Discussion Post - New Lending Rules Affecting HouseHackers

[Christopher Jason Lloyd]

Hello BP!

As many of us have heard, the conventional downpayment requirement for primary occupants is going down to 5% November 18th. However, in all this news and excitement, many missed that the FHA (as of 4 days ago) now allows up to 75% of rental income from ADU's as borrower income to qualify for their mortgage as long as it is existing. If the borrower is using an FHA 203k loan, they can use up to 50% of projected income on an ADU they intend to build for their income requirements.

While this is certainly good news in the short term for many to househack, what are your thoughts long term?  I am curious to whether this will further drive up prices on 2-4 unit properties that already make little sense in most markets.  We see with my clients that they are competing against more and more buyers just looking for discounted living compared to their singlefamily options.  Could this further increase the pool of retail buyers just looking to save on their mortgage and drive up prices faster than normal?

Would love to hear your input!  We are already seeing 3-4 units going for way over asking with appraisal guarantees at the current downpayment amounts. By allowing lower downpayments, I am wondering if the buyer pool will start to have even higher appraisal guarantees which will raise the prices of these assets potentially faster than normal. 

[Benjamin Sulka]

Christopher, 

Basic economics and supply and demand would tell us that prices will go up. More demand for these kinds of properties because the barriers to entry are lower. 

I just have no idea how long it will take for these prices to go up. Multifamilies in half decent areas are already expensive as it is. 

Great post!