Down Payment Assistance on Multi Family Property

[Danny Sanchez]

Hello everyone, 

I want to hear everyones opinions on using downpayment assistance programs for a multi family investment. I know that nothing is free, and that some programs require you to pay the DPA loan back before you move out but what else is there to have in mind that I should know about. What is something you don't recommend or do recommend?

[Andrew Postell]

@Danny Sanchez most downpayment assistance programs won't provide assistance on a 2-4 unit property.  The thing I would encourage you to do here is to speak with your realtor about what lenders offer DPA or First Time Homebuyer grants.  And then interview those lenders on what programs are even available in your market for 2-4 unit properties.  There might not be any.  But reach out locally and see if there's any option at all.

[Amanda McKee]

Hey @Danny Sanchez, down payment assistance is extremely common and a great resource, especially the Minnesota Housing program! I am an investor and realtor in MN and would definitely take advantage of it given the opportunity.  I would recommend chatting with a knowledgeable lender who can help you understand all the options and weigh the pros and cons.  Good luck!

[Jeff Schemmel]

@Danny Sanchez I had a client close last month who paid $1,200 cash to own his $300k home.  He used DPA, and he essentially has a small 2nd mortgage covering the cash he couldn't bring to the table.  My personal opinion is that it should be avoided unless the DPA is a "grant" and not a 2nd mortgage which is much rarer and harder to get.

Here are the main thoughts I speak to clients about 
1.) You likely have to live there longer and/or plan to use it as a rental property (assuming the revenue is high enough) because you're starting at zero equity. You literally CAN'T sell for at least 3-5 years because you wouldn't have enough to pay the fees associated with selling a conventional way, nor would it have been worth it for you to do so. For that reason, you should love the location you buy in. I have seen this get ugly for people who end up being forced to move/sell and take a deep loss or struggle to FSBO because they can't pay commissions.

2.) You may end up paying a higher interest rate on a higher payment.  That's just how it works when you can't put skin in the game so to speak.

[Danny Sanchez]

Quote from @Jeff Schemmel:

@Danny Sanchez I had a client close last month who paid $1,200 cash to own his $300k home.  He used DPA, and he essentially has a small 2nd mortgage covering the cash he couldn't bring to the table.  My personal opinion is that it should be avoided unless the DPA is a "grant" and not a 2nd mortgage which is much rarer and harder to get.

Here are the main thoughts I speak to clients about 
1.) You likely have to live there longer and/or plan to use it as a rental property (assuming the revenue is high enough) because you're starting at zero equity. You literally CAN'T sell for at least 3-5 years because you wouldn't have enough to pay the fees associated with selling a conventional way, nor would it have been worth it for you to do so. For that reason, you should love the location you buy in. I have seen this get ugly for people who end up being forced to move/sell and take a deep loss or struggle to FSBO because they can't pay commissions.

2.) You may end up paying a higher interest rate on a higher payment.  That's just how it works when you can't put skin in the game so to speak.

 Hi Jeff,

Thank you for the reply. All this is good information and great to have in mind. What I want to avoid is staying stuck and not being able to move because of DPA. My goal is to get a deal where most of my mortgage is paid by tenants and I am able to pay off the DPA back within a year so I can move and get another house hack (sounds simple but I know it will not be like that). When you say the DPA grants are harder and rarer to find, why is that and where am I able to find something like that and how does it work?

[Jeff Schemmel]

@Danny Sanchez Yes househacking has been great for me; one of the best financial decisions I've ever made.  If you are more profit-oriented, co-living might be the way to go.  I have a friend who's been quite successful with it, and my first househack was a co-living situation.  As you get further along in your journey, you can start to get more comfortable and give yourself your own unit.  

The best way to understand/find DPA programs is to talk to some great lenders.  Let me know if you'd like to chat and I can connect you directly.

[Danny Sanchez]

Would love that. Reach out via DM.

[Ryan Thomson]

@Danny Sanchez I encourage clients in Colorado Springs to use these programs all the time. It is FREE money. 0% interest loans that you only have to pay back when you sell the property or refinance. There is no better way to reduce the amount of cash you are risking to get into a multifamily property.  I would highly encourage leveraging a DPA program. 

[Tim Swierczek]

@Danny Sanchez you are allowed to pay off the remaining DPA balance to move, so a DPA loan to start may be the best way to lock in today's price, and then continue to live frugally until you save enough to pay off the DPA portion, or wait until you can refi and pay it off. I agree that it's not ideal to use if you don't need it but when rates decrease today's price will look cheap and you will regret waiting to purchase.  DM me if you want to get coffee & chat.

[Isaiah Lopez-Torres]

Quote from @Danny Sanchez:

Hello everyone, 

I want to hear everyones opinions on using downpayment assistance programs for a multi family investment. I know that nothing is free, and that some programs require you to pay the DPA loan back before you move out but what else is there to have in mind that I should know about. What is something you don't recommend or do recommend?

 Definitely look into your states DPA programs. Ohio has the OHFA DPA which provides either 2.5% or 5% down assistance. There is a slightly higher rate with it and you have to pay back the assistance if you Refi or sell with this program. Your state might have a similar program.

My lender was able to ulitize the DPA for a four family I am trying to house hack. Good luck!

[Benjamin Sulka]

Quote from @Isaiah Lopez-Torres:

Quote from @Danny Sanchez:

Hello everyone, 

I want to hear everyones opinions on using downpayment assistance programs for a multi family investment. I know that nothing is free, and that some programs require you to pay the DPA loan back before you move out but what else is there to have in mind that I should know about. What is something you don't recommend or do recommend?

 Definitely look into your states DPA programs. Ohio has the OHFA DPA which provides either 2.5% or 5% down assistance. There is a slightly higher rate with it and you have to pay back the assistance if you Refi or sell with this program. Your state might have a similar program.

My lender was able to ulitize the DPA for a four family I am trying to house hack. Good luck!

 Isaiah, 

That is awesome. I'm an Ohioan as well and I'd love to hear more about your experience with that program! 

[Isaiah Lopez-Torres]

Quote from @Benjamin Sulka:

Quote from @Isaiah Lopez-Torres:

Quote from @Danny Sanchez:

Hello everyone, 

I want to hear everyones opinions on using downpayment assistance programs for a multi family investment. I know that nothing is free, and that some programs require you to pay the DPA loan back before you move out but what else is there to have in mind that I should know about. What is something you don't recommend or do recommend?

 Definitely look into your states DPA programs. Ohio has the OHFA DPA which provides either 2.5% or 5% down assistance. There is a slightly higher rate with it and you have to pay back the assistance if you Refi or sell with this program. Your state might have a similar program.

My lender was able to ulitize the DPA for a four family I am trying to house hack. Good luck!

 Isaiah, 

That is awesome. I'm an Ohioan as well and I'd love to hear more about your experience with that program! 

 Hey @Benjamin Sulka sent a PM your way with more info!

[Julien Jeannot]

I'd reach out to a lender/broker that knows those type of programs.

[Mason Vitalis]

I just bought a single-family house using down payment assistance and it works great for me! For me it's basically a second mortgage so about $100 is tacked onto my monthly payment because my loan was 5% down. In my opinion it's great for starting out because you don't have to pay so much out of pocket but interest rates are still pretty high so I would recommend making the down payment if you can afford so as to avoid paying more in the long run. Hope this helps!