Purchasing Owner Occupied 4plex/ Seattle- best financing options

5 Replies

We are trying to purchase an owner occupied fourplex, priced at just over a million. One of the local lenders we have spoken with told us that they still require 20 percent down even if the fourplex will be our primary residence. Has anyone else run into this issue? Are there any creative ways to pay a lower down payment? Any recommendations on lenders or loan programs? We are in Seattle, WA. Thanks for the help!

@Natalie Wells I think you just need to shop around to other lenders.  While the price of the 4plex is high, that doesn't seem like an unreasonable price depending on where in Seattle. 

If all the lenders give you a response that is more costly than expected (rate, down payment or term) it could be something to do with credit score or debt to income requirements.  If none of those are factors and the property is not distressed in some fashion it could be as simple as the lender is over exposed to real estate and wants greater protection for taking on the loan.

Also in my experience credit unions tend to have tighter lending requirements.

Best of luck with your investing.

John

I believe a 4plex conventional loan requires 20% down and a 2-3 unit requires 10-15% down, while a single family requires 5% down. You could do a FHA loan to only put down 3.5% depending on your situation, but there are limits to the price on a FHA loan depending on your location, so i'd look into that.

Originally posted by @Natalie Wells :

We are trying to purchase an owner occupied fourplex, priced at just over a million. One of the local lenders we have spoken with told us that they still require 20 percent down even if the fourplex will be our primary residence. Has anyone else run into this issue? Are there any creative ways to pay a lower down payment? Any recommendations on lenders or loan programs? We are in Seattle, WA. Thanks for the help!

 HI Natalie,

The truth is sometimes blurred.

Is it partly true? For that lender maybe.

Will FHA require 20% down ? no they required 3.5% down payment but this is an owner occupied loan for min 12 months post closing. Are you living in this planned fourplex to house hack?

FHA also requires the self sufficiency rule which basically means your 1 Mil fourplex would need to rent for nearly 9k a month or at a .90% Rent to Value/price ratio in order to qualify at the min down payment which is near impossible in Seattle/Bellevue core areas unless you either found an off market unicorn property, its heavily distressed, you up convert a SFR into fourplex or other creative value add strategies.

The standard Conventional program will require 25% down payment whether you buy it as an owner occupied or investment property on 3-4 units.

If you live in the property there are some "niche" programs for conventional financing that will allow as low as 5% down but the program is being revamped after the end of July this month as to only allow folks with 80% of the area median income(AMI) to utilize it (seattle AMI is roughly 100k so you'd have to make 80k or less

If you're a Vet or have served in the armed forces you may qualify for VA financing as well (owner occupied only program).

Hope that helps.

Originally posted by @Will Morris :

I believe a 4plex conventional loan requires 20% down and a 2-3 unit requires 10-15% down, while a single family requires 5% down. You could do a FHA loan to only put down 3.5% depending on your situation, but there are limits to the price on a FHA loan depending on your location, so i'd look into that.

HI Will,

Conventional actually requires 25% down on 3-4 units whether owner or non owner occupied however there are some niche conventional programs with as little as 5% down that have been around for a few years now that being phased out at the end of this month July 2019 as we write this.

In the future the niche conventional programs will only be avail able for folks with 80% of the area median income or AMI. As opposed to right now, where there are huge swaths of areas that have "no income," designation and you can buy 5% down fourplexes at will.

I think the govt agencies figured out that their money wasnt really helping the intended but rather being used to help aspiring investors build their portfolio so they've decided to make this adjustment.

As a lender we can still use this program as long as we lock prior to the end of july