first-time home buyer

12 Replies

Hi All,

I've listened to several bigger pocket podcast and love them!  

I'm considering purchasing a two family house in Cypress Hill's area in Brooklyn, NY 11208 and am planning to rent one apartment We are approved for an FHA loan with 3.5% down however it includes an Upfront mortgage insurance and a monthly PMI so the APR will be 4.6%. Don't know what the APR will be without these fees but the interest is 3.75%. We can possibly come up with 15%-20% down to avoid these charges by borrowing money from my 401K this way I pay interest to myself instead of someone else. The house is $480k but after 30 year fixed interest interest/fees, it would be $800K plus. The house is fully renovated in move in condition. Would this be a good investment? Any advise would be greatly appreciated. Please feel free to ask questions.

Thank you.

Sandra

First-time home buyer.

I can't say if it's a good investment, but I will say that if you can get from 3.5% to 5% down and can get a conventional instead of FHA then that is what I would recommend at least. You'll have PMI still, but once the 20% mark of the original purchase price is met the PMI will drop off and you won't have to deal with it anymore.

Medium rhplogo jpgDan Mackin, Red Hawk Properties | [email protected] | 720‑971‑7139 | http://www.redhawkteam.com/ | CO Agent # FA.100056958

Thank you Dan. Do you happen to know of a specific lender that offers 5% conventional for a two-family?

I don't specifically for your area. Start a thread looking for recommendations for your area and folks are usually pretty good at chiming in.

Medium rhplogo jpgDan Mackin, Red Hawk Properties | [email protected] | 720‑971‑7139 | http://www.redhawkteam.com/ | CO Agent # FA.100056958

Hey Sandra,

I am in VT and am a past mortgage lender. The traditional financing options typically require a 20-25% down payment on a multifamily even if you are living in it. I might suggest researching state specific housing authorities to see if they offer a different program.  (In VT it's called Vermont Housing Finance Agency.)

I bought a duplex in 2009 and didn't have the option of borrowing from a retirement plan. So I used FHA and got a pretty good deal on the place. A few years later I refinanced into a 15 year fixed rate mortgage and reduced the rate and dropped the monthly PMI costs because at that time we had 20% equity in the property based on a new appraisal.

I know looking at the bigger picture can be scary - but any loan you get will have interest. Luckily that interest is helpful on your taxes at the end of the year. Just remember, you don't have to be stuck in an FHA loan forever.

Do you think the price on the house is below market?

A

Brooklyn overall is a great investment. Home values seem to appreciate significantly by the day in some parts!

I've lived in Brooklyn my entire life and regret not diving in and buying real estate much sooner.

FHA is really you own option on a 2 family property if you're putting less than 15% down. You are capped at 85% LTV on a conventional loan. But can borrow 96.5% on an FHA.

95% conventional financing is available on single family residences

Thanks

Ed

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@Sandra Diaz

  Cypress Hills can be a really good investment.   I work with a number of investors who are frequently buying in the area.   The neighborhood is certainly trending up price wise and feels like an area that will certainly significant growth as Bushwick/Bedstuy continue to be priced so astronomically.  If the East New York rezoning  goes through I think it will have a very trans-formative effect on the area in a good way.  

That price point feels a little low compared to other renovated 2 families I've seen.  I would certainly advise you  spending the extra on higher end engineers inspection to save yourself future headaches.    

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@Sandra Diaz

There are 2 ways of looking at this purchase, well 100s, but 2 simple ones, rentability or appreciation.

Rentability could be 2 stages: house hacking and then full "investment property"

The basic principal behind house hacking is to drive your monthly housing costs as low as possible.  How much rent will the other side bring in?

Your mortgage will be about $2400. Insurance is probably another $150/month. How much are your taxes? Those will combine into the PITI payment. Principle, Interest, Taxes and Insurance.

As any home owner should, you'll also need to put away some money for future repairs.  Eventually you'll need to replace hot water heaters, roofs and furnaces.  This pot of money is called Cap Ex.  Capital Expenditures are all the major items that eventually break.

If you think about turning this into a full scale investment property you need to consider several things.  You need to add up ALL of your expenses and subtract them from probable rents.

Thank you. All your comments have been very helpful. Thanks to your help we found the Chase Dreamaker program. 5% down, PMI but no upfront mortgage insurance and the PMI will drop after 80/20. Seems good, any thoughts?

I think you should go with FHA loan, one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. An FHA down payment of 3.5 percent is required that is best for your home.