Home Buying in Belmont>Question Details

Jmacmac, Home Buyer in Belmont, MA

We'd like to buy the 2nd unit of our converted 2-family condo. Can we finance without putting 20% down commonly required for rental purchases?

Asked by Jmacmac, Belmont, MA Tue Mar 22, 2011

We have 54% ownership and our unit is our primary residence. We would rent out the other unit. Are there any options through the FHA? Basically we can't do the 20% (I know, I know - we probably shouldn't be buying it). I just want to know if I have options. Thanks!

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All these answers are very interesting. As an exclusive buyer broker these unique scenarios arise all the time and this info was insightful.
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0 votes Thank Flag Link Wed Mar 23, 2011
Why would you need 6 months for both properties and why would you not be able to use rental income?

This is not a departure residence so, it's an investment purchase the lender would obtain a rental analysis and give the borrower income of 75% of the projected rents.
0 votes Thank Flag Link Wed Mar 23, 2011
projected rents? might now be actual rents.
Flag Thu Oct 10, 2013
You would still need 25% down of the pruchase price as well as reserves to carry both mortgage payments. If you are looking for an investment property, it may be best to find a suitable single family home rather than this unit, even though you live there. 2 Unit condo's are allowed in certain area's and are becoming more prevelant throughout the country. Since you own 1 of the units, it would be safe to say that these units are deeded seperately. But the down payment requirement would still remain the same. So in the end you would need to qualify for both mortgages without using the rental income and you would also need the 25% down payment as well as 6 months reserves of the principle, interest, taxes and insurance for both units. Hope that helps answer your questions.
0 votes Thank Flag Link Wed Mar 23, 2011
No options you may not even be able to purchase it conventionalally one investor you would own 100% of the complex which might make the condo non warrantable.

FHA Does not allow investors.

The only way to do it would be purchase and renovate it back to a 2 family from a condo. That probably would not make financial sense as the 2 condos probably have more value than a 2 family.
0 votes Thank Flag Link Wed Mar 23, 2011
Thanks everyone for your responses. FYI, we have owned our unit for 4.5 years and have 14% equity.
0 votes Thank Flag Link Wed Mar 23, 2011
In order to answer your question accurately, the first question would be if your home is deeded seperately for each unit. If it is deeded as 2 units and you are looking to buy the 2nd unit, you would most likely need 25% down to get the best rate. You wouldn't be able to use the 2nd units rental income to qualify unless you have other rental income experienced.
0 votes Thank Flag Link Wed Mar 23, 2011
Thats a tricky one. I would love to see some more mortgage agent responses. Try calling Watertown savings bank. A localized lender may be a good option and they can run the scenarios with you. A great idea to own the whole building. Go for it!!!
0 votes Thank Flag Link Wed Mar 23, 2011
Most loans will require that you out a minimum of 20% down on a non-owner occupied purchase. No special consideration will be made based on the fact that you own the other unit. If you have stellar credit you may find some portfolio lenders willing lend with 10-15% down. FHA does offer loans for up to 4 units properties so as long as you occupy one of the four units. You may want to look at refinancing your existing home with a new FHA loan that would allow you to purchase the 2nd unit at the same time. This would allow you the low down paymenet you are looking for.
0 votes Thank Flag Link Tue Mar 22, 2011
Interesting question. Best way to approach it may be to buy it as a 2 family using the equity you have in your unit. You can also use any rental income that you will be getting from the 2nd towards your ability to afford the mortgage. Depends on how long you've owned your unit and how much equity you have in it.

Web Reference: http://www.LouisWolfson.net
0 votes Thank Flag Link Tue Mar 22, 2011
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