How to determine a budget

[Rachel Hertel]

My husband and I may be moving back home to Chicago in the near future. This time around, we would like to house hack. The idea is to buy a 3 or 4 flat in a neighborhood that we like (we like a lot of them!)

I think I've found myself in "analysis paralysis" very early on, because I'm stuck on the process of how to determine my budget. For our first house (currently our home in Nashville,) I simply used the 28% rule, more or less. 

I now am understanding that with investing, A. you can get creative with borrowing money, B. you don't need to put down 20%, and C. there are so many other factors to add to the equation. That being said, does anyone have suggestions on where to start? I know this is a big question with lots of variables, but I'd love any advice on how to set a budget. I think the idea that you can get creative with borrowing money is sort of throwing me for a loop.

If I can come up with a ballpark price point, I can then start to move forward with analyzing potential deals. I hope with some advice here, I can get the ball rolling. Thank you!

[Brie Schmidt]

Originally posted by @Rachel Hertel:

@Joseph Konney I'll definitely keep an open mind with the suburbs. I'm from Skokie, so I could see myself coming back home to them at some point.

@Brie Schmidt When you talk about a loan limit increase, are you referencing that max limit for an FHA loan that Joseph mentioned? Does this mean that once you need to borrow more than that, you have to put 20% down?

 Yes, each program has a max loan limit for 1-2-3-4 unit properties.  He said there was an increase for expensive markets but Chicago is not one that got an increase.

	FHA Limit	Max Price 3.5%	Conv Limit	Max Price 5%	Max Price 20%
2 Flat	$471,100	$488,187	$653,550	$687,947	$816,938
3 Flat	$569,450	$590,104	$789,750		$987,188
4 Flat	$707,700	$733,368	$981,700		$1,227,125

[Brie Schmidt]

Originally posted by @Joseph Konney:

The loan limit is what it is and clearly there are some expensive areas within Chicago. There are also very inexpensive ones.

The loan limit is not $765k for FHA. A 4 unit limit is $707,700

[Joseph Konney]

@Brie Schmidt is correct. The HUD website I linked to reflects $707,700 for a 4-unit as well. Sorry!