Jumbo Loan for first deal?

Question

Hello! As a brand new investor, would a jumbo loan be a good option for a multifamily property (looking at tri/quadplex)? Looking in the city of Chicago and would be putting down less than 20% due to the high cost of multifamily properties in this city. Credit is over 800. Looking at 400-600,000 for a jumbo loan and income currently is ~80,000/year. Any thoughts or input? Too risky for first deal? Thank you for all the input!

Lindsay Rudolph · Answer

It will be owner occupied. I guess my real question is: is a $700,000 deal for the first deal a good idea? Is it too much risk for a first time investor in a big city? Also, should the 2% deal apply to bigger deals such as this one in Chicago (where all real estate prices are ridiculously high).

Arpan Patel · Answer

I agree with an FHA being the best bet if you are going to live there. Another idea is to find something that needs rehab and then fix it up so there is built in equity and refinance after the asset has proven it's stability. Another option is to find an investor and you can sign the loan with your good credit. Maybe a 203k? Or maybe take a HELOC on a property you already own and use that as the down payment.

Zack Karp · Answer

@Lindsay Rudolph

Hi Lindsay, I'm in Chicago!  First, we need to know if you are relocating and if this will be your primary residence, or if this is going to be an investment property?

If the former, then your best option is FHA for the lowest down payment (and likely the best interest rate) for a multi-family.  3-4 unit properties do not have any conventional or jumbo options for less than 20% down, even with PMI.

If the latter, there are not any conventional or jumbo products that offer less than 20% down for 3-4 unit investment properties.  You would be looking at a non-prime, private, or hard money loan for something like that (if you can find someone to it lend to you).

Hope that helps, let me know if you have any other questions.

Upen Patel · Answer

@Lindsay Rudolph FHA is only for owner occupied property. Is this owner occupied or investment? Loan options available would be very different.

Lindsay Rudolph · Answer

I already found a financial institution that has offered the loan with less than 20% down with PMI. I just am wondering if that is a good idea for the first deal rather than an FHA verses conventional with a lower budget.

Chris Mason · Answer

You're unlikely to find institutional jumbo financing on a multi-unit with less than 20% down.

If you do find it, let me know so I can set up a correspondent lending relationship with them, heh.