What type of Bank Loan should I look for?

Question

Hi All,

I'll respect everyone's time and keep this short and to the point.  I'm just starting out as a newbie RE investor and I met with a loan officer at my local bank (CHASE).  I wanted to request a pre-approval for a loan and see how much I can afford to borrow.  A few questions came to mind and I didn't want to ask the loan officer.  Keeping in mind that banks require 25% down for rental property loans and I do not intend to live in the property (preferably multi-family):

1.  Would it make sense to take out an FHA loan at 3.5% down (tell them I plan to live there) and just pay the additional insurance from the rent proceeds until either I hit the 20% mark and/or I am able to refinance pay in to get me to 20% down?

2.  Same question but instead of an FHA, just tell them I would be living there and opt for the 20% down instead of 25%.

3. Can I get an FHA loan for a multi-family unit? (should have asked that first)

For my first property I plan on spending no more than 80k so while I can afford the downpayment and closing costs, I'm just thinking of ways to stretch my funds so I can invest in more properties.

Thanks in advance!

Kathy Argento · Answer

Interesting.....Our FHA loans on the other hand, are fairly easy to qualify for, actually easier than conventional loans here.

Michael Ibosiola · Answer

@Budahn Darren

Thank you for the information .......

We have something similar in Nigeria called NHF(national housing fund).

its an initiative by the government to provide affordable  housing for Nigeria workers......its made for residential properties..... Repayment period is 30yrs max.....and a 6% interest per annum max....

Comes with other lengthy conditions and i heard its difficult to get access to it.

@Kathy Argento

Thank you...

Kathy Argento · Answer

Darren is correct. It is a loan insured by a U.S. Government agency called the Federal Housing Administration.

You're welcome Devon. Wish I did NY loans. I could have helped you out.

Devon L. · Answer

Thank you @Kathy Argento.  I will try a few more banks in the coming weeks.

Darren Budahn · Answer

FHA loans are a specific federal program to the United States.

Michael Ibosiola · Answer

@ Kathy Argento

Am a newbie also a nigerian but based in uae....Will like to ask are FHA laws and policies the same for all countries.....

thank you

Kathy Argento · Answer

hi Devon. As a banker, I know that it is risky to say that you're living in a home and not actually living there. That is actually fraud.  Most lenders require an affidavit of residency and some FHA lenders will even have a live person check the residence after you buy it to make sure you were living there. If caught, you could get in a lot of trouble and or the mortgage would be 100% due and payable on the spot. You don't want to mess with that.  Not all lenders require 25% down for investment properties. Shop around. You will find lenders out there that will only require 20% down, and maybe less.

Devon L. · Answer

Thank you Lisa, that answers my question.  The properties I'm looking at are about 2 hours from NYC so that wouldn't be an option.

Lisa Kohl · Answer

A FHA loan will require you to owner occupy at least one of the units for a year. There is a lengthy owner occupant certification you will sign. You can get FHA financing on up to 4 units.