Quote from @Tanner King:
I am a first time homebuyer looking to purchase a multifamily unit (duplex/3plex/4plex) in the San Antonio/ Boerne area. Ive been in contact with a real estate investor friendly realtor I was matched up with through the bigger pockets website. Next step is getting a pre approval letter. I have a list of lenders I have compiled through BP recommendations and recommendations from my realtor.
I work a commission based job and am on pace to make just over 6 figures for the first time this year. My concern is my bank account doesn't show that currently (I do have the paystubs to back it up). I don't have the money in my account for a down payment currently but have a plan to within the next few months. I have a 401k and other assets that could equal a down payment just not my checking account. I only have credit card debt with a minimum monthly payment of under $300.
Im wondering if it would be better for me to wait until I have the money in my bank account for a down payment, or at least another paycheck in the account (paid monthly) before I start shopping around for pre-approval letters. (Plan is an FHA loan)
If anyone can help me out with this it would be greatly appreciated! Also would appreciate any advice in general for someone starting out in real estate investing this way, or an insights on the SA/Boerne market.
Thanks ya'll look forward to hearing from you!
@Tanner King I lived in one unit of a duplex and rented the other as my first property in Dallas 20+ years ago long before it was called house hacking. Best real estate investment of my life for a lot of reasons including just understanding the basics of finance and being a landlord etc. So, great idea.
As a lender, I would give you a pre-approval letter as long as you had the assets (and meant all other requirements) even if the assets were in a 401k. You might have no intention of actually using those funds as such, but you could. During our conversation I would understand that the plan would be to have enough cash from payroll saved by the time you closed to use for down payment, and that is completely fine.
But, something to add that you have to understand is that a 3-4 unit has to be meet the FHA self sufficiency test. This requires that 75% of the rent the building brings in covers the entire payment including taxes, insurance and FHA monthly mortgage insurance. With the run up of multi family prices, relatively high rates and the 3.5% low down payment this is virtually impossible (outside of some markets in the upper midwest) to make happen.
Take note that this self sufficiency test does NOT apply to 2 unit buildings, only 3 or 4 units. AND you can know put as little as 5% down on a conventional loan, which is a better loan anyway if you can manage the extra 1.5% down, does NOT have this test for 2,3 or 4 unit buildings.
