Multi-Family Conventional 5% down?

Question

I am looking for options besides FHA (high fees) and the standard 20% down for a multi-unit in Philadelphia, but I can only come up with 5% down for now.

Are there any conventional 5% down mortgages for multi-families? I remember seeing one when i bought my house in 2007, but it seems they are all gone.

Oh and I have fico scores of 780 or so...

Rodney Sums · Answer

Did it prove to be a wise investment or what would you have done differently?

Michael Garson · Answer

I actually did. But only for a duplex. M&T Bank has something and 3rd fed bank has something. They're both local banks, it falls under their "Community Mortgage" plans.

Aaron Osgood · Answer

Michael, I am in a similar position as you. Have you made any progress on this? I would love to hear about it.

Aaron

Michael Garson · Answer

Who does the multiifamily with less than 20%? That's the basic thing I'm trying to find out. I'm okay with PMI if I can get rid of it later.

I won't have something by June 1st, so FHA is getting less attractive. The strategy might be get in with FHA and refinance after 20% equity. Which might be easy if I'm rehabbing.

Joel Owens · Answer

No legal advice.

FHA recently depending on purchase price the funding fee is 1.75% which can be paid at closing or rolled into the loan.

FHA recently raised the mortgage insurance to 1.5%. They keep raising it as it used to be about .5 years ago. They are doing this to pay back and replenish losses from foreclosures of the past.

Great part about FHA is you can get a gift from family etc. for the whole down payment  which is 3.5% currently. Conventional will let you get  a partial gift but have to have some of your own money down as well. There are conventional loans for less than 20% down you just will not avoid the mortgage insurance that way. With FHA insurance rising conventional is starting to come out cheaper on the insurance.

If you go FHA do it soon because after June 1 st you are stuck with the mortgage insurance forever on the loan. Used to once it hit about 80% ltv after owning the property for a few years you could request the insurance drop. You have to get  a property and a case number assigned with FHA before June 1st. FHA doesn't assign case numbers on the weekend so you would have to do it during the week.

This is the basics and do not count all of this as 100% accurate and talk with your local banker or mortgage broker. I only do commercial real estate but know these things because I am helping my brother in law buy a house as a favor.

Michael Garson · Answer

I'm looking at multi-family owner occupied, 4 units or less. In the city of Philadelphia. I've looked at the rural loans, but they don't seem to qualify.

I thought FHA was an extra 1.5-2% in fees, plus higher PMI?

All the conventional I know about have said 20% down.

Mike H. · Answer

Are you looking for multi-family loans or multi-units. There is a notable difference.

If your property is 4 units or less, then its just a multi-unit loan which falls under the same guidelines as a typical conventional loan - i.e, SFH loan.

If the property has 5 or more units then thats what is typically referred to as "Multi-family" and those would fall under commercial terms which tend to be quite different.

The other factor here is whether you are going to move in to one of the units or not. If its a 4 unit or less property and you are moving in to it, then yes, you may be able to get into the home with less than 20% as owner occupant properties tend to require less down payment than investor property loans.

I believe that the fannie mae properties would allow fannie mae to do a loan for less than the normal down payment. Although you would be limited to fannie homes only. But there are also some rural development loans out there as well depending on the area you're looking.  You'd be surprised how many areas allow for rur dev loans.

Also, I believe that some traditional conventional loans allow less than 20% and then require PMI.   Thats one I'm a little iffy on though. I'm not as familiar with the owner occupant loans as I am investor loans.

But assuming you're talking about owner occupant loans for a property with 4 units or less, I do believe there are some options out there.  Although I think that FHA tends to be the easier route. One thing I'd ask is do the fees really matter given how low rates actually are today?

Lets say its 2k in additional fees. For owner occupant loans, you'd be looking at about $8 a month to your payment. Is that really a concern. Its the cheapest money you're ever going to get.