All Forum Posts by: Matthew Porcaro

@Brandon Lechner

You can use a Homestyle or Choice Renovation loan. They're similar to the FHA, but will require a larger down payment on 4 units. I believe it requires 25% down plus reserves.

Still an excellent way to go for it.

@Misti DelMar

Absolutely you can refi! I refinanced as soon as I was finished with my renovation of my duplex when I used a 203k on it. Rule of thumb is 6 months after purchase is the soonest you can refi. Sometimes more, depending on the bank you’re looking to refi with.

The refinance is especially important if you build enough equity to get rid of the PMI (20%). That will give you a nice little boost on cash flow.

@Evelyn Brown

Plenty of lenders do 203k loans. You want to look for the ones that specialize in them. Mortgage Possible is a great brokerage that does lots of renovation lending.

You’ll be able to wrap the renovation costs into the loan, saving you the up-front out of pocket cost.

I bought a duplex that was distressed as well, and lived in one side and rented out the other. You’ll also gain some equity if you make sure to keep your all in cost (purchase + renovation) a bit lower than what it’ll be worth when it’s done.

You MUST be making the property you're primary residence in order to qualify for a 203k loan. If the underwriter senses you're using it for an investment property, you won't be approved. It's not worth playing that game. These underwriters will sniff out if you're lying about anything on your application. 

Another option would be to use the FannieMae Homestyle Loan. It's very similar to the 203k, in that you can wrap renovation costs into the loan, but they have a program where you can buy a non-owner occupied single family residence with it. The only caveat is you need at least 15% down payment, instead of FHA's 3.5%.

As Duriel said, you can look for really distressed multifamily homes, that will be a bit cheaper, and not have to pay anything more than just the minimum 3.5% payment required by FHA. What's great about this program is the down payment requirement is 3.5% regardless of how many units (up to 4 units max for a residential home). If you're looking to house hack, this is a great way to do it with little out of pocket.

The only sticking point for the larger properties (3-4 units) is they're not nearly as plentiful as SFR's, so sometimes adding an off-market deal finding strategy like cold calling all 3-4 unit owners in the market's you're looking to buy in, is a way to help you keep moving forward if there isn't much inventory on the MLS.

Good luck!

Matt

The 203k allowed me to build in the equity I needed to buy more property. I didn't have too large of a down payment, but wanted to build equity on a fix and flip. This allowed me to do that with only $9500 out of pocket. 

I was able to find a deeply distressed 2-family that allowed me to househack initially, as well as qualify for a higher loan limit since FHA loans like the 203k allow you to forecast your future rental income as your total income which ups your allowable loan amounts.

I basically did a househack and live-in flip at the same time using the loan.

As long as you have a good lender that has done plenty of these (there's a bunch of them out there, you just need to know where to look), you'll find that the process is not nearly as daunting as people make it out to be!

@Scot K.

The 203k is great for a 4-unit because the down payment is 3.5% no matter how many units.

Homestyle renovation loan for example requires hire down payments for more units. Combined with the HomeReady Program, you’ll pay closer to 15-20% down depending on how they judge your first time homebuyer status.

Also, remember with something like a 4 unit, your lender is going to want to see a few months rent payment reserves in case you can’t rent it out immediately.

@Matthew Carfaro

Yes - Jeff Onofrio with mortgage possible. He’s one of the best in the business for renovation loans and he’s located right outside Philly in south Jersey.

@Andrew Freed

FHA's aren't meant for flipping, and underwriters will catch what you're doing if you make it an obvious pattern.

If you’re househacking an underwriter is going to ask why you’re moving into another multi-unit property if it’s not far from your current because of job transfer or something like that.

What I found is if you buy the first one right, you can set yourself up with equity and cash flow to finance your future deals with other more conventional or investor friendly methods. (Private money, hard money, etc)

Hope this helps!

@Morgan Ross

Congrats! Did a similar thing with my house! Glad it built so much equity for you!