Owner Occupied Duplex Deal Analysis Requested

[Adam Moyer]

My wife and I want our first home that we purchase to be a duplex. We are looking for that so that we can rent one side out and therefore have a very low mortgage payment. Eventually we will purchase another property and rent both sides out. We were going to do this and put in an offer this week, but we ran into a financing snag.

The duplex will sell for $250k and is exactly where we'd want for location, and it is updated. We have a $25k down payment and we're going to finance the rest. Unfortunately, according to several mortgage companies, a15% down payment is required for traditional financing (MI companies would not insure owner occupied duplexes with less than a 15% down payment). That leaves FHA financing. I wanted to see what you all thought of the deal.

Cost: $250k Down Payment $25k

Interest rate: 3.75% (30 year fixed), 5.239% apr (includes fha funding fee of $3938)

Monthly Payment: $1766 ($1060 PI, $70 HI, $394 taxes, $241 pmi)

Rent: $1200 (currently rented, tenets are great and probably will stay)

Net monthly out-of-pocket: $566

We aren't too fond of the high pmi, or the additional fha fees, but doing a higher down payment is not really an option at the moment.  I was thinking that we would not find to many other properties this nice where our out-of-pocket would be so little.

Long term we would rent out both sides and have monthly cash flow of $634.

What do you all think of this deal?