Buying a multi family for more than bank will lend

[Cory Kim]

Hello everyone,

I’ve been trying to search for this answer but I haven’t been able to find one, so hopefully what I’m thinking makes sense.

For simplicity sake, I’ll use easy numbers. Let’s say someone makes 100k and gets approved for a 300k mortgage. Then they find a 4-plex that’s 500k, which is clearly out of their price range, but the numbers work for them to the point where they feel confident that they won’t fall behind on the mortgage since they’ll have tenants.

They want to get an FHA loan and house-hack, but they cannot get the full funding for it from the bank for obvious reasons. They still want to take what they can get since they want to put 3.5% down.

1. Is this a common situation where the borrower wants to buy more home than they can afford if they know they can still have cash flow from it? Is it a bad idea to do so, again, assuming they’re confident that the numbers work and vacancy will be really low and they have reserves to help them if anything goes wrong?

2. What are some of the creative financing options that you’ve heard of/done for this type of situation?

All input is greatly appreciated!