1st Time buyer Financing for multi family

Hey Guys,

I’m could use some advise as to the best way to plan in getting my finances in line to qualify for a loan.

I am looking to purchase a 3/4 Family in which I’ll live in 1 of the Apartments. I’ll be looking to purchase something in the $300-400K range. It’s reasonable to assume that I can pull in between 2000-3000 a month from the other 2/3 Apartments.

The BAD NEWS :-[

I haven’t run my credit but in 98/99 I had some credit cards that went to collections due to being in school and out of a job. Since 2000 I have had 4-5 cars loans all of which have been paid ontime every month.

I have 4 credit cards with 3-4 year historys and currently I have about 17K sitting on them, I probably have 25K in total Credit on the cards and I have been paying probably $100 a month to each, although never been late on anything in the last ~6 years. I have a car loan at $560 a month with about 55 months to go (Feb 06).

The GOOD NEWS :smiley:

I’m in the process of selling a 2nd car which will give me 10K in cash in August/Sept. I’m planning to give up my current Apartment of 6 years and move back in with parents so I can pay things down.

If things move along as I’m planning, I should be able to have 20K in cash by March 07 and add $2000 to the total every month after. March is the point I would want to start looking and staying an extra year isn’t an option to continue to save $2000 a month.

So Questions are:

  1. Should I pay off all Credit Cards as soon as possible for 0 balance. Will this make my credit look better?

  2. Just keep paying $100 a month to each one and save as much cash as possible for a DP. Cash in hand better with large debt owed?

  3. Something I’m not thinking of?

I currently gross 75K a year at a stable job with 5 year history. I’m looking to buy a house so I can have a tax writeoff and quit getting killed by the IRS every year and also to start building equity in something for the future. I want to do a 3/4 family because I don’t want to have much out of pocket expense and would rather other people pay the mortgage.

After I buy the 1st one, what would I need to do to purchase a 2nd one that I would not live in? IE 100% finance? It would work out so that the Tenants would cover the entire Mortgage.

Am I nuts?


I would not pay off those cards. The more tradelines you have the better, or at least 2 or 3 cards is good plus a car loan. It’s best if the balance/limit ratio is under 50% on the cards or else those could be hurting you.

You should not have a problem getting 100% financing on the owner occupied property, there is 100% financing available for 3-4unit investor properties as well(your planned 2nd property) but it will depend on such things as the loan amount needed and your fico, its hard to say.

Thanks for the reply! I did some more reading and wandered over to one of the credit forums. I pulled my FICO scores from myfico.com and got a copy of my 3 reports.

I’m actually better than I thought I’d be.

TU 719
EQ 717
EX 680

I have nothing negative, guess all that stuff fell off (Sweet!). It says my Balance to Limit is high but I knew that.

I’ll keep reading how to improve the scores but I don’t think I’ll have a problem getting them above 750 by the spring.

you can do just about anything with those score, if you get the mid score above 720 than that’s really excellent.


Depending on where you live you may even be able to qualify for FHA financing on the multi-family as long as you are living in one of the units.

If your DTI is OK, you should be able to get a nice loan on a 3-4 unit with those scores. Good luck with everything!

What is DTI? Debt to Income?

When I apply I’ll have 0 CC Debt with 4 revolving cards, and about 24K on a car loan with 48 months to go. I just won’t have much money to put down but I’m able to show a gross yearly income of 75-80K.


Debt to income is the ratio of all your debts plus your house payment divided by your income. For example, in your case, let’s assume a sales price of $350,000, with your payment somewhere around 1% of that (so about a $3,500 house payment), plus a car payment of $400 a month, making your total monthly debt $3,900.

Now, if your income is $80,000 a year, monthly it would work out to $6,667 a month.

So to calculate your debt-to-income ratio, we would divide your monthly debt by your monthly income, so in this example, $3,900 divided by $6,667. This would give you a ratio of 58%.

This means your combined debts represent 58% of your pre-tax income.

Anything over 50% is usually regarded as high and would normally eliminate certain loan programs from your options, and most lenders would actually prefer it to be down closer to 38% or 45% (depending on whether you go conventional or Alt-A).

You might therefore consider doing an interest-only loan, which would bring your monthly payment down a fair amount, reducing your ratio.

Another option would be to implement a “no-ratio” loan program, where they disregard your ratio but at the expense of a slight increase in rate.

Let me know if this helps!

That makes sense but since I’m planning to purchase a 4 family and live in 1, how does the bank view the rent from the other 3 apartments? Say for instance the others rent for $800 a piece.

They will credit 75% of the gross rents as income.

That would reduce your debt by $1800, 75% of the 2400.