MFR Conventional Mortgage: 3% Down For Owner Occupied

Time and time again lenders claiming 15% is the lowest down payment for a conventional mortgage on an owner occupied multi family rental. It's simply not true! My wife and I used 10% down and my clients are using as low as 3% down. These loans are awesome and this article is wh I recommend using low money conventional for your next house hack..

Our Quick Story

When my wife and I first started investing in real estate we found low money down loans for house hacking. This was back in 2014. We ended up buying our first property using a 10% down conventional mortgage. It worked out great for us and I recommend similar loans to my clients today. We purchased a few properties using this type of loan, one time on our first MFR a second time with a live in fix and flip.

Basic Rules Associated

You must have good credit and stable job to qualify for this loan. Lendee’s must be owner occupying the property and it can be no more than 4 units large. Property Mortgage Insurance is NOT required if lendee qualifies, for some it may be required based on lower credit.

Why I Recommend this loan

The possibility of having no PMI is huge! But not everyone will qualify for that. My wife and I had to pay over $300 per month in PMI for our first multi family using this type of mortgage. Here is the catch, the BIG NEWS! You do not have to refinance to drop PMI. You simply need to appraise high enough where you have enough equity in the property and the PMI goes away. One of the coolest experiences in our investing journey was the day our appraisal came back, we smashed it! PMI went away overnight and we did not have to restart a new loan.

More Perks

We all know the pain that comes with FHA and so do the sellers. Submitting an offer with conventional lending is much more powerful. Most sellers will pick conventional over FHA and in many cases a lower priced conventional offer to avoid any FHA shenanigans.

Why I Recommend This Loan Even If You Are Capable of A Large Down Payment

It varies property to property and client to client but personally I prefer liquid cash and properties that need some level of work. How I see it is if you can put 20% down and then renovate to increase value or you can put 3%-10% down and use the difference to renovate which gets you to the equity mark you need to be at in order to buy another property using low money down you are in better shape. Basic math here: $100k liquid cash, purchase price $500k. 20% down $100k used, no cash reserves good luck renovating. 10% down $50k used, $50k for renovations. 5% down is $75K for renovations. Now imagine what you can do with an extra 75k in your pocket. Had we used the full down payment on our first purchase we would have been sitting ducks with zero cash. Instead we did $50k down, used $50k to renovate and in less than 3 years increased the value of the property by over $300k. The fact of the matter is buying a property does not increase the value, you must alter the property so having liquid cash is huge and using it towards renovations gets you closer to more equity faster.

If you are looking to purchase an owner occupied multi-family rental consider all your options. Going the low money down conventional route has worked well for us and I hope this will work well for you. I am not a lender, just a user of these loans and a realtor. Anyway I can help please reach out.