Putting down less than 20% in SF Bay Area

9 Replies

Hi All,

Curious to hear any personal stories of putting down less than 20% for an owner occupied duplex/multi-family in the SF Bay Area. Cheers!

you'll pay PMI if you are getting a loan, in any case!

Not necissarilly. There are now conventional 5% loans offered with no pmi. If you can owner occupy and receiver the numbers you are looking for with 5% conventional, go for it!

@Ben Rice

I bought a 2/1 SFR in downtown SJ using a 3.5% loan. It had a large garage that I converted to a one bedroom apartment and I rented out the front unit. Not your traditional duplex but it worked out that way.

The process for a multi is much the same, except if there's any income from the second (third or fourth) unit the lender will give you 75% of the income to help you qualify for the property. 

@Robert Musallam - Does there need to be tenants occupying the additional units for it to count towards the 75%?

You might be able to put 10% down and get a 10% HELOC. Get with a mortgage broker about it.

One way to get away with PMI, even though the HELOC could be interest only for the first 10 years (similar to PMI in the sense that it doesn't go towards anything), unless you over pay the HELOC and chip away at the principle.

@Ben Rice From my understanding, Yes. Lenders can only use the data to help you qualify if its real, not pro forma. @Chris Mason may be able to correct me if I'm wrong.

Hi @Robert Musallam and @Ben Rice ,

For purchase mortgages, it's actually a common overlay to require a current tenant, but not technically an Agency requirement. 

For vacant properties, it's just appraised current market rent. 

For occupied properties, we use the lesser of appraised current market rent or current lease in place.

@Robert Musallam or @Chris Mason ,

What's your perspective on someone, like me, getting their first property in the Bay? Go for a 2-4 unit property but requires a larger down payment and harder to carry when vacancy occurs, or go for a "cheaper" one unit property that allows me to pay less for a mortgage than I am currently paying for rent.

@Ben Rice

That depends on your personality and your long term goals. I'm a fan of owning more doors, while also not against living next to my tenants in order to own more doors. For me the decision is easy, I'd buy a multi and if I didn't like the living situation I'd move out in a year. I can rent that unit and then go shop for either another multi or a SFR.

In regards to a multi being hard to carry when/if a vacancy were to occur...If you're doing the calculations correctly and assigning a value to vacancy every month (and actually saving that money) then a vacancy shouldn't hurt when it happens.

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