All Forum Posts by: Brenden M.

I was always under the impression that owner-occupied FHA loans would have a lower interest rate compared to a conventional purchase. It looks like I need to do some more research

Hi all. I am in the process of purchasing a triplex with an FHA loan. I started shopping around with a few different lenders on Friday, but only one has gotten back to me with concrete numbers after I submitted a loan app. She quoted the interest at 3.625% for 30-yr fixed. I was expecting the interest rate to be lower than a conventional rate - not higher. Am I mistaken here? When I asked her about it, she mentioned that the rate is higher specifically because it "will be an income-producing property."

As I mentioned, I am shopping around and will be following up with other lenders tomorrow to make sure I am getting the best option regardless. But should I be expecting the rate to be higher than conventional??

Extremely helpful, Joe - thank you! Seems as if more obstacles are popping up every day, which isn't always a bad thing, as some opportunity usually comes with obstacles. But I am not sure the risk/reward is quite as appealing to me now as it originally was. Thank you again. 

That's a concern of mine as well. I'm having my agent get in touch to find out if they did pull permits and receive necessary approvals, but my guess is no. 

It seems others are taking the opposite stance. Can you provide any explanations? I think a big factor in the current situation is that the sellers have permanently separated the units with walls. So when an inspector/appraiser/whoever comes through, they are going to see that all units are separate. So, although it was previous a SFH with connecting hallways, in it's current state, I believe it would be viewed as a triplex - which, again, brings up the issue of the zoning issues that it seems I will inevitably run into.

I was simply hoping I'd be able to finance with a conventional loan rather than an FHA for two reasons: 1) I have very strong credit and was hoping to take advantage of that with a conventional loan, unlike an FHA that has a fixed % for the PMI amounts (i.e. 0.80% annual with a 5% down payment) and 2) to avoid the costs of refinancing out to avoid the PMI as opposed to the PMI automatically falling off once I reach the 20% equity threshold. I know those costs can be rolled into the new loan, but again, I was just trying to avoid those if possible.

 Thank you for the help, I really appreciate it. That falls right in line with what the loan officer was explaining to me. 

Thank you for the insight - very helpful. It's certainly not ideal to have the zoning issues, but maybe that's something I can ask the seller to deal with prior to sale. 

Hi, everyone. Thanks in advance for any help you may be able to offer. I believe I have found a great property to purchase as my first investment. It is one continuous building on a residential-zoned lot; however, it does have 3 separate entrances and can be viewed as a triplex in the sense that there are three separate living spaces, separate meters, etc. After seeing the property, my plan is to occupy one of the units and use the others as short-term rentals.

My understanding (from the limited knowledge that the seller has provided) is that the main house was originally built as a SFH and then the two additional units were added over time to turn it into a "family compound" with in-law suites, etc. A few years ago, the property was foreclosed on by a bank, and a "flipping team" then purchased the property and has held it since. All three units had previously been connected via hallways so you could walk from one unit to the next inside. However, the current owner/flipper sealed off those hallways with walls so that the units are entirely separate from one another.

After speaking with a lending officer that I was referred to, he told me that I am not able to finance this as single-family purchase - my options would either be 1) FHA or 2) conventional with 20% down since it is a 3-unit. It is listed on the state's assessment site as one building with "1.00 Units", so I asked him why I would not be able to finance as a SFH with a conventional loan with <20% down (as I would like to stay away from an FHA loan if at all possible). His reason is that once someone from his appraisal team goes out to the property, they are going to realize it is a triplex and deem it is as such.

My questions are this:

1. Who is the party that ultimately decides if this property is a SFR vs. multi? Would the appraiser even be the one to decide this, as I thought that would be determined by the municipality? As I mentioned, it is currently listed as a 1.00 unit single family on the state's records website.
2. Could this just be a situation where I need to talk to multiple lenders (which I planned on anyway) until I find one that agrees to finance this as a SFH?
3. What is the determining factor for what constitutes a multi-family? For example, if I knock down the new walls that were put up to separate the units and replace them with doors - would that be more likely to be viewed as a single family?

I understand that should the day come where I want to turn these into long-term rentals, I will likely encounter issues with this not being zoned for multi-family use and will likely require costs to have it rezoned at that point in time if that's the route I plan to go.