We’ve seen an increased interest in wanting to purchase multi-unit housing. Most of the inquiries want to know the minimum down payment. There seems to be a common misconception regarding the minimum down payment requirement. Most don’t realize that you can use FHA financing. You must live in one of the units, purchasing as your primary residence.
Here are 4 advantages to purchasing a multi-unit with an FHA loan:
- Walking in with equity– Most multi-units hold their value, receiving incoming rent, you are able to put more money towards your mortgage. Plus you may find a diamond in the ruff.
- Low down payment- 3.5% minimum with FHA (Conventional loan 3-4 units = 25% down)
- Rental Income- You’re able to use 75% of projected rental income from existing tenants OR fair market rent reported by the appraiser. You do not need a history of receiving rental income. This can help make your cost of living lower while building wealth.
- Minimal Reserves Required– You will need 3 months reserves of mortgage payments (full PITI). *Note, reserves do not need to be liquid, they can be retirement, stocks, IRA’s, etc.
When purchasing a multi-unit the loan limits increase, which gives you even more of an opportunity in leveraging your finances. See our previous blog about 2017 FHA loan limits to learn more. This is a great option to consider when you have limited funds for down payment, but have a good amount of reserves.
There is a limited supply for the demand on the higher priced homes, this gives you the opportunity to invest your time in entertaining different loan options. An FHA loan is not only for multi-units, it is also for single family homes. By the way, did you know you can also purchase a multi-unit with an FHA 203k? When you are investment minded and/or have the ability to envision potential in a home, this is a loan you should consider. More to soon come on the FHA 203k loan, keep on eye out for our next post.
To learn more about FHA financing, please contact us.