to speak with someone that can combine some of these features together to place you in the best loan possible.

Hope all of this makes sense but feel free to post more if you need.  Thanks so much!

Joe Funari · Answer

@Harry Shmelts I recommend you reach out to @Andrew Postell. Andrew is a fellow investor and lender here in the state of Texas. He is quite simply a guru on creative financing options for investment properties. Many of my clients and I have used him for many years. You can't go wrong with Andrew. Just DM him directly to connect. Hope this helps you in your REI journey.

Caroline Gerardo · Answer

DPA usually is higher rate with an upfront extra cost of one percent or 1.5% depending on the many programs

DPA often is a lien on title which has to be repaid if you refinance or sell. In this market where we pray rates will decline in the future this is a HUGE consideration when you state you already have the down payment saved. You are locked in with higher terms... No idea if or when rates decline but this is part of your decision making.

Also how long do you plan to hold or keep the property?

Since there are many types of DPA you need a spread sheet to compare the ins and outs.

If you plan a longer term hold of 8-10 years and think rates won't dip the DPA works to keep your cash in the bank.

DPA per city or property location varies: income limits, rules and shades of how and when they give the money are things you need  expert guidance. Also compare FHA Vs conventional or USDA if location allows- get all the numbers. What is refinance cost, how long do they require you to hold...

Dan H. · Answer

NACA loan program has many hoops to jump through and therefore best to use a lender and possibly RE agent that has experience with NACA loans.  However, it could be another option for you to consider.

Good luck

Devin Gillespie · Answer

I used DPA to get started as well and I do not regret it! I used the DPA to buy a Single Family Residence with an ADU. I now live in the ADU and manage the main home as a mid-term rental.

I would understand the stipulations of the program and make sure that it aligns with your strategy. You may have to live in the property for a particular time or be subject to repaying a lien as mentioned.

Nonetheless I believe that it's a great tool to get started! Account for taxes in your reserves and you're good to go.Best of luck!

Reid Chauvin · Answer

@Harry Shmelts - The only downside is the additional monthly cost of borrowing the down payment assistance funds. As long as the Down Payment Assistance doesn't result in your monthly mortgage payment being too high to be feasible, then holding on to some savings for reserves/repairs via DPA is a great option. Feel free to reach out if you want more information.

Jason Urquhart · Answer

This is a good question.  I would also be interested to see if this would be a good option to take advantage of in starting an investment journey.  Good luck.

House Hacking with DPA??

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