First property looking to house hack

[Dallas Hoover]

Good evening, everyone. 

My name is Dallas, looking to acquire a duplex or triplex for my first property to house hack.  Using Fha of course, what are some problems a 19 year old would run into? I'm 6 -8 months looking in the dfw area like Dallas or Royse city area Tx. How much do is enough for the down payment cause I know it might not be 3.5% down.  Is the market In a good place right now or it is in shambles?

[Taylor Cave]

Hey Dallas - Love that you’re already thinking about this so young! House hacking a multi-unit is the best way to get started since you’re, if done right, paying minimal to potentially no monthly payment out of your pocket. 
Down payment on FHA is 3.5% so you're not wrong there and safe to assume another 2-4% for closing costs BUT you can negotiate seller assist to cover bulk of the fees if not all. I believe they changed the guidelines years ago on the amount of seller assist you can receive on an FHA loan, so I'd look into that with your mortgage company before making an offer, but definitely use that to your advantage when writing an offer! Out of pocket is closer to 3.5% than you think!

[Derek Brickley]

Hey Dallas! Note that FHA can be a great option at 3.5% down but don't rule out the 5% down conventional option either. Both have pros and cons (my first househack in 2023 was with the conventional one). It's so hard to say generally what problems might come up, but the first that comes to my mind is work history - do you have 6 months on the job and a 2 year work/school history? FHA will be looking for that. FHA does have the benefit of max seller concessions being 6% so if your realtor can negotiate for that it can really minimize your cash outlay. Conventional at 5% down would cap you at 3% concessions, but generally is more lenient with employment history and property condition. Note too with conventional - are you renting currently? That will play a factor for qualifying.

[Matthew Kwan]

You can acquire your a primary residence from up to 1-4 units for as low as 5% with conventional or 3.5% FHA with a few exceptions. Many buyers/investors are using this strategy to invest in real estate.

- get into real estate with a lower rate and lesser percentage down payment.

-house hack or rent out your vacant units out to lower your monthly mortgage payment.

-repeat the process every year by acquiring one house every year with the appropriate income qualification

[Bruce Lynn]

@Dallas Hoover  Congratulations.  You're on the right track.

#1 as a 19 year old make sure you get your preapproval lined up before you even go look at homes.  Better yet use a lender that gets you fully underwritten up front, so you don't run into any surprises.

#2 Keep an eye on interest rates based on what the loan officers proposes.  Of course if rates go down, you should be good, if they go up, then have them rerun your payment amounts and purchase power so that you're good to go there.

#3. Bank as much money as you can between now and purchase date.

#4.  Depending on the lender and program your biggest hurdles might be credit score and income and time in job.  Don't know if any of those apply to you or not, but good to check with your lender today and get them to run your credit so you know what your targets are.  Also remember 3.5% is your down payment, but you will also have closing costs and prepaids which might add to that number.

#5. FHA is good, but you have MHP forever until you refinance. There are potentially 100% loans like VA foreclosures, and also depending on where you buy. So have a great loan officer that understands those programs, and doesn't just push you to FHA.

#6. Get a great realtor who knows and understands what homes might qualify for FHA and which might not. I don't want to waste your money on inspection, option money, and appraisal money, just to find out the house doesn't qualify for FHA, so I do my best to keep you out of those situations. Not all realtors understand the requirements, and even when they do, don't always try to keep you out of trouble.