Are we taking on too much risk???

[Ben Cooper]

We are looking for input immediately- our loan is set to be confirmed by 5pm ET today! 

My wife and I have a 3 family in Boston under contract set to close on Monday. We will be living in one of the units, we are using an FHA loan and put 3% down. Just yesterday the lender said that the rents that our realtor comped are not accurate enough and they want us to put down an initial $30,000 in order to bring the loan amount down. Yes, we could be gifted some money and put that extra $30,000 down. We have already leveraged our 401K so we have a personal loan out to ourselves that we need to pay back, plus this gifted money we would be paying back, plus the $862,000 mortgage. So the mortgage that we were ol with paying quickly turns into a mortgage, plus money we have to payback into our 401K, plus this gifted money loan. The house is turn key, but needs about $5,000 invested into it relatively right away. Our plan is to refinance ASAP. The appraisal came back $20,000 higher than we're getting it for.

The city of Dorchester is one of the last cities in Boston to blow up and there are tons of multimillion dollar buildings being constructed just blocks from us, so we are quite confident that things are going to appreciate quickly. BUT! We have always heard don’t bank solely on appreciation. 

Takeaways: turn key house, our rent for unit is manageable ($2,100). But with new loans, we’ll be extending ourselves to the point where we’ll be living paycheck to paycheck. We’re banking on appreciation in the area and looking to refinance as soon as we hit 20% equity (we’re thinking 2 years tops). 

This is LOT of risk! What would you do??? 

Thanks,

Maddy and Ben