Loan Officer: 25% Down Payment Required For First Time Homebuyer House-hacking 4plex

[Scott Bridgehouse]

BiggerPockets Community! I am so happy to be posting my first ever question on the forums. Long-time listener, first-time poster.

As the title suggests, I'm gearing up to buy my first ever property. I have a realtor, a location mapped, savings in the bank, and got prequalified earlier this year. I received a raise, and so I went back to my loan officer who did my first pre-approval so she could give me new figures. During this discussion, she said "by the way, for a conventional loan, we require 15% down on a 2-unit, 25% down on a 3-4 unit." I asked her how that could be considering this is my first-ever property, I wouldn't be exceeding 4 units (staying residential not going commercial), and I would be living in one of the units for at least a year (owner occupied, primary residence). She has not yet responded back to me.

Is this a universal rule with conventional loans? Or is this specific to Guild Mortgage? Of course I could go the FHA route, but I'm trying to avoid the life-long insurance until refinancing aspect of it if I can. I just always thought FHA was better suited for those with lower incomes/ credit scores (I have a stable six figure salary, roughly 750 credit score) - maybe I'm totally missing something here. Maybe I'm not. Should I be shopping for a different mortgage company?

Any help keeping my head straight with what I thought I could do with a conventional loan while house-hacking as a first-time homebuyer planning to owner-occupy would be immensely helpful as I kick off my real estate investing journey!

[David Dachtera]

@Scott Bridgehouse,

Purely my opinion ...

Regardless of how you're financing it, when analyzing a property as an investor, I would expect any multi-family property to meet commercial criteria. Especially, the DSCR (Debt Service Coverage Ratio): the NOI from the units you don't personally occupy should be greater than about 1.2% of the P&I on the property. 1.2% is a common value used by lenders to determine whether the property meets their "self-sufficiency" criteria. You may still need your own income or resources to build up reserves and cover Cap Ex initially.

My $0.02 ...