Real Estate Investor Loan Options

by Lisa in Long Beach, CA and by Laurie from Gainesville, FL

Ask Kate about real estate investor loan options: Lisa in California wants to purchase a multi-family dwelling and plans to live in one of the units. Because she had a foreclosure three 1/2 years ago, she asks for options other than conventional and FHA financing. Laurie in Florida owns a 4-plex and cannot refinance it without paying the lender $30,000. That's not much of an option, is it? I have another idea!


2-4 Unit Owner-Occupied Mortgage Financing After Foreclosure

By Lisa in Long Beach, CA
Real Estate Investor Loan: Low Equity Mortgage Answers

Hi Kate,

I am looking to purchase a multi-family dwelling and plan to live in one of the units. I have a question about my mortgage options. I have enough for 5-10% down and closing costs.

A little history...

Three 1/2 years ago I had a foreclosure and received a settlement under the national bank settlement.

Due to the foreclosure, I am being told I can only qualify for FHA financing and not conventional financing. I could get FHA financing with a 3.5% downpayment but would need to wait 3 1/2 more years to qualify for conventional financing.

Are there any other options out there? I am in Long Beach, California, if that helps. I am looking at multi-family owner-occupant homes as a possibility.

Thank you for any help you can give, Lisa

***zz-portrait-left.shtml*** Ask Kate answers: 2-4 Unit Owner-Occupied Mortgage Financing After Foreclosure

Hi Lisa,

I'll assume when you say multi-family that you are referring to a 2-4 unit dwelling, not an apartment building over 4 units because they require commercial financing.

Before I get into the details of financing, I will mention that the mortgage approval process after foreclosure is an arduous undertaking. So be good to yourself! Prepare complete paperwork and give it to your lender in one package at the time of application. This will help you get a more reliable underwriting response and endear yourself to the mortgage originator.

Use my Mortgage Checklist to get your ducks in a row.

Conventional Financing for Owner-Occupied Multi-Family Units

As you mentioned, Fannie Mae and Freddie Mac conventional guidelines require larger downpayments when financing an owner-occupied duplex, triplex, or 4-plex as opposed to FHA financing.

For fixed rate owner-occupied programs, downpayments generally run between 15% and 25% of the purchase price, depending on the number of units (2, 3, or 4) and the credit profile of the borrower.

For example, a borrower is required to put down $45,000 to $75,000 on a $300,000 2-4 unit home as long as they are going to live in one of the units.

Other loan approval considerations (and thus down payment considerations) are the vacancy factor among rental properties in your city and whether or not you have a history as a landlord.

Apart from underwriting decisions, I encourage you to prepare a budget, planning for the inevitable months when a property brings in no rental income. Ideally, you should be able to pay the entire mortgage payment without the assistance of renters.

FHA Financing for Owner-Occupied 2-4 Units

FHA financing is limited to owner-occupied, not non-owner-occupied homes. But FHA makes an exception for 2-4 unit properties, as long as the homeowner lives in one of the units.

FHA loan limits for Long Beach, California are $625,500 for single family, $800,775.00 for 2 units, $967,950.00 for 3 units, and $1,202,925.00 for 4 units.

Go here for the link to locate FHA Loan Limits for your city.

Government Subsidies, Private Money, and Local Lenders for Owner-Occupied 2-4 Units

Other financing options include seller financed mortgages, private investors, and community banks.

I also recommend that home buyers of rental properties in neighborhoods undergoing revitalization explore local government downpayment subsidies. Go to Housing and Urban Development (HUD) Grants for the City of Long Beach, California for information.

Best wishes,


Underwater Real Estate Investor Loans

By Laurie from Gainesville, FL
Underwater Real Estate Investor Loans


Is there anything new to offer investors who owe more than the property is worth?

I have a mortgage at 6.75% interest on a quadraplex and cannot refinance without bringing about $30k to the table.

Am I just stuck?

***zz-portrait-left.shtml*** Ask Kate answers: Underwater Real Estate Investor Loans

Hi Laurie,

Making Home Affordable (MHA) offers HARP refinance loans to underwater investors. Of course, your mortgage will need to be backed by Fannie Mae or Freddie Mac to be eligible.

Otherwise, MHA opened up the HAMP modification program to homeowners of underwater investment properties a few years ago. If your lender participates in the program, call your loan servicer to begin the process.

You should know this. Although participation in the program is voluntary if the loan is not backed by Fannie Mae or Freddie Mac, many loan servicers still offer modifications.

If your mortgage is not backed by Fannie or Freddie and your loan servicer does not participate in HAMP, you need to write your representatives in the government to ask if HARP 3, the Obama Refi Plan to Protect the American Dream is myth or fact.
Best wishes,


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