Multi Family Minimum down payment If Investor occupies one unit

13 Replies

Hello everyone =)

So I came across this line in another forum discussing if you need and LLC or not to start out. Basically saying that good liability insurance will do the trick as LLCs are easily pierced and just complicate the lending process. It was a forum of the best responses. I am new to the forums and one of the responses included this when talking about financing :

"Down payments are as low as 3.5% if the new investor plans to occupy at least one unit in the building and between 15%-25% if they do not."

Is this true? I am a new investor and I am looking to purchase my first property. It will be a 2 unit multi family and I will live in one. If anyone can help that would be greatly appreciated.

Thank you

Jimmy

FHA up to 4 units with with minimal down payment if you plan to live there, they don't consider you an investor.

@Robert R. thank you! i thin that is the way I'm going to go to start out. Are there any major disadvantages to this type of investing?

This is a very common and popular way to get started investing and it's highly encouraged.

It's known as "house hacking" around here on the forums. You can get in for 3.5% with FHA.

Going In with such a small amount down, there is greater risk of default, or owing more than the property is worth. Like most investments higher risk, higher reward potential.

@Brian Garrett thank you for the contribution. Is there any way to determine how much PMI insurance will cost for such a loan? Any direction you could point me in would be greatly appreciated. Thanks

Jimmy

@Robert R. I totally understand. In other words this would be a good strategy in an appreciating market because you can capitalize with little down but in a depreciating market you could find yourself in a little bit of trouble. Thank you for the post

Jimmy

Originally posted by @Jimmy Ready :

@Brian Garrett thank you for the contribution. Is there any way to determine how much PMI insurance will cost for such a loan? Any direction you could point me in would be greatly appreciated. Thanks

Jimmy

Go sit down with a loan officer at a local bank or credit union. They can explain all the associated costs.

@Jimmy Ready To calculated PMI you can use online calculators (Google). Alternatively, you can sit with a loan officer (as pointed out by @Brian Garrett ) to understand the loan terms being offered in your market. 

If you're on good financial footing and have a solid credit score, I would urge you to look beyond FHA loans. Currently in our market (DFW), you can easily get a loan that is equal or better (when looking at overall terms) to the FHA loans.

With FHA loans you will ALWAYS be paying insurance. That is not the case with conventional loans (another factor to consider in your analysis).

@Omar Khan Thank you for the reply and information. I am definitely open to suggestions on different types of loans. What type of conventional loans do you think would be more suitable and have better value than FHA loans?

@Jimmy Ready Terms on conventional loans differ by lender. If you like I can connect you with a local DFW based lender. Don't know if they do national but they will definitely offer you great terms (equal or better than FHA).

P.S. I am not in lending and do not get ANY sort of compensation from ANY lender. I just wanted to give you an idea. 

@Omar Khan if you could connect me that would be great I would love to talk with them in more detail. Thank you

Jimmy

@Jimmy Ready PM me with your email address and I'll make the introduction.

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