Conventional Loan Rules for 20% Down

[Duane Hundley]

I'm looking at doing a conventional loan on a property that I'll rent to my sister and mom. On the down payment of 20% where can this come from? I was thinking about using a 0% check with my credit card for the $10k.

[Chris Mason]

Originally posted by @Account Closed:

It seems like someone on BP recently said that if you buy a property for your Mom, you can get owner-occupied FHA financing. You might want to check into those rules. Then, you'd only need 3.5% down.

It's actually Fannie Mae, not FHA. 3% or 5% down depending on census tract and income, owner occupied interest rate pricing applies (which is AWESOME). But cannot use rental income to qualify, if needed. And it's supposed to be a situation where mom couldn't qualify on her own, but the bar to "prove a negative" is pretty low.

Incidentally, assuming sufficient income to qualify, it's something that almost every BPer with parents that aren't in the best spot should look at. Mom/dad gets a place to live in their golden years, which is something you might have needed to pay for any-damn-ways except this way it isn't one of those abusive dictator nurse places, and X years from now your reward is that you have a new rental property that you only had to put 5% down on. Karma is rewarding you for doing the right thing and taking care of your folks.

There is no cap on how many of your and your spouse's combined four parents you can do this for, but if you try using it multiple times be prepared to prove to a skeptical underwriter that mom did indeed actually move in, and that you are not collecting rent from her (according to your accurate Schedule E).

Also, because this is a principal residence per Fannie's definition, and not a second home or investment property, that means it can in theory be an 11th financed property.