+$100k down payment? Is this the best way to utilize cash?

Question

I currently live in a home with 2 roommates. I plan to move out and rent as single family home.

I plan to purchase another (owner occupied) home. I found a four plex and a lender who offered an owner occupied loan (no investors) with 5.125% interest rate. I was acknowledged the max loan amount for this interest rate cannot exceed $484,350. So if I get the four plex for say $600k, Ill have to put +$110k down to get to the $484,350 max loan amount with the 5.125% interest rate.

What I ask of the community is this the best way to utilize my +$120k? I can generate about $500/mnth and live in the four plex for free. After a year and I move out, I calculated a 15% ROI for the four plex. Is this really the best way to utilize my $100k, maybe up to $150k! depending on how much I can get the four plex for? Are there other loan options? Would it be better to see if the seller will carry me? Should I find investors instead (but then the loan changes and probably higher interest rate)?

What do you think!?

Colton Dudley · Answer

I researched FHA loans. There is no max sale price, but a max loan price, yes, depending on what you are buying and its location. The max loan price is much higher for a four plex. This means I do not have to put down +$100k, but only $20k! Fantastic! Below for FHA loan on four plex:

Source:

http://fha-home-loans.com/4_unit_fha_loan.htm

FHA's nationwide basic mortgage limits ("the floor") for a            fourplex:

and up to FHA maximum loan ceiling in high-cost* area's for fourplex            is:

Colton Dudley · Answer

Thanks for the speedy reply Diana!

So is $484,350 the max loan amount on conv loans?

Is there a max loan amount for OO FHA and OO Freddie HomePossible? Can you purchase a four plex with those loans types?

Diana Muresan · Answer

@Colton Dudley, it doesn't make any sense, it seems to be a confusion here. That banker gave you the max conv loan limit on a 1 unit but you are looking at a fourplex. Also, downpayment on OO (owner occupied) is 3.5% on FHA or 5% on Freddie HomePossible, rate should be around 4% on FHA and 4%-4.125% on conventional, 30 y fix, no origination or discount points