Acquiring a loan

3 Replies

Names Zach I am 21 and new to real estate. I currently am in the research process , but would like to attempt to purchase my first multifamily home within the next 6-8 months. I don't even know if I a bank is going to give me a loan. How do I go about finding out to just have a general idea of what they would be willing to loan me.

You should be able to call them directly and ask about getting a pre-qualification(different than pre-approval). You simply give them some basic financial info and they tell you what amount you would qualify for if the information you gave them checked out. I pre-approval on the other hand is when you actually submit documents to verify your financial information and they pull your credit and try to approve you for a loan. The pre-qualification is not a firm commitment but it does give you an idea of what should be available to you. Once you get closer to putting a contract in, getting pre-approved is recommended as it shows you're a serious buyer.

Do you plan to live in one of the units?

If so, you can get a 3.5% down FHA loan with a minimum credit score of 580 on a 1-4 unit property. They'll still want to see sufficient income and take a look at your current debt-to-income.

There are other low down payment options that might be available too as well as the traditional 20-25% down conventional loans. 

An FHA loan is great for anybody held back by low credit or insufficient down payment savings. Just remember that with an FHA loan, you will have to live at the property. I was going to explain this, but naturally someone has already written up this discussion, and I've posted it here!

http://homeguides.sfgate.com/fha-occupancy-guideli...

Bottom line-- If you use FHA, make the house your primary residence. Live there as owner/occupant/(landlord) for more than a year while renting out the extra bedrooms (or units if you get multifamily property). If you don't live there the majority of the year, you are likely committing mortgage fraud and get into serious trouble. It sounds scary, but if you just follow the FHA rules outlined in that article you will be fine. As always, be upfront with your lender when asking about FHA loan.

thanks guys for your advice definitely helped me out. I will look into FHA loan.

Thanks again !

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