Can my first house hack be a single family home and my second be a multifamily?

Member since 2023 · 10 posts · 4 votes

I recently met with a lender and this topic came up. The lender recommended I do not start with a single family home because it will raise questions from lenders when it comes to house hacking my second home. Lenders will be suspicious that I am trying to occupy properties as an investor while paying home owner interest rates (~3.5%), instead of putting 20% minimum down payment as required by investors. Does anyone have any advice or experience house hacking in NYS?

I really appreciate the input.

Jorge

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Andrew FreedBusiness Member

Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes

@Jorge Adarraga- Yes, lenders look badly on borrowers moving from a single family to a multifamily. They view it as picking up an investment property where you normally bring 20% down vs. with a low down payment owner occupied loan. When you move from a single family to a multi, in my experience, lenders require a letter of justification on why you are doing this. For instance, moving for a job, getting married and need more square footage etc.

If you can start with a multifamily and end with a single family once you are done house hacking is ideal. It will raise way less questions and lenders will understand moving from one multi to another, especially if you are moving into a multi with less units, e.g. moving from a 4 to a 3 to a 2...

I've househacked multiple times and received this feedback each time.

My last piece of advice would be to find a local portfolio lender that does low down payment conventional products on 3 to 4 families. They have more flexibility with these products since they hold them in house and don't sell them on the open market hence don't have to conform to certain rules.

[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money

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Daniel McDonald
Real Estate Agent · Beverly, MA · Member since 2019 · 358 posts · 308 votes
3y
House hacking isn't illegal or anything so I recommend talking to a HH friendly lender. The only issue I see with starting with a single family is you won't be able to qualify for more based on rents. They will essentially look at it as just a regular primary residence. You will qualify for more with a multi family. As long as you're living in the property for a year a lender shouldn't care what you're doing with it. Don't commit mortgage fraud, that's it.
4 Reply
Andrew FreedBusiness Member
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
3y
@Jorge Adarraga- Yes, lenders look badly on borrowers moving from a single family to a multifamily. They view it as picking up an investment property where you normally bring 20% down vs. with a low down payment owner occupied loan. When you move from a single family to a multi, in my experience, lenders require a letter of justification on why you are doing this. For instance, moving for a job, getting married and need more square footage etc.
If you can start with a multifamily and end with a single family once you are done house hacking is ideal. It will raise way less questions and lenders will understand moving from one multi to another, especially if you are moving into a multi with less units, e.g. moving from a 4 to a 3 to a 2...
I've househacked multiple times and received this feedback each time.
My last piece of advice would be to find a local portfolio lender that does low down payment conventional products on 3 to 4 families. They have more flexibility with these products since they hold them in house and don't sell them on the open market hence don't have to conform to certain rules.
[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money
6 Reply
Benjamin Sulka
Cleveland, OH · Member since 2022 · 826 posts · 578 votes
3y
Quote from @Andrew Freed:

@Jorge Adarraga- Yes, lenders look badly on borrowers moving from a single family to a multifamily. They view it as picking up an investment property where you normally bring 20% down vs. with a low down payment owner occupied loan. When you move from a single family to a multi, in my experience, lenders require a letter of justification on why you are doing this. For instance, moving for a job, getting married and need more square footage etc.
If you can start with a multifamily and end with a single family once you are done house hacking is ideal. It will raise way less questions and lenders will understand moving from one multi to another, especially if you are moving into a multi with less units, e.g. moving from a 4 to a 3 to a 2...
I've househacked multiple times and received this feedback each time.
My last piece of advice would be to find a local portfolio lender that does low down payment conventional products on 3 to 4 families. They have more flexibility with these products since they hold them in house and don't sell them on the open market hence don't have to conform to certain rules.

Does the self-sufficiency test play a factor with a portfolio lender and 3-4 families?
0 Reply
Ben Einspahr
House Hacking Specialist · Denver, CO · Member since 2016 · 411 posts · 396 votes
3y
@Jorge Adarraga I would first make sure the lender you are talking with is familiar with house hacking. Nothing about house hacking is illegal. You are buying a single family home. Living in it for 12 months or more and turning into a rental.

While you can only have 1 FHA loan, you can have multiple 5% down conventional loans

@Benjamin Sulka the self sufficiency test does play a factor in 3-4 units when using traditional fannie mae, freddie mac financing.
2 Reply
Andrew FreedBusiness Member
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
3y
@Benjamin Sulka - No, self-sufficiency test is not taken into consideration when it is a 5% down conventional product on a 3-4 family. It only is applicable for FHA type products. I house hacked a 3 family with a 5% conventional for my last property and it was a breeze. I got the loan via a local portfolio lender.
[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money
1 Reply
Ethan Cramer
Accountant · NY · Member since 2023 · 13 posts · 2 votes
3y
House Hacking is a great way to get started building a portfolio. I've seen clients build substantial wealth through this approach. Youre free to select which every dwelling type you would like as long as meet you the occupancy requirements.
1 Reply
Jorge Adarraga
OP
Member since 2023 · 10 posts · 4 votes
3y
Thank you all for your insightful responses. They were all very helpful. I will start looking for a local portfolio lender that offers low down payment conventional products on 3-4 families. Thanks again everyone!
0 Reply
Ryan ThomsonBusiness Member
Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
3y
@Jorge Adarraga get a new lender who understands what you are trying to do. You shouldn't have to convince your lender that house hacking is legal and allowed. Sounds like they don't understand it. Run.
Also 3.5% for home owner rates? It is more like 7.125 percent right now. Maybe you meant downpayment of 3.5%?
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1 Reply
Benjamin Sulka
Cleveland, OH · Member since 2022 · 826 posts · 578 votes
3y
Quote from @Andrew Freed:

@Benjamin Sulka - No, self-sufficiency test is not taken into consideration when it is a 5% down conventional product on a 3-4 family. It only is applicable for FHA type products. I house hacked a 3 family with a 5% conventional for my last property and it was a breeze. I got the loan via a local portfolio lender.

Andrew,
This is great to know. Thanks for your response!
0 Reply
Jorge Adarraga
OP
Member since 2023 · 10 posts · 4 votes
3y
Quote from @Ryan Thomson:

@Jorge Adarraga get a new lender who understands what you are trying to do. You shouldn't have to convince your lender that house hacking is legal and allowed. Sounds like they don't understand it. Run.
Also 3.5% for home owner rates? It is more like 7.125 percent right now. Maybe you meant downpayment of 3.5%?

Yes, I meant down payment of 3.5%, not interest rates.
I am going to be looking for other lenders. Thanks for the input.
1 Reply
Ethan Cramer
Accountant · NY · Member since 2023 · 13 posts · 2 votes
3y
Quote from @Jorge Adarraga:

Thank you all for your insightful responses. They were all very helpful. I will start looking for a local portfolio lender that offers low down payment conventional products on 3-4 families. Thanks again everyone!
Hey where are you looking to purchase?
0 Reply
Jorge Adarraga
OP
Member since 2023 · 10 posts · 4 votes
3y
Quote from @Ethan Cramer:

Quote from @Jorge Adarraga:

Thank you all for your insightful responses. They were all very helpful. I will start looking for a local portfolio lender that offers low down payment conventional products on 3-4 families. Thanks again everyone!
Hey where are you looking to purchase?

I am looking to purchase in Ithaca, NY.
0 Reply
Stephanie JacobsonBusiness Member
Real Estate Agent · Ithaca, NY · Member since 2016 · 429 posts · 324 votes
3y
Quote from @Jorge Adarraga:

Quote from @Ethan Cramer:

Quote from @Jorge Adarraga:

Thank you all for your insightful responses. They were all very helpful. I will start looking for a local portfolio lender that offers low down payment conventional products on 3-4 families. Thanks again everyone!
Hey where are you looking to purchase?

I am looking to purchase in Ithaca, NY.

Is there a reason you’re looking to purchase a single family instead of a duplex? Prices in Tompkins county are high- maybe that’s an obstacle? Most lenders will consider rental income when underwriting your loan, and you may have some more options than you’re imagine with a multi.
0 Reply
Jorge Adarraga
OP
Member since 2023 · 10 posts · 4 votes
3y
Quote from @Stephanie Jacobson:

Quote from @Jorge Adarraga:

Quote from @Ethan Cramer:

Quote from @Jorge Adarraga:

Thank you all for your insightful responses. They were all very helpful. I will start looking for a local portfolio lender that offers low down payment conventional products on 3-4 families. Thanks again everyone!
Hey where are you looking to purchase?

I am looking to purchase in Ithaca, NY.

Is there a reason you’re looking to purchase a single family instead of a duplex? Prices in Tompkins county are high- maybe that’s an obstacle? Most lenders will consider rental income when underwriting your loan, and you may have some more options than you’re imagine with a multi.

After browsing the forums on BP and looking into the advantages of multifamily properties, I am considering purchasing a multi instead of an SFR for house hacking. I've contacted a few lenders, and I will inquire about attaining a loan for a multifamily. Thank you for this information.
0 Reply
Stephanie JacobsonBusiness Member
Real Estate Agent · Ithaca, NY · Member since 2016 · 429 posts · 324 votes
3y
Quote from @Jorge Adarraga:

Quote from @Stephanie Jacobson:

Quote from @Jorge Adarraga:

Quote from @Ethan Cramer:

Quote from @Jorge Adarraga:

Thank you all for your insightful responses. They were all very helpful. I will start looking for a local portfolio lender that offers low down payment conventional products on 3-4 families. Thanks again everyone!
Hey where are you looking to purchase?

I am looking to purchase in Ithaca, NY.

Is there a reason you’re looking to purchase a single family instead of a duplex? Prices in Tompkins county are high- maybe that’s an obstacle? Most lenders will consider rental income when underwriting your loan, and you may have some more options than you’re imagine with a multi.

After browsing the forums on BP and looking into the advantages of multifamily properties, I am considering purchasing a multi instead of an SFR for house hacking. I've contacted a few lenders, and I will inquire about attaining a loan for a multifamily. Thank you for this information.

@Ethan Cramer could be a great option for you. He specializes in residential investment properties upstate. There’s also a local portfolio lender, Tioga State Bank, that will consider 79% of rent towards your personal income, as long as the lease has six months left. I highly recommend Lisa Viglione there.
1 Reply
Jorge Adarraga
OP
Member since 2023 · 10 posts · 4 votes
3y
Quote from @Stephanie Jacobson:

Quote from @Jorge Adarraga:

Quote from @Stephanie Jacobson:

Quote from @Jorge Adarraga:

Quote from @Ethan Cramer:

Quote from @Jorge Adarraga:

Thank you all for your insightful responses. They were all very helpful. I will start looking for a local portfolio lender that offers low down payment conventional products on 3-4 families. Thanks again everyone!
Hey where are you looking to purchase?

I am looking to purchase in Ithaca, NY.

Is there a reason you’re looking to purchase a single family instead of a duplex? Prices in Tompkins county are high- maybe that’s an obstacle? Most lenders will consider rental income when underwriting your loan, and you may have some more options than you’re imagine with a multi.

After browsing the forums on BP and looking into the advantages of multifamily properties, I am considering purchasing a multi instead of an SFR for house hacking. I've contacted a few lenders, and I will inquire about attaining a loan for a multifamily. Thank you for this information.

@Ethan Cramer could be a great option for you. He specializes in residential investment properties upstate. There’s also a local portfolio lender, Tioga State Bank, that will consider 79% of rent towards your personal income, as long as the lease has six months left. I highly recommend Lisa Viglione there.

0 Reply
Jorge Adarraga
OP
Member since 2023 · 10 posts · 4 votes
3y
Quote from @Jorge Adarraga:

Quote from @Stephanie Jacobson:

Quote from @Jorge Adarraga:

Quote from @Stephanie Jacobson:

Quote from @Jorge Adarraga:

Quote from @Ethan Cramer:

Quote from @Jorge Adarraga:

Thank you all for your insightful responses. They were all very helpful. I will start looking for a local portfolio lender that offers low down payment conventional products on 3-4 families. Thanks again everyone!
Hey where are you looking to purchase?

I am looking to purchase in Ithaca, NY.

Is there a reason you’re looking to purchase a single family instead of a duplex? Prices in Tompkins county are high- maybe that’s an obstacle? Most lenders will consider rental income when underwriting your loan, and you may have some more options than you’re imagine with a multi.

After browsing the forums on BP and looking into the advantages of multifamily properties, I am considering purchasing a multi instead of an SFR for house hacking. I've contacted a few lenders, and I will inquire about attaining a loan for a multifamily. Thank you for this information.

@Ethan Cramer could be a great option for you. He specializes in residential investment properties upstate. There’s also a local portfolio lender, Tioga State Bank, that will consider 79% of rent towards your personal income, as long as the lease has six months left. I highly recommend Lisa Viglione there.

Thank you for the references. I will reach out to them soon.
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