Multi-Family Purchase Qualification

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  • #71158
    jessicannhale
    Participant

    If I understand correctly when purchasing a multi-family dwelling, 75% of rent for each unit goes or is counted towards your shock payment. My question is: when purchasing a multi-family dwelling, what is counted ( or added) to ( my) income when crunching the numbers for qualification in determining what amount of monthly mortgage payment I will qualify for? Your input and responses are greatly appreciated !!

    #71164
    Nelsont
    Member

    75% of the market rate for each unit is added to your affordability.

    #71171
    jessicannhale
    Participant

    Thank you Nelsont !

    Do you know what source document is used to determine “ rental market rates”

    #71175
    Nelsont
    Member

    No. It might not be a document. It might be an industry wide database. I would imagine your real estate agent or MC would know or have an idea.

    If you browse online listings you can get a rough idea.

    #71176
    TTrumble
    Member

    Hello jessicannhale,

    The information on rental market rates is in the NACA-Lynx system and will be automatically factored in. Just to clarify, that 75% is added to your affordability and has no bearing on Payment Shock whatsoever. The calculations based on your income, Payment Shock and so on are exactly the same as those for a single family home and the portion of the rental income is simply added to that.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #71184
    jessicannhale
    Participant

    TTrumble ttrumble@naca.com Thank you Tim! To clarify I understand this, would this be an accurate statement? Lets say for example I purchase a triplex for $450,000 . Let’s say the market rate for each unit indicated in NACA-Lynx system is $1425.00 a month. $2137.50 would then be added to my monthly income. Thank you!

    #71189
    Nelsont
    Member

    Yes. But it’s not added to your income and unless there’s an exception the unit you occupy must be bigger than the other 2.

    2137 would be added to your affordability which is at most 31% of your income.

    If you make 75000/yr before taxes Overtime and bonuses you can be approved for a monthly payment of up to 1937 including property taxes home owner’s insurance and hoa fees. If you wanted to buy this triplex in your example you would add 2137 to 1937 and those would be your affordability numbers for any single family home or that particular triplex.

    It’s worth noting while your monthly affordability will never change without a change in DTI your affordability for a multi family is completely dependent upon the specific house.

    #75562
    sparkledgp
    Member

    @Nelsont does this mean I don’t get to choose which u it I will live in?

    The unit that will be vacant in the property I’m interested is the smaller unit, because it’s 1 bedroom, which works for me because I’m single w/ no kids

    Will this cause a problem?

    #75563
    Nelsont
    Member

    I’m pretty sure the entire house must be vacant by the time you take possession. I could be wrong but I don’t think you can inherit existing tenants. They will probably have to have their leases vacated by the current landlord. I think. And yes I’m pretty sure you need to be viewed as a homeowner renting out rooms as opposed to renting out the house. Your living area needs to occupy the largest percentage of the building.

    #76512
    Hopefullegacy
    Participant

    Could someone please explain how the market rate is calculated? A rental rate of $1350 per unit was generated by the system. For example, if I find a 3 over 3 bedroom house in New York, the lowest monthly rental rate for a three-bedroom apartment is about $2000. Even this is incredibly cheap and very rare. Do they consider this when I am looking to purchase this particular type of property (3 over 3)?

    I’d appreciate the help. Thanks!

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