Househack with 5% Conventional Loan

[Michael Addison]

Hello, After speaking with several lenders about an FHA loan for my first house hack in Cleveland, OH two of them have told me about a 5% (down) conventional loan for an owner occupied property. Does anyone happen to be familiar with this? I was only aware of an FHA loan for 3.5% down. Thanks!

[Jimmy Lieu]

Quote from @Michael Addison:

Hello, After speaking with several lenders about an FHA loan for my first house hack in Cleveland, OH two of them have told me about a 5% (down) conventional loan for an owner occupied property. Does anyone happen to be familiar with this? I was only aware of an FHA loan for 3.5% down. Thanks!

Hey Michael, yep that’s definitely a real thing. A lot of people think FHA is the only low down payment option, but conventional owner-occupied loans can go as low as 3-5% down depending on the property type, credit score, income, and whether it’s a single family or multifamily house hack. For a duplex, triplex, or fourplex where you live in one unit, 5% down conventional programs do exist through Fannie Mae/Freddie Mac guidelines. The upside compared to FHA is usually lower overall mortgage insurance costs and the ability to eventually remove PMI once you hit enough equity, whereas FHA mortgage insurance can stick around much longer. FHA is still great because it’s more flexible on credit and debt-to-income ratios, but if you qualify for conventional, it’s definitely worth comparing both side by side. I’d pay close attention to interest rate, PMI amount, cash reserves required, and total monthly payment instead of just focusing on the down payment percentage. Also smart move looking into house hacking for your first property.