Househacking with 5% down making too much money?

Question

My wife and I are beginning to look at Multifamily homes to house hack.  We would like to put down somewhere around 5%.  We live in the Greater Boston area so 5% will be somewhere between 20-30k.  I was told by someone that if we make combined more than $128k we need to put down a minimum of 15%?

Does anyone know if this is true?  Is there anyway around this?  We are very close to making more than 128k, but nowhere close to having 15% down.  I talk in terms of Gross Salary, of course with write-offs and deductions we claim/make less.  What number do lenders use to come up with salary?  I ask because if we need 15% down, we are going to have to buy quickly before we get raises or I make more money on the side.

My second question is:  Once we have that first MFR, what is the best way to finance a second MFR?  Is it to save up and use a line of equity for the downpayment?  House hack again? (not sure how much longer we will be under the 128k limit.  I want to get the ball rolling and start buying properties, just seems like there is no quick way to do it.  If we bought one MFR and saved up for a second it could take years to get 25% down.

Any help would be appreciated!

John Pauler · Answer

@Chris Roche - no clue where your $128k limit came from, and I have never heard of a lender requiring more money down if your income is too high. You actually should be more likely to receive a loan with little money down if you have a larger income, because your debt to income ratio can support a larger loan.

@Willie Mandrell comes with the right advice....talk to a local lender, and ask them to walk you through the options they can provide. Ask them to give you your main constraints... 1) minimum down payment % by property type (will vary for condo, SF, 2F, etc) and 2) the max loan amount you can carry. Ask them to walk you through how income from rental units will be counted and impact your max loan amount. Ask them about the implications of using an FHA loan, with 3.5% down (comes with a penalty) which can be done on up to 4F units. Ask them how applying for the loan together vs separately will change your options for properties today and ability to get a second property later.

Talking to a local lender is the best way to understand your lending options. These guys hold the keys to the money, and will let you know all of your options (they are incentivized to help you close a deal).

Good luck!

Chris Roche · Answer

Willie,

Thanks for the answer.  I believe the 128k came from using MassHousing to finance?  We were going to purchase the MF together, as I do not think either one of us would be able to qualify for the mortgage on our own.  I would love to buy it in just one of our names, freeing up the other name for an additional house down the road.  I will have to look into that.  And yes, please send me the contact info for the mortgage broker you use.  Just curious, what % are you putting down on rentals?  Seems as if that is my biggest barrier to enter the real estate game.

Willie Mandrell · Answer

Hi Chris,

I'm not sure where the $128k came from but that's not the case at all. I can suggest a very good mortgage broker if you'd like. Local Boston guy that does all of my rentals. Why are you and your wife purchasing together? Have you considered what that will do to both of your DTI numbers? I would suggest purchasing the first MF in either your name or hers. Don't tie both of you down with the same mortgage if its not needed.