All Forum Posts by: Juan Campos

 House hacking is the best way to get started.  Here are some things to know.

For an owner occupied, multi family property, FHA is the best way to go. You can get the highest loan to value of any of the other options. You can use up to 75% of the market rent for the second unit as income to offset the higher cost of the property. Here's a link for further clarification. https://fhalenders.com/fha-loa...

Here's a copy of the Fannie Mae eligibility matrix to show loan to value requirements for their products.   https://singlefamily.fanniemae...

If you go over 2 units to 4, there is a self sustainability provision meaning the property has to cover the mortgage using 75% of the rents. That's not the case with a 2 unit property. Here's a link to a blog by FHA that explains it. https://fha.co/blog/understand...

Lots of lenders and brokers have something called overlays where their company places additional restrictions on loans to mitigate risk.  Doing your research and asking questions like you are is imperative when making such an important purchase.

All the best and congratulations on your new baby.

Stephanie

If you are looking for duplexes in DFW at that price point there is a very high chance they're going to be in the hood. If they aren't in the hood, they are going to be very distressed and you are going to need to plan to do some rehab. Sub 275k just doesn't go very far here anymore with the price increases we have seen the last few years. Even if you go way out and try and house hack a single family, you probably won't have the same tenant demand and best case you can hope for is a 4 bed, 2 bath. 

 Hi Juan, 

As others have said income is allowed from the second unit. We use 75% of the projected income from the rent schedule when it is completed to help qualify you for your purchase. One quick question I did have, is this your first purchase? I ask only because it's worth seeing if you can go the HomePossible route that would allow a 2 unit property with still only putting 5% down. There are some stipulations to being able to use the HomePossible program, but it's worth at least looking into to stay with the conventional route vs going FHA.

@Juan Campos- you  can purchase a duplex  with  a  3.5% down payment and   you will be able to  use part of the  unit you will rent to help qualify ...let me know if you  would like a  lender  referal

Juan,

Yes, you can use the rental income of the proposed Duplex to qualify for the loan. If you choose FHA you will only need to put 3.5% down. You can also use DPA- down payment assitance as a first time home owner as well which can also cover closing costs.

The lender should be using 100% of the rental income typically on the rent schedule on the appraisal unless there is a currnt renter/lease. 

DPA has been very tough to use the past few years....just way too much competition that isn't using it in the sub $300K range.

With that said the market has shifted some the past 2-3-4 months and maybe a seller would accept it if they don't have other offers.

I would just be prepared to make several offers and not get your heart set on one particular house.  You may have to make several offers before you get one accepted.

I think that will be the same with any of the low/no down payment programs.   If you can live outside the city USDA loan may be an option.   If you can live in certain zip codes, the Bank of America zero down program may be an option.  Just be prepared to be frustrated and have challenges as they are often slow and unresponsive.   You won't win ever deal with those, but maybe you get lucky....hit the right house at the right time.

Also with the DPA programs normally I say you need to be prepared to stay in the home 5 years or more as often they have a time limit for the money to be used....sometimes they are a 2nd loan that goes away at 20% a year, so you need to stay 5 years to take full advantage of it, or you will have to repay it.  They also tend to require you live in the home to use it, so normally you can't use it this year, and then turn that property into an investment property and try to buy something different next year.

Also it depends on how much money you make.  The DPA programs are normally pretty restrictive on what they will offer based off your income. Sometimes what they require just doesn't make sense.   Seems like often if you make enough money to afford the payment, then you don't qualify.  If your income is low enough to qualify, you can't afford the house.

Also they tend to want you to buy homes in good condition, so no fixers.

Best thing to do is get with a great lender that knows the programs, see what works for your income level and where you want to live.   Get all the details and purchase amount and then go shopping.

As far as limiting your ability to buy an investment property, typically I say you need to plan on 25% down for the next property, although there are investor loans perhaps at 10% down if you have great credit and reserves, but you will likely pay higher interest for those.

I like also and agree with what @Sasha Mohammed posted above.

first of all let me say, there is NO one size fits all when it comes to loan programs. what makes sense for you may not make sense for someone else, so take my opinions here as exactly that - my opinion. 

i am personally not a fan of DPA. reasons being the rates are always higher than traditional counterparts, and they're not usually even gifting you any money. Typically DPA takes the form of a 1st and 2nd combo, sometimes a 1st, 2nd, and 3rd combo where the down payment and closing costs are basically financed. in some cases, that chunk of money is either silently accruing interest without a payment, and under certain circumstances, forgiven if you play your cards right. but it does pose a challenge for refinancing as you are not walking in with equity -- you're starting out a little over-leveraged. 

Generally speaking, you're paying for this feature in the form of higher-than-market interest rates, and interest-accruing balances that are not often paid down. 

with FHA allowing for 3.5% down, conventional allowing for 5% down (and 3% down in some cases as well), the barrier to entry is not massive. if my mother were asking these questions, this is what i would advise her. small down payment, but a significantly better loan IMO.

hope this was helpful!