Investment property is one of the best ways to grow your personal wealth. Most think that it takes a large down payment to buy an income producing, multi family home and it may depend on the financing you are able to obtain. However, a multi-family home may be within your reach if you qualify for one of the following loans.
Are you eligible for an FHA Loan?
Offered by approved lenders, an FHA loan can get you into a multi-family home for 3.5 percent down. This means that for a down payment of $3,500 you may be able to find a $100,000 investment in your city, in the form of a multi-family home. The only catch is that you must live in one of the units. The lending limits for an FHA loan varies from state to state and your lender can help you determine how much can be borrowed in your area of the country.
You will have to pay a mortgage insurance premium (MIP), upfront, on an FHA loan and this will be one of your expenses above the down payment amount. The good thing, though, is that an FHA loan allows up to six percent of closing costs to be rolled into the loan. The purpose of this fee is the same as private mortgage insurance on a conventional loan with a down payment of less than 20 percent. MIP covers the lender in the event that you default on the loan and will be one of the expenses of an FHA loan. The amount you will have to pay will depend on your loan amount.
Are you eligible of for a VA Loan?
If you are a veteran who meets the following criteria:
- Ninety consecutive days of duty during a time of war
- 181 days of duty during times of peace
- Six years of Reserve or National Guard duty
- Or you must be the spouse of a service member who died in the line of duty or of a veteran who died because of a service-related disability. You cannot have remarried.
Then you may qualify for a VA loan that will require no down payment on a multi-family home. As a property purchased with an FHA loan, though, you will be required to live in one of the units to be eligible. With loan limits of $417,000 for qualified buyers, you will be able to buy a duplex, triplex, or quadruplex with your loan and immediately add enough income to cover some of the expenses of your own unit of a multi-family home.
No down payment loans are very rare these days, so if you have the opportunity and are able to use a VA loan to purchase a multi-family home, do so, and invest in your future.
Do You Live in a Rural Area?
Another affordable way to get into property investment is with a rural are development loan, although there are limitations. The property that you want to purchase must be in a qualifying rural area and, as with the other loans; you must meet the qualifications and live in one of the units of the property.
The following criteria must be met to qualify for a USDA mortgage.
- You must not be able to obtain a loan from any other source that offers terms and conditions that you can reasonably meet.
- The home you purchase with a USDA mortgage must be used as your primary residence.
- You must be without housing that is safe, decent and safe to occupy.
- To enter into a USDA loan you must have the mental capacity to contract and meet requirements of citizenship.
- The home must have less than 1,800 square feet of living space.
- The home must not have an in-ground swimming pool.
- The market value of the home cannot be greater the loan limit for the area in which you wish to purchase the home.
If you meet the above qualifications, live in a rural area and want to purchase or rehabilitate a multi-family home and USDA loan may be right for you and can add to your income and your personal assets.
Are You Going to Live in Your Multi-Family Home?
With FHA, VA, and USDA loans you will be required to live in your home for a minimum of two years before you can consider using verifiable rental income as a way to buy another property and expand your holdings even further. Maintaining steady tenants and income will be the key to your moving forward and purchasing another multi-family home.
Do You Qualify for a Loan on a Multi-Family Home?
If you don’t fit the requirements of any of the above loans, you can take out a conventional loan to finance a multi-family home for investment purposes. If you are going conventional, the down payment for a duplex is 15 percent and a down payment on a multi-family home can be as high as 25 percent. Of course, your ability to obtain a mortgage for a multi-family home with any loan will hinge on your credit score and ability to repay the loan.
Are You Ready to Make an Investment?
No matter how you finance a multi-family home, the increase to your income and personal wealth will be worth the venture. Even though you may be required to live in one of the units of your property, the income from tenants will pay your way to more property if you manage it properly, maintain it and keep the units rented. Buying property is still the best way to increase your wealth so if given the opportunity and ability to purchase, you should give it a long thought.
2 Point Highlight
No matter how you finance a multi-family home, the increase to your income and personal wealth will be worth the venture.
Investment property is one of the best ways to grow your personal wealth.
