First Time Buyer Programs and Multi-Family Housing

| | Comments (0)
Can I qualify for first time home buyer financing if I buy a duplex and live in one and rent out the other?

I thought if I bought a duplex, lived in one side and rented out the other would be a good idea to help pay the mortgage. I would live there for a couple years then move and rent the entire duplex as an investment property

It would be very popular to answer "yes".

However, the fact is that the only nationwide first time buyer program in existence, the Mortgage Credit Certificate, explicitly disallows all multiple unit property from participating.

Furthermore, I've dealt with the federally funded local first time buyer programs throughout southern California (in excess of forty different municipalities). In every single case I'm familiar with, it's a requirement that it be a single family residence. Just like the MCC, no duplexes, no apartment buildings, no "2 on 1" properties. Condos, townhomes, and PUDs are fine, but nothing intended for more than one family to live in.

People sometimes get confused because of the way residential property is defined (1-4 units), but just because something qualifies as residential property doesn't mean it is eligible for a first time buyer program.

Finally, for every first time buyer program I'm aware of, the government assistance goes away (as with the MCC), or worse, becomes immediately due, should you move out. For example, in the municipality where my office is located, they have a very nice "silent second" program. It means you only have to actually pay the mortgage on a potentially much smaller amount, usually wiping out a need for PMI or a conventional second mortgage, while the city's second accrues at a very low rate. But if you move out, they'll call the loan, which means you've got thirty days to get them their money somehow before they foreclose.

(They also flatly refuse to subordinate, meaning you're not going to be able to refinance without paying them off, so you'd better choose a fixed rate loan that you can really afford for your primary mortgage in the first place)

There may be municipalities somewhere where this is permitted under their local programs, but I've never heard of one, and I do suspect it's prohibited in the legislation and regulations for the federal administration that funds these local programs. The First Time Buyer programs are intended to stabilize neighborhoods, and make it a little easier for people to be able to afford to buy housing they intend to live in. They are not intended to help you build a real estate empire - as a matter of fact, that's somewhat counter to their purpose. They are also never free of strings. If you intend on taking advantage of these programs, it would behoove you to make certain you understand what those strings are, as well as all of the implications, before you've got a purchase contract. Some of the strings on first time buyer programs are real deal-killers. For example, a city about a half hour's drive from my office has one that looks really nice at first glance, but restricts both who you sell to and what you can sell for, eviscerating the economic benefits of ownership and making you essentially a renter who also pays maintenance and property taxes. Unless you're just going to live there forever, which may not be under your control, that's not a desirable situation. Probably better to buy in the city next door, which has a more useful for your financial future "silent second" program much like the one described above. You need to be careful with first time buyer's programs, lest you end up in a situation that does not justify your expenditures with future benefits.

Caveat Emptor


Delicious Bookmark this on Delicious StumbleUpon Toolbar Stumble It!
Please be civil. Avoid profanity - I will delete the vast majority of it, usually by deleting the entire comment. To avoid comment spam, a comments account is required. They are freely available, and you can post comments immediately. Alternatively, you may use your Type Key registration, or sign up for one (They work at most Movable Type sites). All comments made are licensed to the site, but the fact that a comment has been allowed to remain should not be taken as an endorsement from me or the site. There is no point in attempting to foster discussion if only my own viewpoint is to be permitted. If you believe you see something damaging to you or some third party, I will most likely delete it upon request.
Logical failures (straw man, ad hominem, red herring, etcetera) will be pointed out - and I hope you'll point out any such errors I make as well. If there's something you don't understand, ask.
Nonetheless, the idea of comments should be constructive. Aim them at the issue, not the individual. Consider it a challenge to make your criticism constructive. Try to be respectful. Those who make a habit of trollish behavior will be banned.

Leave a comment

Copyright 2005-2017 Dan Melson. All Rights Reserved


Buy My Science Fiction Novels!
Dan Melson Author Page

The Man From Empire
Man From Empire Cover

A Guardian From Earth
Guardian From Earth Cover

Empire and Earth
Empire and Earth Cover

Working The Trenches
Working The Trenches Cover

Preparing The Ground
Preparing The Ground Cover

The Book on Mortgages Everyone Should Have!
What Consumers Need To Know About Mortgages
What Consumers Need To Know About Mortgages Cover

The Book on Buying Real Estate Everyone Should Have
What Consumers Need To Know About Buying Real Estate
What Consumers Need To Know About Buying Real Estate Cover

Dan Melson's San Diego Real Estate and Mortgage Website

↑ Grab this Headline Animator

About this Entry

This page contains a single entry by Dan Melson published on December 13, 2007 7:00 AM.

Which Makes More Difference - Buyer's Agent or Listing Agent? was the previous entry in this blog.

What Can You Recover From the Title Company? is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

What I Do

Read My Promise To All My Clients

My Office Contact Information

There are no better agents in San Diego County!

There are no better loan officers in California!

Ask for your free consultation today!

Favorite Loans Available Now

My Listings

Hot Properties!
Email me! danmelson(at)danmelson(dot)com
I want your business!
Unhappy with your loan?
Can't afford your payments?
I can help!
Want to buy smart?
Want to sell smart?
I can do it!
In Default?
Let Me Help!
Want to buy properties in distress?
(defaults, foreclosures and REOs)
Ask Me How!
Bad Credit?
No Down Payment?
Ask Me What I Can Do!
1031 Exchanges
Forward, Reverse, or Partial
I Get It Done!
Should I Buy Now?
Should I Sell Now?
Would It Help Me to Refinance?
I'll tell you if the answer is "No"
I'll help you if the answer is "Yes"
Contact me:
My Office

Want San Diego MLS?

Here's my office's link to San Diego MLS

Enter your email address:

Delivered by FeedBurner

Subscribe with Bloglines Add to Technorati Favorites

Not in San Diego?

My other site is here
Powered by Movable Type 4.21-en