Funding first multifamily least amount down

[Amanda W.]

Hi bigger pockets family! 

I have two single family homes in Philadelphia, currently rented, so far all good.  Funded purchase and rehab largely with cash.  Value of both $280K, I did pull $75K out of house #1 to fund purchase and rehab of second one.  

Now looking to leap to my first multifamily with OPM in Philadelphia or Northern DE.  Tri or quad.

Talked to a lender, getting advice "there's no such thing as less than 20% down", 6% interest, Fannie Mae requires 4 points at closing due to multifamily.  

I am nervous about pulling more equity out of my first two homes and want to get a mortgage with as little money down on the multifamily. 

For those who have invested in multifamily, is this what you are hearing?  Is there a better option?

Thanks!

Amanda 

[Chris Mason]

Originally posted by @Ernest Sparkowich:

@Tom S. How does living in a unit lower the down payment? Trying to get into the rental stuff myself. 

Residential 1-4 unit properties have their financing effectively subsidized by Fannie Mae. Without that, no one would lend money out at a 4% or 5.5% interest rate (which is ROI for the lender) when Wall Street is paying 8%+ ROI.

The subsidy is greatest for owner occupied real estate. 

The owner occupancy promise is a 12 month promise. So if you can swing living there for a year, the low down payment and lower interest and lower discount point options will open up for you. There are threads on this forum about FHA and Home Possible, go give a few of those a read.

(This paragraph directed at the lurkers & those who found this via google search who just went "Aha! I know what I can do!!!" in their heads, not at anyone in this thread.) Not worth lying about your occupancy promise & intent, if you say you will live there I strongly encourage you to do so. In theory it's fraud and prison time if you lie. In practice getting on the FNMA/FHLMC/FHA blacklist is more likely, but that would still be significant because it means no subsidized mortgage interest rates for life (you would always get an interest rate higher than what an S&P 500 index fund is paying, since you have to be willing to pay enough in interest to convince someone to NOT put their money in that index fund). Here's a lawyer talking about someone naughty that got blacklisted. 

Regardless, 4 points for 6% is crazy, find a new lender. Rather than saying "we don't do that type of loan," lenders sometimes instead say "we'll do it, but only if we can juice up the profit margin to something absolutely ridiculous." This is an example of that. There are a lot of reasons you want an investor friendly lender, this is one of them.