Rental Property Investor · Altoona, PA · Member since 2020 · 22 posts · 4 votes
I am going to be a first time home buyer and first time investor.
I am between picking an FHA loan or having to borrow outside money to put towards the 25% down payment for an investment mortgage (Triplex going for 79k, my friend owns it). A friend of mine who was a hard money lender suggested a credit union. Well, I just spoke with them and they have some appealing options.
Should I get my mortgage through the credit union for 85% home value and seller finance the remainder? FHA and live in the property and lose the income? Or are there some other solutions I haven't sought out?
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
6y
@Lake I., I would try and split the difference and use a low-down payment conventional loan. You'll have to owner occupy, but that was already on the the table. FHA has more paperwork, up-front mortgage insurance, plus PMI for the life of the loan. With a conventional the PMI will drop once you hit 80% LTV.
Owner financing can be great, just talk with the bank ahead of time. They may not like the idea of you basically being 100% leveraged, especially if you don't plan to live there. What kind of terms can you get on the owner financing?
Rental Property Investor · Altoona, PA · Member since 2020 · 22 posts · 4 votes
6y
@Jaysen Medhurst
Seller is asking for 20k under last years appraisal (we are friends). 3 units generating about $800-$1000 in cash flow.
Credit union will give me 85% loan to value. That’s 100% financing. Only catch is 15 year balloon.
I really prefer not to live in it. My goal when calling the CU was to get a personal loan for the 25% down, $25k for costs and down payment. When discussing that and the properties income production, he suggested doing a business loan and I pay my friend the rest through seller finance. If the appraisal comes back anywhere near 98k we don’t need anything except the loan from the CU.
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
6y
@Lake I., sounds pretty good. Don't sweat the balloon. You'll have plenty of chance to refi in the next 15 years. I assume it's 30-year amortization? If the balloon really bothers you, do the owner-occupied route.
Last year's appraisal, meaning the town's appraisal? Can't go by those. Might be accurate, might be way, way off. Are there any recent comps you can consider? If you're truly getting it well below market, owner-occupied starts to make even more sense. Get the longer term, low residential rate locked in, and then in a year either refi or apply for PMI to be removed based on the higher FMV.
FYI: the CU (or any lender) will most likely lend on the lower of purchase price or appraisal, so that $98k appraisal isn't going to get you out of a down payment.
Rental Property Investor · Altoona, PA · Member since 2020 · 22 posts · 4 votes
6y
The balloon doesn't scare me. With the money I get by not living in it I can pay the loan off in 5 years instead of 10 or 15. And the appraisal was from the previous sale. The appr is full of comps. And as far as owner occupy goes, why lose money when I can just own it as an investment. FHA is my last resort without getting a personal loan for 25% down or doing the CU way and seller financing, which the owner is all for. So what I am hearing is I need a solid answer from the CU after I order the appraisal on how much they will give. Rep seems more interested in the money making capability of the home and its current value than anything else.