2-4 Unit Financing (Owner Occupied)

[Michael D'Alessandro]

Hello,

I have been reading/hearing varying information regarding financing options for owner occupied 2-4 unit properties. I realize lenders can provide a multitude of programs from lender to lender, but I wanted to have a better idea of what is actually possible. I am familiar with the FHA "House Hack" option, I am curious to understand the conventional loan options. Is it possible to buy a 2-4 unit owner occupied property with as little as 5%-10% down with certain programs or more investor savvy lenders? Also, does the financing differ from 2, 3, or 4 units, or is it the same across the board if it is less than 5 units? Thank you so much in advance!

Best,

Mike

[Jaysen Medhurst]

@Michael D'Alessandro, yes, there are plenty of options available. Talk to your local banks and credit unions about what first-time buyer products they have. Financing terms should be the same for 1 to 4-unit owner-occupied properties.

[Michael D'Alessandro]

Thanks for the information, that is a great idea! Do you think connecting with Mortgage Brokers could be beneficial and helpful as well?

[Bob Okenwa]

@Michael D'Alessandro

Mortgage brokers can be helpful, but you will have to pay for their services. You can house hack with a conventional loan as well if your credit is good enough. You can get a conventional loan for as little as 3% down, and FHA loans appear to be 3.5% down, but rarely is it mentioned on BP that there is an upfront premium, or fee, of 1.75% of the loan amount.

You can pay that premium at closing, if you have the cash. Or you can roll it into your loan amount, which increases your monthly payments slightly because you're borrowing more.

[Michael D'Alessandro]

Thanks Bob! Yes, I've been in mortgage industry for 2 years and I never knew why BP doesn't talk about the hefty fees associated with FHA loans. After all of the fees associated with closing, much more cash is needed than just the 3.5% down.

But that was my thinking with trying to learn more information about the conventional loan options. I wouldn't be a first time homebuyer, so I wanted to understand my options with electing to go with a conventional product and occupying one of the units.

[Justin Kane]

yes, mortgage brokers, non sub prime non doc lenders, BLOCS vs Equity leverage etc.

[Michael D'Alessandro]

@Justin Kane thanks for the info! I am going to reach out to some local lenders to learn more. My main curiosity is learning the minimum downpayment for duplexes, triplexes, and quadplexes for owner occupied conventional financing. I am sure this can vary from lender to lender with their specific programs and portfolio loans. Was just curious to know if anyone had prior examples with needing a specific downpayment or not.

[Justin Kane]

if you HML it the you can obviously BRRR it out with no money down or potential make money on the refi depending on how well you bought the property. but conventional typical 20-25% down, but just keep shopping around dont go conventional if your pockets are empty but also dont buy a deal thats not really a deal

[Ratna E.]

@Michael D'Alessandro Yes, there are variety of owner occupied options available. I spoke to different local banks for a 4-Unit property and they said I'm over the income limits of Fannie Mae/Freddie Mac 5% down conventional loan. The income limits are based on the county you are buying and you can check income limits on their website.

FHA is one of the conventional options I can go with with low money down. I will follow this thread to know more about creative ways of owner occupied financing. Thanks!

Also, in my personal experience, offers with FHA loan(or a low money down in general) financing doesn't seem attractive for a seller. I may be wrong here but this is what I'm seeing in my market from last 6 months. I would like hear what other BPers thoughts are on this.

[Michael D'Alessandro]

@Ratna E. Thanks so much for the info! I read similar things as well regarding Freddie vs Fannie and their income limits. I know there are other unique options out there as well that require specific requirements. I am definitely going to connect with some local lenders. Thanks again!

[Jeff White]

Hi Mike,

Where is @Chris Mason when he is needed?  Anyways, Home Possible conventional 5% down payment program is a fantastic one to use, you just have to find a multifamily that is in a low income tract so there isn't a restriction on how much income you make.  Also, the down payment would be the same whether you have a 2, 3 or 4 unit.  The rates would probably be different though. 

Check out Chris's post: https://www.biggerpockets.com/forums/49/topics/609...

[Michael D'Alessandro]

@Jeff White thanks so much, this is awesome information! This was my assumption and hope. Do you think credit unions or smaller local banks would be more aligned with what I’m looking for?

[Jeff White]

@Michael D'Alessandro  I would reach out to Fannie Mae/Freddie Mac conventional lenders that work with real estate investors.  Credit unions and small local banks usually are more expensive and specialize in commercial lending (portfolio loans).