Hello everyone. My husband and have decided to buy our first investment property. We currently own a home (SFR) and are buying a duplex about 15 miles away. After running numbers and getting quotes from lenders, my husband and I have decided to downsize and move into the top half of the duplex home and lease our current home out. This way, we won’t have such a hefty mortgage payment and I will be much closer to work. (Our current mortgage payment is $1400.00 PITI) Taxes are WAY too high! Our new mortgage should only be about $830.00/Month! Looking forward to that!
This will actually work a lot better for us because we will be able to take advantage of the owner occupied rates.
So here’s my question: When we go to apply for the mortgage, and they pull our credit, they will see a current mortgage on the credit report. Will they need to see a lease agreement from a prospective tenant to prove that this new duplex home will be our primary residence? I found tenants and can provide a lender or bank with a signed lease agreement if need be. Will they be asking for this?
Thanks JayDee
Lender will not ask for a lease unless you are claiming rental income from the property.
Patrick is right. They will not need to see a signed lease unless you need the rental income to meet the DTI (Debt To Income) guidelines of the loan.
Ok Thank you. 
Jay Dee…
A couple of things:
(1) If you really are going to live in it, yous hould qualify for “owner/occupied” (O/O) loans rather than investor loans…this should come in at a lower percentage rate (hey, every little bit helps!).
(2) As O/O, you may qualify for FHA funding…don’t overlook them as a funding source. They lend against small multi-families if you are going to live in it.
(3) How much of a negative cashflow will you be looking at with your current home? If the mortage is $1400, you will need to have a relatively high rental rate to cover ALL of the expenses. Will the property support that?
Keith
Hey Keith,
Thanks for your reply. Yeah the loss we will take on the rental is within our means.
What kind of FHA funding is there for multi family homes? Does a two unit qualify for being a multi family?
Do you know what kind of interest rates we will get as owner occupied on a duplex?
Thanks again!
Jay Dee
Talk with a lender…they should be able to plug you into the FHA funding…(as a note, their inspections/appraisals tend to be tougher!).
I believe that 2-4 units can qualify for FHA financing.
Rates are dependant upon your credit…I would guess in the 6-7% range with decent credit.
Keith
Alrigh Keith. Thanks. Appreciate all your help.
JayDee
FHA Rate owner occupied on a 1-2 unit is 6.25% right now.
It is a great way to buy a 2 unit. FHA requires 3% down but you can use a non profit gift for the down payment.
So say you are paying 100k for a 2 unit and you have a purchase contract for 103,000 you can have neighborhood gold, or ameridream or someone like that give you the 3% for the down payment. You can also ask for the sellers to pay up to 3% towards closing costs and pre paids. That means you really only have to pay for a pest inspection and your first years home owners insurance.
We have done a lot of them in the last few years.
My only confusion with this deal is weather or not you can own another home. I will look it up tomorrow in my 4155…i mean the fha manual and get you that answer.
The cool thing about buying a 2 unit for someone just getting started is that they can use the income from one side of the unit to help them qualify for the mortgage payment.
Great Strategy.
Good Luck and I will post the answer to multiple properties in the morning.
Ramona
Ramona,
Thank you so much for taking the time to post all that! Great information!
Let me know what you find out!
JayDee 
JayDee,
The guidelines do not restrict someone from owning another residence however you can not have two fha loans at any one time. Also it says that Hud will not insure a mortgage if they conclude that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the proerty to be encumbered will be the only one owned using FHA mortgage insurance. So in your case going from a $1400 dollar house payment down to $830 per month could look as though you were not buying it as a primary. If it were us doing the mortgage and we could show the underwriter that one of your children and their family were buying that house on a land contract from you and you were empty nesters then we could make a good case for you going down in housing expense.
Good Luck and feel free to call me if you have any questions.
Ramona
Hey Ramona,
I actually already have an FHA Loan on my current primary res. So looks like getting another would not be feasable.
Looks like I am heading toward a Fannie Mae. They allow equity gifting between family members for a primary res, will go 30-40 years on a primary res, and will will get me a reasonable rate.
Don’t know about if the lender will come back doubting that it will be a primary res. The Broker hasn’t said anything.
Thanks for sharing you info.
I appreciate it.
Jay Dee
You will probably be fine if you are going conventional.
I should have asked you if your home was FHA now. But either way it is good to know the answer. And it is good for me to refresh my memory as well.
Good Luck to you.
Thanks Ramona. I appreciate your help!
JayDee