Who says you can only get multis with cash?

Question

My buddy and data geek, @Ian Hogan, ran some cool data from the MLS on methods of financing for Massachusetts multis. To our surprise, most multis are financed with FHA and Conventional financing at a whopping 77%. I just wanted to pass this along to the community with the hopes of offering encouragement to the many investors out there losing to cash buyers. You will land a deal if you put in competitive offers on a consistent basis. Good luck hunting out there my friends!

Tom Wagner · Answer

Incredible chart, thanks for sharing.

Going to save this one for the next time someone comes at me with "yOu CaNT bUy A prOpERtY wITh An FHa LoAn iN tHis MaRKeT"

Jonathan Bombaci · Answer

Great data! Thank you @Ian Hogan and @Andrew Freed for digging this out and sharing it. It confirms what we always tell new clients looking to o househack. Buying with fha has its challenges for sure, especially in the Greater Boston market, but it’s a fantastic loan for those looking to get started with very little money down. It’ll for sure take some time, and we will want to pick our battles, but we’re still able to get plenty of fha offers accepted even in today’s market.

You should plan to share this at the Worcester meetup next week.

Best,

Jon

Andrew Freed · Answer

@Shera Ewing - Usually you have to find portfolio lenders who do these types of loans, think local credit unions and banks. They keep the loans in house hence they don't have to conform with normal lending guidelines.

Andrew Freed · Answer

@Shera Ewing - Well it really depends on what multi's you're going after. There are more low down payment convention loan products out there for 1-2 families, but for 3 to 4, lenders tend to require that you bring at least 20% for owner occupied conventional. However, a lot of banks give leniency to first time home buyers hence they offer low down payment conventional products to that demographic for 3 to 4 families. So you might as well utilize this option so you can use your FHA right away for the second purchase.

Otherwise, if you use your FHA and want to house hack again, you need to refinance out of your FHA to a conventional loan, which usually requires 20% equity. Normally, you can only have 1 FHA loan at a time.

At the end of the day, if you have a choice, conventional is always better b/c you can lose the PMI once you have 22%+ equity and usually has less closing costs than FHA. FHA will have PMI forever.

Andrew Freed · Answer

@Peter Carboni - Glad to help. If you ever have any house hacking related questions, always feel free to DM me. I truly enjoy helping people reach financial freedom with the power of real estate. It's an incredible wealth building tool.

Andrew Freed · Answer

@Lien Vuong - Thanks Lien! I hope all is well.

@Peter Carboni - Nice, good luck on your journey. I would recommend looking into some low down payment conventional options for your first house hack so you can save your FHA for your second one. I went in to my first house hack with FHA and regret it since it locked me out of other low down payment conventional loans. For Mass, I recommend checking out Rockland Trust, Jeanne D'Arc and Fidelity Bank. I know all of these banks are portfolio lenders and offer low down payment conventional loans to first time home buyers.

Lien Vuong · Answer

Great info and very relevant data to support it. Thanks for sharing this to our community.

Andrew Freed · Answer

@Shera Ewing - These are definitely questions for the lender, but you can find local portfolio lenders by asking other investors who they use, posting on local real estate Facebook groups, calling around to every bank and credit union in your area and asking what low down payment owner occupied loans they offer. These types of loans are out there, but they take work to find them.

Shera Ewing · Answer

@Andrew Freed how does one qualify? Is it the same as if applying for FHA and conventional?Or is that something to ask them?

Shera Ewing · Answer

@Andrew Freed all everyone seems to get me qualified for are FHA loans.I’m guessing it’s because of the amount of money that I have saved, but I didn’t even realize there are low down conventional loans out there. I’m also trying to house hack through multi-family units. Why is it that the FHA gets locked out? It’s kind of discouraging.

Who says you can only get multis with cash?

Most Popular Reply