Financing Options for First Duplex

[Craig Moreau]

 Hi Everyone,

My roommate and I are looking into moving down to Austin, TX this coming year from Boston, MA. We are planning on purchasing a duplex down there and house hacking. We’ve been networking with local investors, lenders, realtors etc. to gain as much knowledge about the market as we can. We’ve talked to a few lending specialists to narrow down savings goals and see where we need to be financially in order to get that first property. We’re considering renting initially to get used to the market and learn the city prior to purchasing, but if we find a deal why wait???

I haven’t posted on BP about this yet but I wanted to get some perspective on the different options we’ve been presented with. 

To give you an idea of the numbers we each make between 50k-$60k/year and were looking to purchase a duplex around $300k.

One lender told us that we would each be able to qualify for an FHA Loan on our own given our current financial positions. This would allow us to purchase another duplex the second year if the other roommate applied for an FHA loan opposed to both of us applying for the first mortgage. I liked this approach personally and hadn't considered that we'd each be able to qualify on our own.

Another lender had told us that we'd only qualify for a $200k home on our own (they didn't factor in rental income) and $400k together. Again, the only problem applying together would be that we can't use the FHA on the second property.

I hear a lot about the FHA 203k loan on BP but after discussing this with one of the lenders they did not recommend it. That was our initial inclination to get into a property but now I'm second guessing it.

To get into a duplex the first year using the FHA loan as a solo applicant and the other applying the following year seems to be the best option for us at this point, but I wanted to hear from the rest of the community to get your thoughts. I also plan to document this journey from getting into our first property and beyond and sharing with the BP community.

I appreciate the feedback!

-Craig

[Craig Moreau]

@Aaron Gordy I appreciate the insight! Coming from Boston I'm sure the traffic situation is one in the same. The commute can be tough getting across town... Location of the jobs will definitely play a role in where we eventually buy, so hopefully by renting to start we'll get a good feel for the city and where the best areas are. Sounds like a great rental you've got there but unfortunately given that we're trying to cut expenses prior to purchasing that may not be the best move for us. 

It's interesting the different perspectives out there on the 203k loan. What are typically the conditions that allow someone to secure a 203k loan? Does there need to be a scope of work established prior to getting the loan so that the bank knows how much additional funds are needed? We'll continue to ask around but if you do have someone you could refer me to, I'd love to talk with them about our plan.