Financing real estate househack

[Simon Sanchez]

Ive read on The book on Investing in real estate with no and low money down that a 1-4 unit property is considered residential however I have been to 2 local banks and told them I was planning to househack and they have told me that since I would be renting to others and gaining income that it is commercial and what have to put 20 down is this strategy worth it now since according to them I'm unable to use an FHA loan since it's commercial property what do you guys think?

[Jessica Von Zastrow]

Hi Simon! 

House hacking is a great way to get started in real estate investing! FHA loans have specific rules and guidelines for financing multi-unit properties, and it's important to understand these rules before you make a purchase.

According to FHA guidelines, multi-unit homes with 4 or fewer units can be financed with an FHA loan. If you are planning to live in one of the units and rent out the others, you may be able to use the future rental income to qualify for an FHA loan. However, the rules around this are tricky and it's important to understand them before you move forward.

Depending on the property, your lender will need to determine your Self-Sufficiency Rental Income Eligibility (as mentioned above). This refers to the rental income produced by the property above the Principal, Interest, Taxes, and Insurance. There are also required reserves needed (additional savings) that you might need to consider. If you have further questions or would like to discuss your home purchase goals in more detail, I'd be happy to help.