Keeping Mortgage Payments Low

[Xavier Wharton]

Hello BP Family, OBJECTIVE My wife and I want to make our first purchase a multi-family property (preferably a fourplex). We currently rent an apartment, but wish to become owners. PLAN: The plan is to occupy one of the units, rent another unit to my mother-in-law, and lluse the third unit as either a rental, or an Air Bnb. CHALLENGE: Similarly listed properties (multi-family/duplex/triplex/fourplex) go start around $500,000.00 and go up to $1.2million in areas that are considered "decent". QUESTION: If we were to qualify for a purchase, then aside from putting down a large deposit, how can we keep our mortgage payment low? Do lenders factor in credit scores as well, when calculating your mortgage payment (like a car-note)? Bonus Question: In California, has anyone used NACA (Neighborhood Assistance Corporation of America) https://www.naca.com/purchase/steps-to-homeownership/ Thank you -Xavier

[Andrew Postell]

@Xavier Wharton this is the age old question that a lot of investors face.  Now, admittedly, many investors don't have unlimited funds so they do try to keep their down payment as low as possible so they can try to do more deals but let's explore your options a little:

1. FHA Loans - FHA loans allow you to bring 3.5% down to buy a multi-family property. That is the lowest down payment available on multi-family homes. There are a LOT of "down payment assistance" programs out there so I can't speak for each one but MOST will only be allowed for single family homes. FHA loans do have loan limits per county so talk to your lender who will prequalify you to see which counties will support a higher value for you.
2. Conventional Loans - Again, "MOST", will start at 20% down for multi-family units.  There are 3% down options but please forgive me for not knowing California so well...I'm not sure about the loan limits there since so many counties are considered "high value" in the lending world.  Maybe @Chris Mason could help here a little.  
3. The difference? - FHA loans do have the lower down payment option but they also carry PMI...and it's forever. So if you do have a good amount of funds to put down...maybe a conventional loan could be a better option. But even with the PMI your cash flow should be pretty good. Multi-Unit properties in general cash flow at a better rate than other property types.

Those are some items to consider but I would HIGHLY RECOMMEND speaking with a lender and seeing the numbers side-by-side to see the true difference.  Good luck!