Qualifying For a Multi-Family Purchase - Conventional

5 Replies

Hi Guys!

Anyone have any advice or experiences they'd like to share in regard to qualifying for a multi-family rental purchase?  This would be my first multi-family purchase so any advice would be of help!

Here's my situation: I started with my first rental purchase in 2013, and I'm now up to 3 units. What I'd like to do now is purchase a larger multi-family (maybe a 4 unit) and live in one of the units. I know some lenders will use the potential future rental income from the additional units to help you qualify. I'm concerned that with a multi-family potentially being a much larger purchase than I've done in the past, my DTI ratio will not qualify. Unless, the lender is "giving me the benefit of the doubt" by adding in potential rental income from the additional units.

So my question is, has anyone had experience with this type of transaction...using rental income to qualify, before you actually start receiving it?  Are there any of the larger lenders that are more flexible? (I'm near Ann Arbor, MI)  Any helpful advice before I start calling lenders would be GREATLY appreciated.  Thank you very much for your time!

Kyle Berns

@Kyle Berns

A MFR is a great way to invest! Keep in mind that you will be required to put more money down than with a SFR. 25% down is required for a MFR. You can use 75% of lease agreements on the property or 75% of the projected rental income determined by an appraiser if the units are not currently occupied.

You can qualify for a conventional or FHA loan with a 4 unit as long as you qualify the dti. You cannot use the future income of the property you are buying, but you can use the income from your current rentals as long as they are seasoned a year or two. Talk to a local bank or credit union to see if you can qualify. I have a good contact if you need it. Pm me

You could get a cml loan. From my experience though, as a newer investers they looked at my personal financials vs looking at the performance of the property, similar to conventional financing.

You will need to have a bigger down payment. I recently got a quote on a 10 unit where 35% was required as down payment. 

But you will have to talk to a few sba lenders to get a good idea what you can qualify for. 

Thanks @Jerry Padilla

I will keep that in mind as I am searching around for deals lenders. Good tip on the larger down payment and 75% use of the rental income. I appreciate your response!

Thanks Joe!  That's good advise on potentially looking for a commercial loan. I will do my research and shoot you a message if I have an additional question! 

Thanks so much for the help!

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