Multi to single family First time home buyer

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Multi to single family First time home buyer

John Armando
Dartmouth, MA · Member since 2016 · 40 posts · 10 votes

Hello BP Team,

I'm trying to get a feel for what everyone's experience has been going from a low-down payment multi-family first time home buyer property to a single-family residence (would the single family residence still qualify for low-down options as it is essentially "trading up"). I know there are a lot of options, so looking for what other people's experiences have been.

In short, my fiancee and I are looking to buy a multi-family with low down to conserve our capital. We hope within a year (~ 1 year to meet owner-occupancy requirements) we would purchase a single family home to start our family. With this strategy, we would be able to house-hack for the first year, learn hands-on about being landlords, and be able to acquire a multi-family for little down.  

Is it possible, and what mechanisms from your experiences have worked, for using low-down options for both purchases? We have enough liquid to purchase one of the properties at 20-25% down if necessary, but would like to keep our liquid assets intact. 

Thank you for your guidance.

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  • Josh Mitchell
    Real Estate Agent · Naperville, IL · Member since 2013 · 402 posts · 177 votes
    9y

    @John Armando you can buy the multi family (1-4 units) for 3.5% down, live in it for a year, rent the other unit (s), then refinance it to a conventional mortgage. Then when you are ready to buy your single family home, you can do another FHA with 3.5% down on that property. Keep in mind, you can only have ONE FHA LOAN AT A TIME, so this strategy would require a refinance of the multi family/following FHA guidelines in regards to occupancy.

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  • John Armando
    OP
    Dartmouth, MA · Member since 2016 · 40 posts · 10 votes
    9y

    Thank you @Josh Mitchell 

    For the Refi out, in your experience would the lender then typically expect an LTV of <80%.

    Also, we may plan to go non-FHA routes through local lenders that have other low-down programs.

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  • Josh Mitchell
    Real Estate Agent · Naperville, IL · Member since 2013 · 402 posts · 177 votes
    9y

    @John Armando Typically lenders will want to see 20-25% LTV to do the refinance on an investment property, however, if you still live in the property when you do the refinance you will get more favorable terms since this would still be your primary residence when doing the refinance out of the FHA product. With a multi family, some lenders will still want to see some equity in the property however. Could be 15-20% needed in equity before you refinance.

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