I'm curious if someone can shed some light for me. I recently talked to a lender (Wells Fargo) and told them that I was looking to buy a multifamily, live in 1 unit, and rent out the others. They told me that a 3 or 4 unit will require at least 20% down. They also said that I needed 6 or 7 months of PITI, even though I'll be living in it. Did I tell them the wrong thing?
The reason for this post is because, if I'm buying a property, and I can easily afford to mortgage, why is the PITI requirement even a thing?
Hello @Sang Nguyen
Not sure if that is a Wells Fargo thing but you definitely do not need 20% down. I'm looking into getting a two-unit property with a different lender and told them I wanted to do an FHA loan which only requires a 3.5% downpayment. However, there is a PMI that is charged for there being such a low downpayment.
As far as the PITI, Im not to sure on that. When I talked to my lender it seemed like she said the majority of that would be paid upfront which confused me. Hope someone can elaborate on this more for both you and me!
All the best.
Right! It didn't make sense to me. Like, if I can afford the mortgage payment without renting out the other units, why does PITI matter? I'm just thinking that I made the mistake of telling them my intentions (that I wanted to rent out the other units), but I'm just curious if it's a federal law with buying multifamily properties.
@Marcos Paulo Cerra is right. You should be able to get it for 3.5% with an FHA or similar package.
Perhaps a keyword to mention next time is "
"owner-occupied financing" and mention that it isn't strictly for investing but also to live in (at least for a year).
@Andrew Hogan Please forgive me for the stupid question, but what exactly do I ask? "I would like an owner-financed mortage"?
Yes, FHA loans are great, there are similar rates depending on the institution for
owner-occupied financing options
So with owner-occupied financing, I can house hack and not have to show 6 months of PITI?
You can get a 3-4 unit with FHA and only 3.5% down. 3-4 units do require 3 months of PITI for reserves and they must be your own funds.
Some lenders have overlays and that may be the banks requirements for an FHA mortgage. You will need a more investor friendly lender.
@Sang Nguyen stay away from Wells Fargo. I’m closing on a 3 unit on Thursday and I used Howard bank. 3.5% down payment and $4000 lender credit. Call Howard bank and see if they will lend in your state
@Rod Curry I'll give that a shot Monday. Thanks for the tip!
You went to the wrong bank, try a local credit union. National banks are great when you need millions of dollars for a development project, not a creative living situation. Local credit unions have more flexible terms and they could have better interest rate too. Plus, who doesn’t love networking with their local banker?
@Nick Rutkowski does it help if you're a member of that bank? i have a local CU in mind, and i have some money in there too, but i'm thinking of liquidating and moving to wealthfront for a higher APY
Of course, it’s always a plus to be a member. My advice is find a lender who backs your vision. Mine does and she will jump through hoops to get me financed, she’s a miracle worker.
@Sang Nguyen I would recommend speaking with a Mortgage Broker - they do business with my many banks and different lenders and have access to the best mortgage products and rates on the market. They will have the FHA programs being spoken of here and be able to explain all the details. Wells Fargo does not have the best reputation right now...
If you go to findamortgagebroker.com and punch in your zip code, you can get info of some in your area. Be open upfront and honest and expect the same in return.
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