I've read several articles and have watched several videos about house hacking, and they all talk about using an FHA 3.5% down payment or a conventional loan 5% down payment when possible. If someone has the 20% down payment, wouldn't it be better to just go with a conventional loan and get rid of the PMI?
Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes
5y
I did this with my first house, a duplex, which I bought as an investor but ended up living there.
It's all math in terms of the amount of cash you have vs. savings, how long you intend to hold the home for, etc., and of course you can always refinance later into better terms.
Your lender should be able to provide some insight specific to your situation.
Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes
5y
I did this with my first house, a duplex, which I bought as an investor but ended up living there.
It's all math in terms of the amount of cash you have vs. savings, how long you intend to hold the home for, etc., and of course you can always refinance later into better terms.
Your lender should be able to provide some insight specific to your situation.
Rental Property Investor · Brooklyn, NY · Member since 2021 · 4 posts · 3 votes
5y
@Oto Tabares Think of it this way: Theoretically, you can either put 20% down on 1 house, or buy 4 houses with 5% down on each. Generally, the more you leverage, the higher your ROI will be. If you can make more money on another investment using part of the capital you have for that 20% down payment than what the PMI is on the 5% down, then you're maximizing your investment money. But the more you leverage, the higher the risk. So it's really up to your comfort level.
@Gittel Grunstein I can understand the general concept of leveraging the extra cash in other investments, but how could I buy other houses with 5% down each? Wouldn't they be considered investment properties and require a much higher down payments?
Rental Property Investor · Brooklyn, NY · Member since 2021 · 4 posts · 3 votes
5y
You are right, as far as I know, you cannot buy 4 houses with 5% down each at once, that's why I said theoretically. But there are other options that will allow you to leverage more. For instance, you can put 5% down on your first, live there for a year, move out and refinance to a conventional loan. You can then do the 5% down again. There's also the option of putting 10% down on a vacation home.
I'm just pointing out that there are ways to maximize your capital, before even getting into creative financing. I'm no expert in loans, only trying to explain why the videos you've watched and articles you've read might be stressing low down payment loans.