Home Possible Loan

[Sterling Pompey]

Hi All, 

Has anyone heard of the "Home Possible Loan" from Freddie Mac? What are some Pros and Cons of using this method as this is the first time I'm hearing about it. I've never heard of it mentioned on the BP Podcast but one lender suggested it to me today as a way to scale a multi-family portfolio (buy first multi-family with the first time home buyer's loan FHA, then buy the second multi family with the Home Possible loan Freddie Mac.)  

For context, I'm a single 27 y/o working for an Industrial REIT as an Asset Manager and am blessed to make decent money for my age. No kids, living at home with my parents to pay down my car and student loans. These properties that I'm planning to purchase, will be my first two in the next coming years. My original plan was to buy a single family/condo live in that for a year or two while I fix it up then rent it out and move on to a multi-family next. This conversation was prompted when I asked the lender (who explicitly works with investors) "what the biggest mistake is that new investors make?" The lender said, you just made it with that plan.

The lender (been a lender for 25 yrs) said the investors he's seen have the most success utilize the strategy I mentioned in the beginning of this post. The lender said I'd be able to utilize the down payment characteristic of both loans to essentially get into the real estate game and be on a good track to start scaling. Obviously, the lender mentioned all the good sides of the loan so I wanted to do some due diligence as this is the first I'm hearing of this. Does any one have any experience with this loan product? 

Thanks in advance for any and all insight. 

[Chris Mason]

Quote from @Sterling Pompey:

Hi All, 

Has anyone heard of the "Home Possible Loan" from Freddie Mac? What are some Pros and Cons of using this method as this is the first time I'm hearing about it. I've never heard of it mentioned on the BP Podcast but one lender suggested it to me today as a way to scale a multi-family portfolio (buy first multi-family with the first time home buyer's loan FHA, then buy the second multi family with the Home Possible loan Freddie Mac.)  

For context, I'm a single 27 y/o working for an Industrial REIT as an Asset Manager and am blessed to make decent money for my age. No kids, living at home with my parents to pay down my car and student loans. These properties that I'm planning to purchase, will be my first two in the next coming years. My original plan was to buy a single family/condo live in that for a year or two while I fix it up then rent it out and move on to a multi-family next. This conversation was prompted when I asked the lender (who explicitly works with investors) "what the biggest mistake is that new investors make?" The lender said, you just made it with that plan.

The lender (been a lender for 25 yrs) said the investors he's seen have the most success utilize the strategy I mentioned in the beginning of this post. The lender said I'd be able to utilize the down payment characteristic of both loans to essentially get into the real estate game and be on a good track to start scaling. Obviously, the lender mentioned all the good sides of the loan so I wanted to do some due diligence as this is the first I'm hearing of this. Does any one have any experience with this loan product? 

Thanks in advance for any and all insight. 

 It's great when/if you can make it work. The income limit is the kicker. 

Gotta make greater than $X to qualify for a mortgage of the size required to buy a 2-4 unit.

But also gotta make less than $Y to be able to use the Home Possible program.

And if you use the rental income for one of the above, you have to use it for both, whatever is good for the goose is good for the gander. Same with bonus income and overtime. You can cherry pick which sources of income you use (base salary, rental income, bonuses, overtime), but whatever you pick, has to be used for all qualifying criteria.

If your loan officer told you about it, that likely means you're in that very narrow strip of overlap (the "Goldilocks zone," or the "sweet spot," whatever you want to call it). Most people, I'd say >90%, are not in that narrow strip - the soup is either too hot, or it's too cold, either way there's nothing there for Goldilocks. Which is also why it doesn't get much copy on podcasts, etc. If I go talk about it on a podcast, and 50 people call me for it, then I'm going to be disappointing at least 45 of them. 

The home possible income limits are by census tract, and available here --> https://sf.freddiemac.com/work... 

If you're reading this and want to see if the program might be a good fit, see if you're just a tad below that income limit, by like 1% to 25% (& if you're only 1% below, then don't get any pay raises after you're preapproved!). Then call a local mortgage broker or local mortgage banker, tell them your finances, and ask what your buying power is. Then go ask a realtor if duplexes or fourplexes, in that are, at that price point, actually exist. The moon, sun, AND the stars, may or may not align. Only way to find out is to go check.