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I strongly recommend, if possible, to have a single homeowner and set everyone else up as renters. The only exception is married couples who already have shared

I strongly recommend, if possible, to have a single homeowner and set everyone else up as renters. The only exception is married couples who already have shared finances. Around here, finding the money for a 20% down payment is the biggest impediment to buying a house (it can be hard to scrape up $100K - $200K), so that's easier if you can pool your funds among friends, its easier to do. So that pretty much precludes a rental arrangement. I think it'd be hard to get a loan on a property if the down payment funds are coming from your friends -- and you're treating it as an investment property because you need their rent to afford the mortgage. This kind of arrangement is typically structured as a Tenancy in Common: https://www.investopedia.com/terms/t/tenancy_in_common.asp https://www.investopedia.com/terms/t/tenancy_in_common.asp

ensignavenger 8y ago
In the US, most home buyers will qualify for a much lower than 20% down payment for their primary residence.
- moorhosj 8y ago
  This likely comes with a monthly PMI payment. Correct?
  - ensignavenger 8y ago
    Yes, in most cases.
  - spectrum1234 8y ago
    Do people know situations where its possible to not have PMI with a bit less than 20% down? Ideally they wouldn't increase your rate then. I know SoFi has no PMI with 10% down but I believe rates are slightly higher.
  - mlboss 8y ago
    You can ask lender to drop PMI once 20% downpayment is reached.
- Johnny555 8y ago
  But if you're your counting on rent from your friends to pay the mortgage, you're no longer a residential homebuyer, you're buying an investment property and typically higher standards apply. So realistically, the only way you could buy a house and rent to your friends is if you can qualify to buy the house on your own.
  - ensignavenger 8y ago
    DTI ratios are usually pretty generous, but if you can't qualify without the rental income, you may need to buy a 2-4 unit building and rent the other units to friends. This can be done with an FHA insured loan. It may be possible to count rental income on a 1 unit property under some programs, I am not fmailiar with all the rules. I don't think you can with an FHA loan, though.
    - ThrustVectoring 8y ago
      AFAIK the rental amounts count for 75 cents on the dollar against the mortgage total, and you need to either have experience being a landlord or have a signed letter of intent to show the underwriter.
  - ThrustVectoring 8y ago
    What? That's not how the qualification works. If it's no bigger than a 4-unit building and is going to be your primary residence, you can still qualify for a FHA loan at 3.5% down.
    - Johnny555 8y ago
      My bank required proof of income sufficient to qualify for the mortgage -- presumably if part of that proof was "4 of my friends promised to pay me $1000/month each to rent a room in the house", that would no longer qualify for a regular homeowner mortgage program.
- dragonwriter 8y ago
  > In the US, most home buyers will qualify for a much lower than 20% down payment for their primary residence. Well, that's true in the US in that, so long as you have sufficient income to make the payments, you can probably fine subprime financing for purchases with less than 20% down, but you'll pay more for it than you would for the same size loan with more equity (whether in PMI, interest, fees, or some combination.)

ensignavenger 8y ago

In the US, most home buyers will qualify for a much lower than 20% down payment for their primary residence.

moorhosj 8y ago
This likely comes with a monthly PMI payment. Correct?
- ensignavenger 8y ago
  Yes, in most cases.
- spectrum1234 8y ago
  Do people know situations where its possible to not have PMI with a bit less than 20% down? Ideally they wouldn't increase your rate then. I know SoFi has no PMI with 10% down but I believe rates are slightly higher.
- mlboss 8y ago
  You can ask lender to drop PMI once 20% downpayment is reached.
Johnny555 8y ago
But if you're your counting on rent from your friends to pay the mortgage, you're no longer a residential homebuyer, you're buying an investment property and typically higher standards apply. So realistically, the only way you could buy a house and rent to your friends is if you can qualify to buy the house on your own.
- ensignavenger 8y ago
  DTI ratios are usually pretty generous, but if you can't qualify without the rental income, you may need to buy a 2-4 unit building and rent the other units to friends. This can be done with an FHA insured loan. It may be possible to count rental income on a 1 unit property under some programs, I am not fmailiar with all the rules. I don't think you can with an FHA loan, though.
  - ThrustVectoring 8y ago
    AFAIK the rental amounts count for 75 cents on the dollar against the mortgage total, and you need to either have experience being a landlord or have a signed letter of intent to show the underwriter.
- ThrustVectoring 8y ago
  What? That's not how the qualification works. If it's no bigger than a 4-unit building and is going to be your primary residence, you can still qualify for a FHA loan at 3.5% down.
  - Johnny555 8y ago
    My bank required proof of income sufficient to qualify for the mortgage -- presumably if part of that proof was "4 of my friends promised to pay me $1000/month each to rent a room in the house", that would no longer qualify for a regular homeowner mortgage program.
dragonwriter 8y ago
> In the US, most home buyers will qualify for a much lower than 20% down payment for their primary residence. Well, that's true in the US in that, so long as you have sufficient income to make the payments, you can probably fine subprime financing for purchases with less than 20% down, but you'll pay more for it than you would for the same size loan with more equity (whether in PMI, interest, fees, or some combination.)