Tuesday, June 24, 2014

Townhouse Qualifiers

Many Brooklyn purchasers are considering a multi-family townhouse as a viable option with more living space, private garden area, storage in the basement and an additional unit generating rental income to reduce their overall out of pocket monthly expenses. The first order of business is getting pre-approved for this type of transaction because there are different requirements for conforming (under $625K) versus non-confirming (JUMBO) loans. One consideration is the down-payment requirements for 2 versus 3 family homes. Typically 3-family townhouses  require a 25% down-payment, a little more than the normal 20% down-payment. Also, the buyer’s ability to use rental income in order to qualify depends on the size of the loan too. Lenders will use the rental income if a conforming loan, however on a JUMBO loan, the requirements are tougher. In order to show the use of rental income, the buyer will have to show a history of managing rental properties with two years of tax returns supporting the claim. An exception may be considered with strong credit and post-closing liquidity.