Another Mortgage Qualification Question!!

[Archer1315]

My situation is as follows
Im 20 and will be 21 in Jan.
My Equifax Fico score is 713 currently I haven't checked the others.
I have 2 CCs totalling a $700 limit.
$5000 auto loan that will he paid off before I start shopping loans this coming Spring.
I work for USPS as a mail carrier and gross about $2400 a month w/o overtime. Will have about 9-11 months on job at time of loan application.
I want a 3-4 unit in the 120-175k range and plan to occupy the property and rent out the other 2-3 units.
Just looking for advice and suggestions regarding my chances, fha vs conventional and any things I should be thinking about. ( Please no "you're too young" lectures) I also may bring in a co borrower who makes an identical salary but no credit (to help with dti ratios).

[ShanetheMortgageMan]

With conventional you'll be looking at a 20%+ down payment requirement on a 3-4 unit primary residence. 

FHA can be as little as 3.5% down, however FHA has a self-sufficiency test that all 3-4 unit properties need to pass - For 3-4 units they must pass a self-sufficiency test, meaning the rent from a market rent analysis (form the appraiser does) of all units (even the occupied unit) minus the vacancy & maintenance factor (varies depending on what market the home is in, typically it's 15%), must be equal to or less than the monthly PITI payment on the home.  So with 3.5% down if the total payment is $1,100/mo and the rent analysis show the total rental income is $1085, you'll need to put a little bit more in order for them to be inline.  You also need to show 3 months PITI reserves for 3-4 unit properties with FHA financing.

Not knowing the area that this property is in, it's tough to estimate taxes/insurance, and not knowing what the other units would be renting for, it's tough to determine if your debt to income ratio would work out.  However if at least 2 units are rented out at $500/mo then that should give you another $850/mo of rental income to qualify with, and you just may qualify for FHA.

If you add a co-borrower who occupies the property then your debt ratio should improve, if they don't occupy the property then their own expenses (namely housing, since they don't have any credit) will be factored into what you could qualify for.

[Archer1315]

Thank you for the response good sir. I live in Chicago where an updated 2 bdrm unit would go for 750-800 easy, maybe more depending on the area. I wasn't aware that OO loans differed so greatly between fha and conventional. I'll look around a bit more thanks again!

[ShanetheMortgageMan]

You are welcome.  At $750-800/mo of rental income it's likely the 3-4 unit would pass the self-sufficiency test with no more than a 3.5% down payment.

[Archer1315]

I was wondering if anyone had any insight on how stirct lenders are on the 2 year employment requirement for primary AND co borrowers. Is there any difference? I, the primary, would have 10 months on my current job give or take but can document a full 2 year history with no break. The co borrower however would have 9 months at the MOST on current job and possibly less as he just received an offer which pays double his current salary. The big problem is that this is his FIRST job ever so there is no documentation prior to 2013. Is this a big problem?? ANY insight is appreciated!!

[Archer1315]

Sorry to revive this ANCIENT thread. But just and update for anyone who cares or is hesitant to jump in. My advice is GO FOR IT! I closed 2 days ago on a 2 flat in Chicago and got an AMAZING deal. I ended up going conventional and was able to get $21,000 in grant money for closing costs and down payment. Long process with some bumps along the way but was fun and can't wait to do it again. Thanks to everyone that contributes to this site. I dont say much but i learned a TON and went into the process knowing EXACTLY what was going on. Big thanks to you all!!!