House Hacking Just got a LOT Cheaper - New Conventional Rules 2023 | Summary and Q&A

TL;DR

Financing a multi-unit property for house hacking just got easier with new conventional loan rules: only 5% down payment required, no self-sufficiency test, and potential to save on mortgage insurance.

Key Insights

• 👶 The new financing rules make it easier for first-time homebuyers to house hack by significantly reducing the down payment requirement.
• ✋ Conventional loans offer the advantage of removing mortgage insurance after 2 years, resulting in higher monthly cash flow.
• 🤗 The elimination of the self-sufficiency test for conventional loans opens up more options for buyers, regardless of rental income.
• 👻 House hacking with conventional loans allows buyers to repeat the strategy and build a real estate portfolio over time.
• 👶 The new rules come as a relief in an expensive housing market, where affordability has been a significant concern.
• 🤳 FHA loans remain popular among house hackers but have limitations due to the self-sufficiency test and mortgage insurance requirements.
• ✋ The new financing rules provide an opportunity to offset high mortgage payments through rental income while building equity.

Transcript

if you've been trying to house hack your way to your first home or maybe you're trying to find new and creative ways to make house buying a lot more affordable after all we're in an incredibly expensive market right now it just actually got a lot cheaper for you to finance your way to buying your first two three or even four unit property now you s... Read More

Questions & Answers

Q: What are the key differences between conventional and FHA loans for house hacking?

One major distinction is that conventional loans allow for the removal of mortgage insurance after 2 years, while FHA loans require refinancing for the same benefit. Additionally, FHA loans have a self-sufficiency test, which can limit the options for buying a multi-unit property.

Q: How does the new financing rule make house hacking more affordable?

The new rule reduces the required down payment for multi-unit properties to 5%, making it more accessible for first-time homebuyers. It also eliminates the self-sufficiency test, allowing buyers to qualify for the loan even if rental income doesn't cover the mortgage payment.

Q: How does conventional loan house hacking support the acquisition of multiple properties?

Unlike FHA loans, conventional loans do not have limitations on the number of financed properties. This means buyers can repeat the house hacking strategy multiple times, allowing for the acquisition of a real estate portfolio.

Q: Can prospective buyers begin the mortgage application process before November 18, 2023?

Yes, it is advisable to start the mortgage pre-approval process as early as possible. Seeking pre-approval will provide buyers with a clearer understanding of their financial capacity and allow them to be ready to take advantage of the new financing rules.

Summary & Key Takeaways

• Starting from November 18, 2023, first-time homebuyers can purchase a multi-unit property with only a 5% down payment using a conventional loan.

• Unlike FHA loans, conventional loans allow for the removal of mortgage insurance after 2 years, resulting in higher long-term cash flow.

• FHA loans have a self-sufficiency test, requiring 75% of gross rental income to cover or exceed the mortgage payment, which can be challenging in high-interest rate environments.