How do you buy a $249,000 home when you are only qualified for $120,000? Be an investor!
With housing prices lower than the peak of the market, as well as low, low interest rates, investors are on the lookout for a good deal. But you don’t have to be an investor to pick up a great investment property.
In fact, if you are a first-time homebuyer or maybe an experienced homeowner looking to downsize, you may want to look into purchasing a duplex, triplex or fourplex and live in one of the units.
The rental income from the other unit(s) can count toward qualifying for the loan.
If you purchase a duplex for $249,000 with an FHA, owner-occupied 30 year loan, your down payment would be $8,715. With an interest rate of 3.75%, your estimated monthly payment for the duplex would be $1,600. If you rent out the second unit for $1,000 per month, your mortgage payment would be $600 a month.
You can use rental income to help qualifty when using:
- a conventional loan (but must have 2 years of landlord experience)
- a VA loan (but must have 6 months landlord experience and 6 months of reserves)
- an FHA loan – no limitations!
Why isn’t everyone doing this?
The key to making this work is finding a 2-4 unit residential property that you can live in yourself. Renters may be able to accept a 2 bedroom, 1 bath home on a temporary basis but you, as a long-term owner, may not want that small of a property. But there are properties are live like townhomes and offer good square footage, ample bedrooms and even a yard. Those are the properties you may want to consider.
The other advantage is if you need housing for multi-generations. Instead of having your aging parents move in with you, they can live right next door to you. Or your college-aged kids can have a “place of their own,” but still are nearby. Or first-time homebuyers who don’t like what they see in their price range can check out this option of becoming a homeowner and a landlord.
If you don’t like the housing options available at the amount you’ve been qualified for, discuss with your lender this option of becoming a landlord to increase your purchasing power.