Financing in Salt Lake City>Question Details

Scott, Home Buyer in

financing an owner occupied duplex

Asked by Scott, Sat May 19, 2012

We are looking to purchase a duplex and live in one and rent out the other unit. I was wondering if I could get a conventional loan on such a property or only do FHA. I have called a couple of brokers and they have told me different things. Any input would be appreciated. Reason for pursuing conventional is to do single premium upfront PMI and just get it out of the way and not have to worry about the 78% LTV assuming my house will go up over the next 5 years. I feel lenders will be hesitant removing PMI when it is time.

Also, I checked with my friend who just bought a single family home for the same price as the duplex were interested in. He tells me he is paying about $90 in PMI where my current broker is quoting me $284 per month. Is $284 in line with a 289,900 dollar house price. We would be putting down 3.5% if we did FHA or 5% if we did conventional.

Thanks for your help.

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The PMI factor should be the same whether it is a 1-unit or 2-unit property. At 95% LTV on a duplex, with a 760+ score one of our PMI providers (MGIC) has the annual premium at .59 per year ($135.41/mo on a $289,900 sales price with 5% down). The 1-time/single premium would be 2.18%.

If your credit scores are great/excellent then conventional should edge out FHA, if they aren't so hot then FHA could end up being the better choice.

MGIC's guidelines & PMI rates:
http://www.mgic.com/pdfs/71-40600_uwguide.pdf
http://www.mgic.com/pdfs/71-6768_bpmi_noref_singles.pdf

Shane Milne | NMLS #81195 | Lending in all 50 states
1 vote Thank Flag Link Tue May 22, 2012
I am in a similar situation, deciding how to go about a buying my first duplex.
After talking with US Bank about the options, it seems that in the last year the rules of the real estate market have changed a bit, I was told that 5% conv loas are no longer offered on multifamily property (now you need 20% min down to quailfiy for a conv loan )

looks like FHA is my only option (as it will get me where i want to be much quicker)

hope this helped
0 votes Thank Flag Link Thu Jul 26, 2012
It is best to speak to loan officer who is familiar with the positives and negatives of each loan. Typically I would lean towards the FHA over 5% conventional. Email or call for a recommendation. Thx
0 votes Thank Flag Link Sat May 19, 2012
The cost of PMI just went up significantly, so, yes you are going to pay a lot more than your friend. However, the only way to avoid it is to pay 20% down. So, save your money and put down 3.5%. You'll pay the PMI either way.
0 votes Thank Flag Link Sat May 19, 2012
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