FHA Multi Family Purchase Questions

13 Replies

Hello BP,

I am hoping to purchase a multi family property (4-plex), with the information:

Price: $255,000.00

Down Payment: 10% or $25,000.00 with FHA

Loan Period: 30 years

Loan Rate: 3.75%

The questions I have are:

1. How long would I need to live in the property before I move into a different property? Is it based on the lender or is it based on the state?

2. How much is PMI (State of Washington)?

3. How much would my payments be?

4. Where could I find a lender that could help me finance this?

I have many other questions, but this is a start

Thanks for any help!

@Denny Le

I am hoping to purchase a multi family property (4-plex), with the information: Awesome. I did this too and it was a great move in the end.

Price: $255,000.00

Down Payment: 10% or $25,000.00 with FHA

Loan Period: 30 years

Loan Rate: 3.75% You can't choose this.

The questions I have are:

1. How long would I need to live in the property before I move into a different property? Is it based on the lender or is it based on the state? You will need to occupy the property for at least one year.

2. How much is PMI (State of Washington)? Mine was about 1.35%. You should speak with your lender.

3. How much would my payments be? Your lender will disclose this to you.

4. Where could I find a lender that could help me finance this? There are several lenders. Call a bank or use a mortgage broker. If your interested in using a mortgage broker, I have one I would recommend to you who I personally use.

Originally posted by @Denny Le :

Hello BP,

I am hoping to purchase a multi family property (4-plex), with the information:

Price: $255,000.00

Down Payment: 10% or $25,000.00 with FHA

Loan Period: 30 years

Loan Rate: 3.75%

The questions I have are:

1. How long would I need to live in the property before I move into a different property? Is it based on the lender or is it based on the state?

2. How much is PMI (State of Washington)?

3. How much would my payments be?

4. Where could I find a lender that could help me finance this?

I have many other questions, but this is a start

Thanks for any help!

 1) 1 year min

2) 1.35% with less than 5% down, 1.30% with greater than 5% down so in your case 1.30% annual factor + 1.75% upfront financed MIP

3)1081.45 mtg + 248.63 for  monthly MI

4) pretty much any bank in the US

Feel free to let me know if you have any questions.

Deny

I believe you have to live in the home for a minimum of 1 year.

@Zach Schwarzmiller Thanks for the reply! I didn't choose the loan rate, a lender gave me that number. I remember talking to you before about multi family homes, what can I do to make this deal work out?

@Albert Bui Thanks for the information and percentage of PMI. How would you make this a deal?

I have a few other questions:

1. When will the PMI be gone from my loan?

2. Are there grants available for FHA loans?

Thanks again!

Hello Denny,

If you term is above 15 years and you're putting down 10% your MI will last for 11 years.  In regards to grants I'm not familiar with any but I do know that some counties in different states will give you a down payment assistance of 3%  Which would make your down payment .5%

@Denny Le There is the Washington State Bond program that will pay your 3.5% down payment. I have a client doing one right now. Message me if you want a lender recommendation. Interest rate may be higher using the bond program then you specified in your post.

1. it would be gone when you reach 78% of your purchase price if you put down 10% or more down. This generally takes about 78-80 months of payments with out paying extra to reach.

2. Yes there are grant programs but contrary to what people say you have to look at the programs. What I always advise is that people not only look at the advantages are but to check out the disadvantages too especially with bond programs, down payment assistance programs, or other subsidy type programs that serve a niche or exist to promote housing to a sector of the economy that most needs help such as low income, redevelopment of an area, etc. 

The gist of these programs are that you receive a benefit whether its down payment help, a tax credit, a home priced under the market, or closing cost assistance. The disadvantages are that you  can lose a bit of control temporarily like you cant sell for 9 years(example), you cant rent the home out must use as primary, you cant sell for a profit within X years, must share some of your profit if you sell within X specified time period, or other.

At the end of the day the benefit must make sense with your strategy definitely pay attention. WA programs may differ from CA programs but the gist of it is always the same or similar.

@Ty Snyder

@Shaun Weeks Thanks for the information. I looked up the information for grants, and if they're only paying for the down payment, then the interest rate would probably accumulate pretty quickly.

@Albert Bui If I reached the 78% in a shorter period of time, will the PMI be gone from my payments? have you invested in multi family properties for yourself and are you familiar with multi family using FHA?

@Denny Le   - Yes I am familiar with the program because lending is what I encounter day to day its the lesser of 78% or 11 years with a min of 10% down so to answer your question if you pay it down to 78% in less than 11 years you will still pay MI because the wording is "the lesser of."

The above assumes a 30 year fixed FHA, 15 year products have lower annual MIP, but the down side is the much higher monthly payments which may adversely affect your cash flow.

Beginning June 3, 2013, the FHA changed its long-standing Annual MIP Cancellation Policy. The FHA guidelines currently state:

  • Loans beginning at 90% LTV or less will pay annual MIP for 11 years.
  • Loans beginning at 90% LTV or more will pay annual MIP for the complete loan term.

This means that home buyers using the Federal Housing Administration's 3.5 percent downpayment program will pay annual mortgage insurance for the loan's full 30 years, regardless of whether the home appreciates to the point of having 22 percent equity or more. With the new FHA rules, MIP is forever.

@Denny Le
Other important questions...
If this is income property, what are the rents or potential rents? Who pays utilities?
Is there any rehab work required?
How long you live there can vary depends on the circumstances, if you got a job transfer, or other explainable situations it could be less.

@Albert Bui @Joseph Zanazan Thanks for the replies, do you know how many months/years it would take to qualify for a refinance?

@Michael C. I have looked into the questions that you asked, I was just wondering mainly about the FHA and how it works. Thanks for the comment!

Technically about 6-8 months of payments prior to refinancing into conventional but if you're not buying the fourplex at significantly below market how do you figure you'll be able to refinance ? Max LTV (loan to value) on 4 units if you have 1-4 financed properties is 75% and if you just recently bought using FHA your ltv will be some where in the 96.5 to 98% range. At this point you have two options: find an amazing deal using FHA which will be very difficult with the health and safety requirements needed to close with FHA or put down a huge equity contribution to do a regular rate and term refinance into conventional. How do I know this ? I am loan officer and I've planned the same strategy you're considering in the past as well.

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