Before I explain the great news that will change the entire house hacking landscape, I want to touch on two other items.
“1-0” Buydowns; Not “1-1” Buydowns! (Different Buydown Periods Explained)
I have been pushing temporary buydowns aggressively (for rate and payment relief) in recent blogs like this one: How to Get 1% Below Market Rates.
And I pushed “1-1 buydowns” as an inexpensive way to knock 1% off an interest rate for 1 year. BUT – I should have said “1-0 buydown,” not “1-1 buydowns.”
A 1-0 buydown buys down the rate for one year only; a 1-1 buydown buys down a rate by 1% for two years; a 2-1 buydown buys down a rate 2% in year one and 1% in year two; a 3-2-1 buydown buys down the rate 3% in year one, 2% in year two, and 1% in year 3. Apologies for the confusion!
Bill Ackman: “The Economy Is Slowing Faster than the Data Suggests.”
I share the above quote by famed hedge fund manager, Bill Ackman, because he was previously one of the hedge fund managers predicting higher rates for longer (and shorting bonds as a result). But – he apparently has been reading my blogs, and he now agrees with me. 😊 Anyway, his quote was all over Twitter Monday, as he is clearly not the only one who thinks the economy is slowing very quickly. Ackman believes we will be in a recession by year-end – which of course portends lower rates.
5% Down for 2, 3, And 4-Unit Purchases!
Starting in November, 2, 3, and 4-unit property buyers can obtain Fannie Mae/conforming financing with only 5% down if they intend to occupy one of the units – and this is HUGE!
Previously, 2-unit buyers had to put down 15% for Fannie Mae financing, and 3 and 4-unit buyers had to put down 25%!!
I should also note that this house hack is only available for purchase that are below the 2024 low-balance conforming loan limits (check out the 2024 loan limits in my blog here).
So, this is the house hacker’s dream, as it will make it far easier for them to truly “house hack” or use rental income from their owner-occupied property to pay off their mortgage.
“But Jay, you ignorant schmuck, FHA already allows buyers to put only 3.5% down!” (a response I expect to get).
And to that I say, you are correct, but FHA has a “self-sufficiency” or cash flow rule for 3 and 4-unit properties that requires 75% of the market rents to cover the total housing payment (PITI).
And the odds of that happening in markets like CA’s Bay Area are approximately one in thirteen trillion (give or take).
Here are a few great reminders when it comes to buying units: (1) buyers can use the market rent from the non-occupied units to help qualify for the purchase; (2) first-time homebuyer discounts still apply – so first-time homebuyers can get very competitive rates – particularly when it comes to units!
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