< 20% Down on an Owner Occupy Triplex

[Chad Gaither]

Hi all - I'm currently under contract on a triplex in Long Beach, CA for $625K and am running into some financing issues. I originally planned to do an FHA loan on the property but that program requires 75% of the market rents to cover all of the P&I which they currently will not unless I put >20% down. I am a young professional and currently can't afford that but might be able to swing 10-15%. Time to get creative. Would love to hear any suggestions that you all might have. Thanks in advance!

[Albert Bui]

Originally posted by @Chad Gaither:

Hi all - I'm currently under contract on a triplex in Long Beach, CA for $625K and am running into some financing issues. I originally planned to do an FHA loan on the property but that program requires 75% of the market rents to cover all of the P&I which they currently will not unless I put >20% down. I am a young professional and currently can't afford that but might be able to swing 10-15%. Time to get creative. Would love to hear any suggestions that you all might have. Thanks in advance!

HI Chad,

Your main options would be FHA and Conventional or as low as 0% down with VA financing (if you're a veteran).

There is a niche conventional program called home possible that will allow you to purchase your triplex with a max loan amount up to 656,350 (you'll be under this with 5% down).

FHA is available but since you're in Long beach, CA you'll probably not be able to do 3.5% down FHA with out putting more money in especially depending on the area because:

- FHA requires the self sufficiency rule on 3-4 unit properties which means 75% of the gross rents of all 3 units (includes your unit you'll be living in) will be required to be greater than the total monthly payment on that property which is commonly referred to as PITI (principal/interest/taxes/insurance). This is often very difficult for areas that rent for less than .90% rent to price ratio, this means your 625k triplex would need to have gross rents of 5625 (1875 rent per unit). The rental income used is the lower of current rents for the tenants in the building currently or market value as determined by the appraiser so often times the current rents are lower so you will wish your building came vacant lol

The conv HP program does not have any rental income requirements which therefore makes it superior to use on the house hacking strategy.

HP Conventional requires the borrower to not own any real estate interest at the time of closing on either individually or jointly (partnerships).

Hope that helps, let me know if you have any questions.