Why couldn’t I get a low down payment house hacking?

[Jacob Harbin]

I am a Real Estate agent in Alabama and was in a contract to buy a duplex that has a detached garage with an upstairs apartment, so 3 units in total. The smallest unit was vacant so I was buying the property and and going to live in it for up to a year while renting out the other units(they were already rented).

The loan officer said we could do 5% down as long as it was my primary residence which was fine. After the inspection had been done she told me the underwriters came back and said it had to be an investment loan and had to be 25% down minimum. She claimed since income was going to be coming in from the other units it couldn’t be the low down payment whether I was living there or not. I didn’t have the 25% down so I had to back out of the contract.

Everything I read and researched said this would be a good way to get a property like that and I cant seem to figure out why it didn’t work. Thoughts?

[Wayne Brooks]

FHA makes no such distinction, up to 4 units you can do 3.5% down.