25% Down to Avoid PMI on a 3/4 Family?

[Garrett M.]

Hi Everyone,

This is the first I am hearing about this on a residential multifamily building - maybe I have not done enough research on the topic but I was hoping to get some insight from the more experienced folks here. I have been saving for a down payment of 20% in order to buy a 3 or 4 family building as owner occupied. Just this past week I finally amassed the amount that is typical for a 20% DP in my area and figured I would call a bank to get pre-qualified given my financials. After running the numbers, the bank advised that I would need 25% for a 3 or 4 family but only 20% for a one or 2 family under conventional financing. Under FHA I can be approved for significantly higher but I do not ever want to pay PMI now that it is locked on for the life of the loan. (and with the recent news from the FOMC, rates may begin to creep up!)

I am going to call other banks as this was only the first one I reached out to but was wondering if this was the norm or if it was somehow based on my financials.

On the other hand, my strategy is to buy my first property, live in it while renting the other units out and do that again within ~5 years and repeat again. Should I choose to go the FHA route, I would have more funds available for my 'second' down payment on the next house. Anyone have any opinions on this strategy and if it is flawed?

PS, I am looking in NYC if it matters.

Appreciate any responses !

Many Thanks