First time buyer, found dream property. Minimum downpayment question

[Rojan Jacob]

This will be my first foray into real estate. Currently looking at a beautiful 3 story multifamily brownstone in NYC area for 400k Three 1 br rentals bring in $2800 of monthly income. Rents can be higher. Owner pays the heating bill. Full basement for storage, backyard. Only problem I have is I only have 40k in the bank but also have a steady income of $3,800 a month with minimal expenses (Still live with parents, owe 20k in student loans) Is this property affordable for me and what is the minimum I would have to put down as a 1st time home owner?

[Mike H.]

Couple of key questions on this one.

1) I'm assuming you are moving in to this property because you said you were going to be first time home buyer which typically implies owner occupant purchase. Is that correct?

2) What is the property going to appraise out at? Is it worth 400k? 500k? 

3) Why is this a dream property exactly?

If you're buying as a first time home buyer, then I believe that 40k is going to be enough money for a down payment on a 400k house. There are definitely loan programs out there that would allow someone to buy with 10% down.

Is it a good investment? Part of that depends on what its worth today. 

Bottom line is that at 360k, your mortgage is going to be around 1,800 a month.

Taxes and insurance???? How much? You would have to answer this one.
Monthly Heat bill????? How much?
Expected maintenance???? How much?
Vacancy???

Then you'd be getting rent for 2 of the units instead of 3 since you're living in the other one now. If 2,800 for 3, then 1,900 for 2?

So lets say the rent of 1,900 covers the mortgage payment.

That would leave you with a monthly payment for:
Taxes, insurance, heating bill for all 3 units, maintenance and vacancies.
Once you plug in numbers for those items, that should tell you whether you're getting a good deal and it makes sense. Is that a good deal to you? Cheaper than renting there in NY?

Also, I'm not sure if you'll qualify for the loan based on your income. 3,800 a month is your net or gross salary? If gross, that means you can only apply 37% of that to go toward all your monthly debt payments (student loan, car loan, credit card payments,) plus the mortgage (principal and interest), taxes and insurance (PITI)

I don't know if they'll let you count the rental income or 75% of your rental income towards your income to make the numbers work. Some banks might. Some might not.

There are a lot of variables here to consider. But I think the two key ones to me would be:
1) Will your bank count a portion of the rental income in your DTI calculation? If not, you won't qualify.

2) When you add up taxes, insurance, maintenance, vacancy, etc., does that come up to a number larger than what you'd consider a fair amount to have to pay for the unit you'll be staying in?  If it does, then is the principal paydown and tax writeoff you'll be getting worth the added difference?