Request for Multi Unit Loan Advice & Credit Score Issue

7 Replies

Hello All! I’m brand new to this amazing site. To be honest I’m a novice. I look forward to gaining friends, learning & sharing.
My project is a property with 2 units on 1 parcel. My $145,000 offer was accepted. I'm having issues & was wandering if someone could help. I have $8,000 to put down.
FHA & USDA loan options were denied. I've found a credit union that will offer a conv. loan w/ 3% down. My credit is getting dinged because credit reports are pulled each time I inquired about loans. I would like to confirm/compare my rate, but don't want to keep getting my credit score lowered. Also, the credit union wants to charge an IR of 4.25%, which is almost a full percent more than the FHA/USDA. Any advice on if this is a decent rate? Any advice of where else to look for loans without lowering my credit report?
Any advice is appreciated.

Usually if you have multiple pulls for a home loan within a 2 week period then it counts as one pull. Are you going to be living in one side of the unit and renting out the other??

It sounds like you are going after and owner occupant loan and not an investor loan. If that's the case you must live their and will sign an affidavit stating such at closing with the lender.

They know buyers who are living in a property will fight hard to keep it in tough times which is why you have the better rate and less down than a investor loan.

The investor loan they want more down so the investor has skin in the game and it will be painful to walk away when things get tough. Lenders are just like insurance companies and they base metrics and requirements off of data and things they have learned from in failed ventures (loans) from the past. They set up requirements to minimize risk and increase the chances of a successful outcome with their loans.

Few things:

The less money you put down, the higher the interest rate that you can expect. 20% down is the standard these days so it's going to be tough to find a lender willing to accept anything less. On top of a higher interest rate, you can also expect to pay for Private Mortgage Insurance which may be another $100 to $200 or so. So 4.25% doesn't sound too bad. Consider yourself lucky that it's not 8%.

Getting your credit pulled shouldn't ding your credit score too much. Basically, you need to be above 720 for top tier credit. If your credit score came out below that then it's going to be tough going to find a bank willing to work with you on low money down. If you got pulled from 728 to 718, that's one thing. But if you went from 680 to 660, the problem isn't so much a little ding to your credit score as it is the fact that your credit score isn't what most lenders want to see.

Finally, echoing what Joel said, unless you're an owner-occupant, forget about borrowing from a traditional lender with less than 20%. You may find it to be more like 25% down.

The 5% down party crashed back in 2008. It's over. Nowadays banks want their full 20% down. FHA will do 3% down for owner-occupants but you've got to have a pretty sterling credit and income record. I recently received a 3% FHA loan but man, they put me through the ringer. They wanted documentation for every last thing - including invoices and sources of funds for every $1000 deposit over the prior three months. (Given that virtually all of my deposits are for in excess of that, we had to do a lot of digging.)

John and Joel - you guys are a lot of help. Thank you! I had no idea this site could be so helpful. Just the info and experience I was hoping for. I do have a credit score in the mid 700's and the "dings" were not that substantial, but were noticed and each time the credit report got pulled the bureau that was issuing it was quick to point out that I had recently had my credit checked and frowned upon it. I'm glad to hear that it's not too big of a deal. And your guys assumption is correct! I will live in one of the 2 units. Again, you guys are very helpful.

If you want to be able to compare multiple offers, rates and terms and perhaps using OPM other peoples money, you should consider working with a business/commercial loan broker. Often you can supply your own credit reports, which has no impact on your FICO score.

Excellent advice Angela. I like that option. Thank you.


Do you mind sharing why the FHA and USDA loans were denied? Your credit score doesn't seem to be the issue.


Paul Cordero - Sorry for the late reply. The FHA method was denied because according to my Loan officer, there were no COMPS comparable rates in the area for two separate properties on the same parcel - plus 1 or the other multi units in the area was touching / not separated & the other multi unit was sold for $20,000 less. The USDA loan was not approved because the property had investment potential with the other unit and was therefore looking into other options since I only have about 15% to put down and not the full 20%....

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