All Forum Posts by: Kyle D.

I've hit a brick wall here! I've also spoken to 2 lenders now who supposedly offer the HomePossible Product, but they don't seem to have the answer themselves. 


Short bit of info on me: I'm coming up on 2 years of ownership in a MFH (3 units, purchased with 3.5% down FHA) in Hudson County NJ.
I'm now shopping for my next live-in MFH in the area. Due to my current home being locked at a low interest rate (2.25%), I don't imagine it would be prudent to refinance into conventional.

This leaves me with a few options to purchase my next MFH with a low(ish) down payment (hopefully 10% or less). One such is the Freddie Mac HomePossible package. In researching, I'm a bit confused by info I'm finding. I understand the package is limited to qualified buyers with income below 80% of the AMI (Area Median Income). This is where I have 2 questions, which I have yet to find a solid answer on.

1) AMI- is this calculated based on current salary/income, or average of prior 2 years tax returns? I ask, as my current yearly salary is above the AMI for my area. However if I were to average my '20&'21 returns (OR my '21 & '22 once completed) I would be under the AMI.

2) The location I am targeting (Hudson County NJ) is noted as a "High Cost Area" on the Freddie Mac Eligibility map. However, I have read that the 80% AMI cap is adjusted for high-cost areas. That said, I cannot find any info regarding this adjustment - so I am wondering if there's any further info on this, or if this is possibly old/incorrect info.



Appreciate any and all insight into the matter- and if there are any lenders floating around BP who work on HomePossible or other MFH Primary Packages in NJ, I would be open to chat!

Thanks in advance,

Kyle

@Alfath Ahmed

How did you secure this loan at 5% down? Are you living in one half?

@Austin Steed

Just curious, what kind of issues did you run into with a Govt backed loan? And how many properties did you own that raised a flag?

Hi All- and forgive me for the long post!

I’m a rookie investor in North Jersey (Hudson County) looking for some insight on my current situation.

About 10 months ago, I purchased a 2 family home with an FHA loan @3.5% down.

As a little background on the property- the home is a legal 2 family, but includes a ~1500sq foot garage with separate gas/electric meters, effectively giving me 3 units. This is what drew me to the property- I was paying 2 family price for 3 units.

When I purchased the property it was fully vacant. I did a very light rehab on the first unit (3 br/1bath), consisting of paint, laundry hookups, LVP flooring in the kitchen, and some minor appliances. The bathroom is still pretty old (think 1960s Pink tile) but clean and serviceable.

The upstairs unit, however was in really rough shape. I went in and personally renovated, doing all new flooring, new kitchen and appliances, paint and plaster repair, and opened up the living room/kitchen. With this work done, I’m estimating I’d see about $1650/month from this unit once I move out.

Currently the property is fully occupied- myself in one unit, and the garage and the first floor apartment both rented out. The rents from the first 2 completely cover my expenses, including capex and such- effectively I’m living for free.

With my one year mark approaching, I’m planning on finding another Multi to HouseHack. Ive also been analyzing out of state markets, as I’d like to jump into a cash flowing duplex elsewhere (to combat NJs pricing). I have about 100k liquid right now, and in a perfect world, I would be able to purchase a ~$150-200k duplex out of state, and a new multi to house hack with that money.

Below are the options I’m weighing.

Option 1) Refi this property to a conventional and use an FHA 203k on my new primary residence.

Pros:

•203k would be perfect for the next property as I will be looking for a fixer upper again. Had I known about this loan last year, I would have used it here.

•I believe based on comps in the area, appreciation and the forced equity from the work I’ve done, I would be at or near 20% equity.

•Allows me to remove PMI

Cons:

•Tough to gauge exactly how this property would appraise as it is unique with the garage unit. Also concerned the older kitchen & bath my hurt the appraisal #.

•Even with PMI, my current loan is at 2.25%, so not sure how much I'd save with today's rates.

Option 2) Keep this property under the current FHA loan and use a Conventional Owner Occupied mortgage to purchase the next property.

Pros:

•My current home will cashflow about $500/unit once I move out even with PMI on my current FHA.

•No need to worry about appraisal.

Cons:

•North Jersey ain’t cheap! For a multi I’d need 10-15% down even if I’m occupying, and for a home that will likely be near 500k, I’d like to keep the down payment low so my $ can be better used elsewhere.

•I’d like to purchase a fixer upper, and this route will leave me going out of pocket for renovation.

•This route will take up most of my available cash, and likely delay me purchasing an out of state rental.

Maybe I’m overthinking all of this, but I’m just not sure what the right next move is. I really appreciate any and all insight!

@Blake H.

That’s great! Were there any specific stipulations, or just a standard investment property otherwise?

@Blake H.

I see you purchased as a second home, 10% down.

Just curious- is this a short term rental?

I only ask because my impression was second home loans must be occupied some % of the year for vacations or other by the owner. With a conventional year to year lease I’d assume this wouldn’t be possible/easy.

Nothing crazy for North Jersey. I'm living in a house hacked 3 unit in Hudson County paying $14k/year in Taxes, and I still CF ~$500/mo while occupying. For reference, once I move out, it will be cashflowing ~$2k/month.

Don't focus on taxes if you're investing in this area- focus on the deal as a whole.

Hey BP,

Actively looking to begin my RE Investing career in Northern NJ, specifically focusing in 2 and 3 family homes in Hudson County.

On most accounts I feel that I’m in a good spot.

Just at the 1 year employment mark, bringing in low 6-figures as a W2 employee. No debt outstanding, just shy of 100k liquid in savings, and a verified 800+ credit score.

The only issue I can foresee is a lack of W2 income for the last 2 years- I have none.

Graduated college 2 years ago, and spent the past years traveling and weighing career options. I worked some small under the table cash jobs in between, but nothing of note.

Would a co-signer be required in this scenario? Any input would be appreciated to make sure I’m approaching this properly.