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Henry Lazerow#1 Chicago Real Estate Forum Contributor
  • Real Estate Agent
  • Chicago, IL
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Rule Change: No longer allowed 5% down home possible - House Hack

Henry Lazerow#1 Chicago Real Estate Forum Contributor
  • Real Estate Agent
  • Chicago, IL
Posted Jun 24 2019, 20:07

Very bad news! Freddie Mac just sent out a bulletin announcing a rule change for Home Possible 5% down to now have a $67,000 income cap (chicago). Meaning if your income comes over this you can no longer do the loan. 

I talked with lender and we can do Home Possible under old rules if get loan app in within next 30 days so if you have deal under contract or are looking for next house hack be sure to get your loan app in ASAP. You can read the full bulletin here: https://guide.freddiemac.com/app/guide/bulletin/2019-15

Some alternatives to Home Possible for house hacking....

1) FHA always works for 2 units and is excluded from the self sufficiency rule. FHA can work for some 3 and 4 units if self sufficiency rule doesn't get in the way which it often does in the popular hot house hack neighborhoods with low down payment. A way we discussed to get around this is by doing FHA 203K (even for a very small renovations) and then the underwriter will let assume high enough rents for the deal to meet the self sufficiency test and pass underwriting.

2) FHA is excluded from self sufficiency test for legal 2 units. So if the building has an unzoned attic or basement apartment the building still counts as a 2 unit and is excluded from the self sufficiency test allowing you to buy a "3 or 4 unit" with 3.5-5% down.

3) I found a lender on the west coast who can do 4.5% on a 5 year ARM at 10% down for 3 and 4 units owner occupant. The arm can only reset so much as has max rate increase so this is a relatively safe option at great rate on a 30 year term. I closed a deal with them last year and it ran smoothly.

4) Some local brokers can do 5-10% down but rates around 6%. I am going to reach out to more and also call the little banks/commercial lenders and see what they can do I have feeling can find lenders willing to work something out. 

5) VA loans. Also doctor loans for anyone who is a licensed vet, nurse or doctor. Both these options allow 0% down.

6) Put 20% down. Rates are low right now around 4% so if have the cash can be nice to lock in 30 year fixed for cashflow. 

The rules change a lot for Freddie Mac so hopefully this is not a long term rule and reverts back but as of right now above are some options for house hacking. Happy investing everyone! 

Chicago, Illinois

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