New to Real Estate · Lake Elsinore, CA · Member since 2021 · 39 posts · 8 votes
Hello BP community. My wife and I, are in search for our first multifamily investment property. We will be using the house hacking strategy. We have ran the numbers on many, and have came across a few that might work. However, I was not aware of mortgage insurance on FHA loan. I am planning on only putting 3.5% down, so my mortgage insurance payment would be really high, and this brings my ROÍ down on those few potential properties to a negative. Has anybody else faced this issue. Any advice would be much appreciated. Thank you in advanced.
Lender · Member since 2021 · 277 posts · 150 votes
5y
Mortgage Insurance differs from conventional and FHA.
FHA mortgage insurance is 85 basis points of the loan amount. For a $300,000 loan amount, multiply it by 0.0085 and that will be the amount for the year and then divide by 12 for a monthly payment. FHA PMI will always be 85 basis points with 3.5% down under a $625k loan.
Conventional PMI is based off of the LTV, the borrower''s credit score, if there is a co-borrower, if the borrower is a first time home-buyer, property type. Conventional can be a lot cheaper than FHA.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
5y
Any loan with less than 20% down will have mortgage insurance. It sounds like you need to sit down with a lender....there may be other givens that you are missing (5% or so closing costs/prepaids).
Lender · Member since 2021 · 277 posts · 150 votes
5y
Mortgage Insurance differs from conventional and FHA.
FHA mortgage insurance is 85 basis points of the loan amount. For a $300,000 loan amount, multiply it by 0.0085 and that will be the amount for the year and then divide by 12 for a monthly payment. FHA PMI will always be 85 basis points with 3.5% down under a $625k loan.
Conventional PMI is based off of the LTV, the borrower''s credit score, if there is a co-borrower, if the borrower is a first time home-buyer, property type. Conventional can be a lot cheaper than FHA.
As stated by the others here you are going to have PMI on any low to no down payment product. The advice from the others on this thread about speaking with your lender to gain further perspective is right on. My question is are you approaching your numbers including you as a non-paying tenant (living in the building) or with the building at full occupancy at market rents? If you are only considering the former in these figures then a negative ROI may not be a bad thing depending on what you can capture with the building operating as a NOO space.
Hard to say without seeing the numbers where it went wrong or where the deal needs to improve. HOA insurance is an expense like normal property insurance or taxes that you'll have to pay putting anything less than 20% down. Increasing the amount you're putting down will lower the insurance amount but will also increase your investment, so your ROI will not improve that much, if at all. It sounds like the rent and/or other expenses are hurting this deal. Is there a way to value add to increase rents?