DP minimums for Duplex in LA?

Question

Interested in house hacking a duplex by living on one side and renting out the other in LA. Do I have to put down 10%? Will the rent count towards my DTI ratio?

Any lenders out there that can help me out?

Albert Bui · Answer

CHENOA DPA or down payment assistance helps cover 3-5% of your down payment and its offered on up to 2 unit properties or duplexes too (its really a loan in 2nd position behind the FHA 96.5% note). The program is great for those who have very very limited money to put down.

The other hurdle/con with CHENOA is that its first mortgage rates are around .75 -1.25% higher than the current FHA market rates so if FHA was 6.5% your chenoa first mortgage loan rate to is going to be around 7.25-7.75% with possibly points too. This is something to consider when opting for this 3-5% down payment assistance help (i'd say pros and cons...).

The CHENOA comes in 3 flavors, first and foremost there is forgivable 2nd mortgage that is silent meaning there is no payment, but you have to be at 80% AMI or area median income (to buy in LA county this is really hard to do but in Enid, OK it can be done since houses are like 100-120k for a SFR). the 2nd variant of CHENOA DPA is that there is a payment each month for the 2nd loan and income restrictions however the loan is not forgiveable after 3 years you have to pay it payoff eventually, and then the third variant of CHENOA has no income limits which is nice because in LA county you need this to afford most of the prices in the area and its repayable monthly and is not forgiveable after 3 years.

Most investor mind house hackers who want a good income component will opt for that 3rd variant because it allows you to be a first time buyer, have higher income, and still get that down payment help and still buy.

Kevin Tang · Answer

@Sammy Lyon Sounds interesting! Could you please send me more information?

Albert Bui · Answer

Just to piggy back on what @Bradley Dosch mentioned you can do 3.5% down FHA which will be less than 10% down payment or you can do 15% down owner occupied on 2 unit properties with standard conventional loan programs as well. There are 5% down conventional Niche programs (home possible freddie mac) however its subject to 80% of AMI (area median income) limits which makes it nearly impossible to qualify for given the prices in Los angeles county are beastily high even if your 2-4 unit property is in a secondary or tertiary area of CA state (for get the core/prime areas like santa monica where a fourplex is like 2.5-3M).

With regards to your income being helpful in the DTI calculation, yes you can use the other units rental income (75% of the gross lease or your appraised rents as determined by the appraiser) towards your qualifying income. In some cases if the 2nd unit could rent for 3000 per side or per unit you could use 75% of this or 2250 add to your personal income. This addition can be sizeable enough to help you qualify especially in these more expensive coastal markets (appreciation market versus linear or hybrid markets).

The other thing to take note of is that when you're occupying the 2-4 unit property, the other units rental income is only added to your personal income and it is not used to offset the mortgage completely which would be the case if you weren't occupying the property. This is one of the main advantages of buying a property as an investment versus a primary residence because of the income calculation is far superior that to owner occupancy, however the advantage of owner occupancy is superior when it comes to lower down payment and rates, which are lower rates/costs with primary residence/occupancy.

@Carlos Valencia@Matthew Kwan

Bradley Dosch · Answer

Hey Kevin, there are many loan different programs you can use to house hack. The most common one is 3.5% down FHA and yes you will be required to count the rents from the other units as part of the FHA self sufficiency test.

Other loan programs include NACA, local city/state loans, Bank of America program, etc. Los Angeles will have plenty of options. Hope this helps, feel free to reach out with any other questions!

Rick Albert · Answer

I will shoot a message with a few.

Bradley Dosch · Answer

Yeah I recommend and use @Albert Bui for both my own transactions and for my clients :)

Kevin Tang · Answer

@Rick Albert @Bradley Dosch @Nicholas Coulter Thanks for the response y'all. Any lender recs?

Sammy Lyon · Answer

Of course. I called her again to double check and it's legit!

Sammy Lyon · Answer

Hey Kevin, generally for owner-occupied duplex you'll be putting at least 15-20% down depending on credit, UNLESS you go FHA at 3.5% (as others have answered below). I do know a lender who has an in-house FHA program with 0% down you can use on a duplex (essentially they put a second loan at 3.5%). So, that is an exciting new option for house hacking in LA!

DP minimums for Duplex in LA?

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