No more house hacking in Chicago North Side?

14 Replies | Chicago, Illinois

With the 5% program essentially gone the only option for low money down being FHA... with low loan limits and hard to pass self-sufficiency tests the program is very hard to do. So is house hacking with low money down dead on the north side of Chicago?

@Weston Harding @Henry Lazerow @Jake Fugman thoughts?

There is the dream maker program with 5% down and no PMI but with rates above 6% it will cost almost $400k more in interest on a $750k loan. Any alternatives?

We should talk to some large mortgage banks and try to come up with a new program. It's a unique situation in that the average Chicago house hacker has great credit and strong income but likes to put as little as possible down. Maybe people should just start putting more money down, doing 20% down conventional gets you awesome rates right now. 

Ways to do it now low down....

I have gotten the last two pre-approvals OK'd for 4 units by making them FHA 203K this allows appraiser to expect top of market rents. We were only going to do like $10-20k of "rehab" basically just to get a pass on self sufficiency test. 3.5% down.

Legal 2 units + an illegal 3rd. This always will enable FHA to work and buy 3.5% down.

I have a lender in California who will do 10% down at around 5% interest rate. Closed a Logan Square 4 unit with him and it all went smooth. It's on an ARM but not a balloon so overall a really great product. He only does higher credit/income clients though.

A bunch of local mortgage brokers could do 10% I have no idea what the program was but rates higher. As long as still cashflows or you plan to refinance after rehabbing who cares about rate. I just look at deals as Cash on Cash % so don't really care about interest and most people are going to refinance these things at some point anyways.

Local west suburbs bank - They can do 15% with rehab costs wrapped in loan. Higher rate and one point but an awesome program if buying our 2-4 units non owner occupant.

@john warren did you say there was a way you got the home possible to work in another post? Or meant the FHA 5 down?

Originally posted by @Brie Schmidt :

With the 5% program essentially gone the only option for low money down being FHA... with low loan limits and hard to pass self-sufficiency tests the program is very hard to do. So is house hacking with low money down dead on the north side of Chicago?

@Weston Harding @Henry Lazerow @Jake Fugman thoughts?

There is the dream maker program with 5% down and no PMI but with rates above 6% it will cost almost $400k more in interest on a $750k loan. Any alternatives?

whats your max FHA I think in our market here in Portlandia is about 425k.. which does not get you anywhere on a 4 unit can still buy a duplex for that though.. I know in bay area or LA I think its closer to 800k what is yours ?

@Henry Lazerow the 5% down is still working in some of the lower priced suburbs. I am doing two in Cicero right now, and also doing one in Forest Park. The suburbs have lower purchase prices/higher taxes, so the 5% down conventional can still work for first time buyers. The main issue will probably be the lower income limit. 

FHA has been tough for a while in the suburbs due to the self sufficiency guidelines. We will probably have to use more FHA loans going forward.

I had an interesting conversation with my lender about this whole process. He thinks that this will dampen appreciation on 2-4 units as more and more borrowers will be forced to put down 20-25%. It is a fascinating issue as the rents still seem to be appreciating nicely, so you would think prices would keep moving up. 

Gotcha, I see how it worked now. 

I am going to talk to the 10% down Cali lender again. When he did 5.0% loan interests rates were higher might even be in the mid 4's now. 5 year ARM with a rate cap. This can be the go to option for 3 units. I think with most 4 units we can do the local FHA and make it pass.

The FHA limit for 4 units is $707k. 2 units is $471,100 (loan amount not price)

@Brie Schmidt @Henry Lazerow @John Warren

Hey guys... from what Im aware the 5% down using Home Possible is still available for a 2-4 unit.  They only thing that changed is now the income can’t exceed 80% of the AMI (area median income), which is now $69,920 for Chicagoland (80% of the new area median income of $87,400).  This includes employment income and any qualifying rental income

Low income tracts no longer trump the income limit, and it was 100% of the AMI before, which was $84K. So buying power has decreased significantly for this program, but the 5% down is still available.

FHA is still a strong tool especially if underwriters would start to count non-conforming units into the total unit count. Has anyone had luck with this?

I don't think they will ever count rent from the illegal units. Unless Chicago ends up legalizing accessory dwelling units which would be huge boost for 2-4 unit owners. There is a lot of talk about this and some west coast cities have now done it with success. It will suddenly increase the value of 2 + illegal unit buildings by six figures+

Two more low down options from my lender...

VA:

This a loan for veterans, active duty military, and so on. This type of loan often has many benefits over the other loan types as long as you qualify (no mortgage insurance, typically lower interest rates, and are able to put $0 down in certain scenarios). The down payment on a VA loan is $0 up to a $484,350 sales price. If the sales price is over $484,350 the down payment is (sales price - $484,350) x 25%. For example, if you purchase a property for $600,000 using a VA loan the down payment requirement is ($600,000 - $484,350 = $115,650) x 25% = $28,912.50. Unlike the other loan types, you are not able to use 75% of the rental income for the units you will not be occupying to qualify for a larger amount, unless you are able to document a 12 month history of landlord experience.

Doctor Loan:

This is for 1-2 unit properties. No MI, lower interest rates, and 0% down.

@Jake Fugman - rental income will account for at least $35k a year out of that $70k limit, so they have to make less than $35k a year and wouldn't get approved for a $500k loan.  It is basically worthless.

FHA I can't get the majority to pass the self sufficiency test

@Henry Lazerow - I got a lender who does physician loans on 2-4 units if you ever come across it

Multi- Unit (2-4 Units) * Minimum of 10 months reserves, full PITI payment. Retirement accounts are o.k. Primary Residence Only

5% Down with No PMI up to a loan amount of $750K

10% Down with No PMI Up to a loan amount of $1 Million

Loan amounts over $1 Million = case by case basis

@PJ Kolnik - The one I have done is for:



Medical Professionals Loan Physicians, Medical Residents, Interns & Fellowship Doctors, Dentists, Chiropractors, Certified Nurse Anesthetist, Veterinarians, Physicians Assistants

Wow rates dropped! Looks like buyers are good as long as have sufficient credit scores and meet the reserve requirements... Multi- Unit (2-4 Units) * Minimum of 10 months reserves, full PITI payment. Retirement accounts are o.k. Primary Residence Only

30 year fixed on a multi family 5-10% down is at 4% today, could get to 3.875% soon.
15 year fixed is at 3.625%, possibly 3.5% soon. 

This is the out of state lender @Brie Schmidt and I have used in past. PM either of us for the contact info/details. 

@PJ Kolnik I think you can do it if you are a PHD whether it's medical or not. I know some even let attorneys get this loan basically anyone with an advanced professional degree.  

Rates dropped this morning just locked in a 3.75% through the above mentioned program. Reserve requirement is now 6 months. 5% down.

With these new low rates opportunity to capture higher cash flow at same cap rates as when interest rates were higher is now present. Definitely something to add in your analysis for next deal. 

Closed the 3.75% fixed 30 at 5% down on a multi unit today it's legit! We all had our doubts as this rate was unbelievably low. Worked as buyers agent with @brie and @charlie team as seller's agent!