change primary residence to investment property to avoid 20% down

2 Replies

I own a 2 family in the Bronx.  The house 2 doors down from me is for sale.  It is basically the exact same house as mine and would be the ideal second property for many reasons (proximity, size, ability to rent).  

I spoke to a lender and he told me that I could not purchase that house with a conventional 10% down loan even if I plan to move into it (I do plan to move into it) because there is no reason to move into a mirror image of my own home that would satisfy an underwriter.

1) Is that true?  Are there any reasons that would satisfy an underwriter?  My reason is that I am house hacking in  current 2 family and I have 4 roommates in the 1st floor/basement unit (I have the whole finished basement to myself).  I would like to move to an apartment by myself without kicking out paying tenants, but not sure if it should even be mentioned since the basement is not technically a living space, and assuming an underwriter would suggest that I just kick out the roommates if I want my own apartment.

2) Can I legally switch my current apartment into an investment property by having my current roommates sign a formal lease for the apartment (right now we are all informally living together - they are friends of mine)?  This would leave me without a legal apartment in my house.  Could this free me up for a conventional loan even though it's 2 doors down?

Basically, I have enough for a 10% down payment but not 25%, and trying to make it work.  Open to other ways of making it happen also.

Can you refinance your current primary into a conventional loan?

Form what you’ve said I think this won’t satisfy any underwriter

Hello and welcome to this and putting a good question in here to ask Michael!  If your existing home is very rentable  and you think the future would not change your decision to keep it as a rental and is not prohibited by local zoning.  If those 4 are helping you makerent I think it will not matter to the underwriter.  They are only interested in your ability to pay, especially if they help you make your debt payment.  If you are doing a conventional loan, you will probably would make you pay a 20% down payment.

The way to get a low down payment is to get a "house hacker" loan in multiple units of 3 or 4 units in SFH or get a loan from a Private Lender. Is there not any equity in your existing house or are you already planning to use that towards the down payment? Good luck to you!