Monday, November 30, 2009

First time buyers! How about a two family?

You know, we are seeing quite a few young buyer-wannabes expressing some frustration. The banks are a little tougher on them. It really is harder to get approved for a mortgage these days.

So, some of the agents in my office were talking the other day and they are offering an alternative to these young first timers.... How about a two, or maybe three, or even four unit? You live in it, and collect rents from the other unit(s)! The banks will consider the potential rents as part of your qualifying... it will vary from institution to institution as to how much of the income can be projected to be used in your qualifying for a mortgage.

Now, you may notice I stopped at FOUR units here. That's because once you go to five or more units most banks will consider the property to be of a "commercial" nature and their loan packages vary significantly. They usually want a larger down payment (20 %)... they also may change the length of the loan and their right to call the note.... the interest rate may be subject to market indexes as well.

But think about this... You buy a house for say, 175K.... put 5% down... So you have a principal of $166,250.... At 5% rate you are looking at $892.47 principal and interest for your payment. Of course you will have to pay property taxes and insure the building... But think about how much you are paying in rent at your apartment right now.. $450?... $600?.... $800? If someone else is paying that to YOU... what's your net cost for living in the building you own... and the tax advantages you are getting... and the appreciation of the value building!

So you buy the building, live in it while you are building up equity and saving money for that single family home down the road....

Now this is a blog. It's not a detailed scenario that covers all the aspects... but it might be an idea that you may want to pass by your real estate agent!

Pretty good way to get started! Call your favorite agent today!