Purchasing Multi Unit for less than 20% - 25%

[Joseph Barthelemy]

Hi All,

So, I'm looking to purchase investment propert #4, which is a duplex. The issue I have is that I am self employed and with the last investment property we purchased we had to put down 25% using a DSCR loan.

Being that we don’t have 25% to put down on another property, we could swing 5% - 10%, but want to know how I would be able to qualify. 

I appreciate any and all advice/tips. Thank you!

[Sasha Mohammed]

Hi @Joseph Barthelemy

FHA will allow for 3.5% down minimum on multi-unit properties, but you would have to live in one of the units.

If you opt for a bigger multi-family, keep in mind that for 3-unit and 4-unit properties, FHA has an added guideline which require the unit to fully self-sustain (rents need to cover the mortgage 100%). More often than not, this added guideline will force you to bring more down than the 3.5% minimum, but if the property pencils out, you have the ability to bring in less.

Conventional owner-occ duplex could go as low as 15% down payment, but again, you have to intend to occupy one of the units. Both FHA and Conventional would be full-doc for qualifying, with DTI calculations.

The rule of thumb is you need to live in there for 1 year... what you choose to do after that year is up to you. 

Lastly, if you are looking for strictly investment opportunities (and don't intend to live there), you could try for Non-QM DSCR financing. Many lenders will allow for as low as 15% down, albeit tougher to find these days than even 6 months ago. This loan type you CANNOT live in the property, but "qualifying" would be based off of the property's ability to generate income vs it's carrying costs, not your personal ability-to-repay.

5%-10% as requested would more than likely have to go full-doc FHA.

Hope this was helpful!