Rental Property Investor · Phoenix, AZ · Member since 2017 · 26 posts · 4 votes
Hey all,
I am in the process of selling my condo and looking to roll that money into a multifamily purchase. I am hearing that in CA a 3 or 4 unit bldg requires a 20% down payment minimum. Is that set in stone for me in CA or are there other options i'm not aware of?
Rental Property Investor · Phoenix, AZ · Member since 2017 · 26 posts · 4 votes
7y
@Christopher Hunter
Thanks for the response! I've followed up with another realtor friend of mine who spoke with her preferred lender. She said her lender says 3.5% down for FHA still works for up to 4 units. I'm kind of seeing a mixed message from different folks hence me bringing up this question in the first place.
I think I'm just going to call up some local lenders around my way and see if they do 10% down FHA for a quad. That's basically what I'll have to put down at this point.
3-4 units can be tough with FHA in CA due to the high costs of properties and the self-sufficiency rule:
The maximum mortgage amount for 3-4 unit properties is limited, so that the ratio of the monthly mortgage payment, divided by the monthly net rental income does not exceed 100%, regardless of the occupancy status. This is also taking into consideration, a 25% vacancy factor. Plus the upfront mortgage insurance premium and annual mortgage insurance premium can be pretty high compared to other conventional financing routes.
Upfront Mortgage Insurance Premium - For 15 year and greater than 15 years.
1.75% of purchase price
Annual Insurance Premium
Greater than 15 years & greater than or = 95% LTV - 0.85%
Greater than 15 years & less than 95% LTV - 0.80%
Less than or = 15 years & Greater than 90% LTV - 0.7%
Less than or = 15 years & less than 90% LTV - 0.45%
Annual Insurance Premium For Higher Balance Loan Amounts - Greater than $625k
Greater than 15 years & greater than 95% LTV - 0.105%
Greater than 15 years & less than or = to 95% LTV - 0.1%
Less than or = to 15 years & greater than 90% LTV - 0.95%
Less than or = 15 years & less than or = to 90% LTV - 0.7%
Less than or = 15 years & less than or = to 78% LTV - 0.45%
I would take a look at the Home Possible program. If you don't meet the income restrictions, there are area's that have no income restrictions. The drawback to this loan is that Freddie Mac no longer allows rental income to be used without a 2 year rental history and this program only allows you to own 2 financed properties including the subject.
Here is some helpful info.
Income limits apply ONLY in certain locations. The borrowers qualifying income converted to annual income must not exceed 100% of the Area Median Income for the location of the subject property. This can be looked up on Freddie Mac’s website; Freddie Mac Home Possible Eligibility