Do you want to start investing in Real Estate but don’t have much of a down payment or maybe your credit isn’t that great? There is a little known secret to help buyers like you that want to buy some income property but they don’t have enough down payment for a conventional investment (non owner occupied) loan. The solution may be an FHA loan on a 2, 3, or 4 plex. FHA loans allow for a buyer to buy a duplex, a triplex or even a four-plex with just 3% down and as always FHA loans are not underwritten based on credit scores but credit situations.

These is a catch however. Because FHA is an owner occupied loan program, the buyer needs to move into one of the units. But this could be a great way for an entrepreneurial buyer to get started on investment property ownership. The other advantage to using an FHA loan program to buy a 2-3-4 plex property is that the FHA loan limits get higher as the number of units go up. Here are the current loan limits is the Denver Metro Area:

2-plex = $347,322
3-plex = $421,980
4-plex = $486,900

So as long as the LOAN amount (not purchase price) is under these levels then an FHA loan can be used.

There are a few more things that you need to keep in mind if this is a good option for your buyers. This is still a FULL DOCUMENT loan and unless there are current leases on the property that can be extended, we will not be able to use “potential” rental income to offset the payment in the Debt To Income ratio. Therefore the buyer would have to qualify for the entire payment themselves. If there are current renters in place then we could use 75% of those rent payments towards the debt ratio. However, The renters would have to enter into new leases with the new buyer.

As far as the interest rates go, there is no penalty for buying a property like this using an FHA loan. It would be the same rates as if your buyer were buying a single family home. Right now those rates are around 6% to 6.25%.

If this is something that you think could help you now or in the future, feel free to contact me with any questions.

Thank You,

Mark Afman

Direct 303-759-7392
Cell 303-905-2488

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