Loan for triplex 10% Down Owner-Occupied in CA Bay area

7 Replies

Is there any lender can do Morgage with 10% Down for Owner-occupied Triplex in CA? Purchase Price about 650k. The property's condition is just Ok. I am not sure it can meet FHA requirements. Please let me know if there is any other options.

@joestretch can also help out. Make sure to get multiple quotes to ensure a good rate!

Best of luck.

Originally posted by @Catherine Zhang :

Is there any lender can do Morgage with 10% Down for Owner-occupied Triplex in CA? Purchase Price about 650k. The property's condition is just Ok. I am not sure it can meet FHA requirements. Please let me know if there is any other options.

You Can Catherine but you will come up invariably upon the Self Sufficiency Rule (or SS Rule). FHA will allow you to put down less than 10%, 3.5% in fact, but if you'd like a bit lower monthly FHA MI and removal of lifetime FHA MI you can put down that 10% if you want (only slight benefits).

The SS rule will require you to have around 5850 gross rents or higher to qualify this "rule." There are some other ways to massage these figures to make it work but this is just a general figure. Putting more down payment is a way you can make the numbers work better but the more you put down the closer you are to conventional financing and thwarting the benefit of low down FHA financing.

The SS rule requires that the gross rents of all units even your owner occupied unit X 75% is greater than your monthly PITI (prin/int/tax/ins monthly payment). Its Important to know that the SS rule on FHA only affects 3-4 unit properties not, 1-2 unit.

With 3.5% down, in general you'll need the property to rent for .90% of your acquisition price. You can of course improve this general rule of thumb by:

1) putting more money down to lower your monthly payment

2) buying down your rate to lower your monthly payment

3) get a cheaper insurance quote to lower your monthly payment

4) use a different product with a lower rate for a lower monthly payment like a 5/1 ARM FHA

5) if you're in a historic district you can apply for property tax exemptions which lower property tax and thereby lower your monthly payment like in Orange, Ca they have a Mills Act which reduces the property tax to about 1/10th of the surrounding properties. This lower property tax calculation can be used to squeek you through the SS rule above. 

6) many other strategies 

Hope that helps. 

Originally posted by @Jonathan Pflueger :

@joestretch can also help out. Make sure to get multiple quotes to ensure a good rate!

Best of luck.

 Great rate with out execution .... means nothing. Great rate assuming all else is equal, sure. 

Account Closed Any idea if something similar would be possible in Chicago? I am hoping to do 10% down for an owner occupied triplex that exceeds FHA limits. I know that 10% down on SFH or condo is no big deal but things get stickier with multifamily purchases.

Originally posted by @Meera Lakhavani :

Account Closed Any idea if something similar would be possible in Chicago? I am hoping to do 10% down for an owner occupied triplex that exceeds FHA limits. I know that 10% down on SFH or condo is no big deal but things get stickier with multifamily purchases.

 You can find the loan limits here, note that they go up with unit count. It looks like the triplex FHA loan limit in Chicago is $569k. With 10% down, that would put you at a purchase price cap of $632k.