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Is 5% down possible on second home?
I currently live in a SFH have a conventional mortgage.
My father and I are hoping to team up and purchase a duplex together that we have our eye on.
I will rent out my SH and move into the duplex to get us an owner occupied rate and he will be the co-signer and pay for the down payment.
Our problem is that we cannot find a lender that will provide a loan with less than 20% down. We were hoping to purchase with FHA 3.5% down but have been told it's not possible.
Does anyone know of any lending options that will meet our needs of 5% down or less?
Originally posted by @Peter Parisey:
I currently live in a SFH have a conventional mortgage.
My father and I are hoping to team up and purchase a duplex together that we have our eye on.
I will rent out my SFH and move into the duplex to get us an owner occupied rate and he will be the co-signer and pay for the down payment.
Our problem is that we cannot find a lender that will provide a loan with less than 20% down. We were hoping to purchase with FHA 3.5% down but have been told it's not possible.
Does anyone know of any lending options that will meet our needs of 5% down or less?
Sounds like you would have to get a private money lender but for little down expect 3 points to begin the loan and a large interest rate of 8 to 10 percent for the first 2 years before you could refinance normally.
Any equity you could cash out of your current SFH? We have a few conventional lenders (i.e. Huntington Bank) in our area that will do a home equity line up to 100% LTV. At a rate that is a bit higher than a conventional mortgage but less than the 8 to 10 percent and 3 points @Brandon Battle is suggesting.
Why did they say it was impossible? From what you have said i see no reason you cannot buy an FHA financed property unless you have DTI issues or something else specifically tied to your credit. I have done what you are suggesting and there are no rules against it. You might want to check with other lenders. The main rule is that you can only have one FHA insured mortgage which is not an issue since you dont have one already.
Now if you have DTI issues or other credit issues that is different. Post those and we can see how they may be solved.
Why can't you get personal mortgage? What is the banks reasoning? We have bought 8 houses in 4.5 years at 28 and 29. we have learned there is almost always a will and a way. So before I gave up would definitely see why and ask a few more places. We personally have found mortgage brokers have lent to us much more easily than banks. although wellsfargo will buy our loan no problem.
Yes, but not likely. Good luck.
I make $40k a year, 16k in student debt (which is $210/mo.) no car payments, no credit card debt, and my PITI is $1500/mo. I have a roomate who lives with me for $850/mo. Dad/co-signer makes $220k a year.
They said we would have to put 25% down FHA and 30% down conventional even though I intend to owner occupy because I would have a co-signer on a duplex and this isn't my first mortgage.
Sorry I forgot to mention credit scores. Mine is 680ish and dad is 760ish.
What lenders are telling you this?? I would contact a broker/lender. Not a big bank.
Do they know you intend to owner occupy and rent out your current property?
If your DTI is too high that may be the problem. Doesn't matter if you have good income or good credit if your debt it too high.
Elizabeth - we completely agree. We too believe if there's a will there's a way. Dad is currently pursuing other lenders and I'm combing biggerpockets. I love this place!
Sarah - the lender who told us this was Merrimack Mortgage Company. They are who we went through for my original loan and who my father and I did separate refi's through only a few months ago.
They originally thought we could do FHA @ 3.5 down but discovered they they were wrong during a pre-approval for us on this duplex.
@Peter PariseyThe reason you can't get a FHA 3.5% loan is because you have a Non-Occupying Co-Borrower and you are looking to buy a multi-family. You where buying a SFH/TH/Condo, you would be able to buy with FHA 3.5% down. You will get the same answer from every lender. It FHA guidelines. If a lender tells you Yes, then they are simply trying to bait you in and will tell you later that it can't be done with FHA.
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Thanks Upen, I will keep that in mind if I hear that from any lender. Are there any types of mortgages that will allow me to owner occupy, dad co-sign and allow for around 5%-10% down?
Try local banks and credit unions that keep their loans in house. I know one in my area that will do 10% down for owner-occupy properties if it's 2-4 family. There must be one around you. You just have to make some calls to find them.
@Upen Patelis correct. I had to look it up myself but it is plain and clear.
Directly from the FHA handbook.
4155.1 2.B.3.d Restrictions on Non-Occupying Borrower Transactions - If the LTV exceeds 75%, a mortgage with non-occupying borrower(s) is limited to a one-unit property. The non-occupying borrower arrangement may not be used to develop a portfolio of rental properties. The financial contribution by the nonoccupying borrower and the number of properties owned may indicate that the family members are acting as "strawbuyers."
So you can use your father to cosign if you were buying a one unit property, or if you can pay 25% down. Best bet would be to see if there is a conventional low downpayment program you can qualify for. Or find a portfolio lender.
Thanks guys. My father is a member of 2 credit unions. He's looking into what they can do. Also a family member and the realtor of the seller both recommended a lender for us to call. Turns out they both recommended the same woman! She must be good. Hopefully my dad can reach her today as well.
If the Duplex needs work, you might want to check out a 203k loan without a cosigner. If there's enough room to build some decent equity then you may be able to refinance within the next year to a conventional FHA 20% loan and bring your father on board.
Seeing as how I already have a SFH with a conventional mortgage, what requirements will I have to meet to qualify for this duplex on my own?
Originally posted by @Peter Parisey:
I currently live in a SFH have a conventional mortgage.
My father and I are hoping to team up and purchase a duplex together that we have our eye on.
I will rent out my SH and move into the duplex to get us an owner occupied rate and he will be the co-signer and pay for the down payment.
Our problem is that we cannot find a lender that will provide a loan with less than 20% down. We were hoping to purchase with FHA 3.5% down but have been told it's not possible.
Does anyone know of any lending options that will meet our needs of 5% down or less?
Hi Peter-
Checkout: (3) Secrets Everyone Needs to know about using a 203k loan for more information on the 203k loan, loan process and how to build the right team for success.
Good luck to you!
