Pros and Cons of Home Possible loan (Illinois)

[Ashley Budyak]

What are some opinions on home possible loans? Pros and cons? I am from Illinois, I am not sure if that makes a difference.

[Anna Swartz-Lopez]

@Ashley Budyak 

Hi Ashley, congrats on moving in the right direction! Here are some things to understand when you start talking about financing your real estate investment. 

From a lender's perspective, anything 4 units and under is considered residential, and anything 5 units or more is commercial. So if you want to buy a duplex, you will be getting a residential loan. 

Now the great thing about househacking is the lower down payment to get started. Just be aware that lenders have tightened restrictions, and you will have to have outside income that supports a mortgage. 

To clarify, let's say you buy a home with five rooms and you plan on renting out four bedrooms. You used to be able to count income from those rooms in the calculation as to whether your income can support a mortgage. That is no longer the case. But, if you buy a duplex, a triplex, or even a fourplex, you may be able to secure it with the lower down payment and you should be able to count the income from the separate properties in the mortgage calculation. So if it is a separate unit that you will be renting out, you can count the income, but if it is just a room in the house, you cannot count the income toward the calculation to show you can pay the mortgage. 

Hope that helps, and best of luck!