Working with lenders

[Ben Nelson]

Hi folks! I'm preparing to do my first house hack in 2021 (moving into a multi-family property and property managing myself), but I'm having some trouble when talking with lenders. In order for my potential investment to look great on paper, I need to find a lender that is willing to agree to the following loan criteria with me: 

1. 30-year fixed conventional loan

2. 2.75% interest rate or better

3. 5% down payment or less

I'm in excellent standing as far as credit score (800+), cash reserves, and I'm debt-free including my current home. What am I missing? Is it realistic to think that I can find a lender that will give me a loan that meets the criteria I listed above, or should I start thinking differently? I have already worked through the pre-approval process with two lenders without success, but think I may just need to keep looking around... 

I appreciate any advice on this topic, especially if you can share experience or new ideas that might apply to my situation. Thanks in advance!

[Ben Nelson]

@Kevin Zolea,

I have a few questions for you if you have the time to reply :) 

Update: I spoke with two more lenders this morning, and both were unable to offer me the criteria I listed in my original post. When talking conventional loans, it seems that Freddie/Fannie want a down payment of 20-25% on 3-4 unit multifamily even if the property will be my primary residence (I'm unwilling to put down that much cash if I'm living there... that's one of the benefits of a house hack right?). 

Question for Kevin: My question for you Kevin is were you to obtain the exact criteria listed below (or better) on your house hack? Perhaps you bought single family (not 3-4 units), went with an 3.5% down FHA loan (not conventional), a higher down payment (not 5%), or had a higher interest (above 2.75%)? I'm still not seeing my criteria all come together with lenders. I'm hopeful this can still be achieved, but part of the reason for my post is that I don't want myself (or others) to chase something that's unrealistic.

Criteria:

1. 30-year fixed conventional loan

2. 2.75% interest rate or better

3. 5% down payment or less

4. (ADDED/NEW) 3-4 unit multifamily property

Additional Information: I found an old post on BP that I think this is enough to solve my mystery... "5% down on conventional is the best way to go if you're going to buy a single unit because mortgage insurance is going to be significantly less, improving your cash flow. Standard conventional financing though, requires 15% down for 2 units and 25% down for 3-4 units." (Original poster Stephanie P.) This seems to be the reason why lenders are unable to work with me on a conventional loan with only 5% down. It's because I'm looking at 4-plexes that would require 25% down. 

I hope this helps others, and I look forward to any replies!

Ben