What To Know About House Hacking

September 18, 2020



When you think of buying a home, you generally think of a single family dwelling. Thoughts also turn to depleting your life savings for a down payment, which can stop you from signing the mortgage papers.  However there is a seldom-discussed avenue to becoming a homeowner that has the potential to generate income for you and that's buying a multifamily building. Some call it house hacking and the idea is that you can live in one of the units while renting out the others. It’s a strategy that allows you to earn passive income from your renters to pay down your mortgage while building up equity and setting up the property as an investment that will pay off down the road. When you purchase a multi-unit property you qualify for the same types of loans that you would for a single-family home. This means you can take advantage of low-interest FHA loans, which require as little as 3.5 percent down. In addition to lower interest rates, mortgages for owner-occupied properties also come with lower fees and lower down payment thresholds compared to loans for investor mortgages. Some lenders will also add projected rental income in calculating how much you can afford to borrow, meaning you’d be able to score a more desirable, higher-priced home. Mortgage lenders require that you live in a property for at least one year before moving, so buyers can theoretically move in and house hack for a year, and then go buy another home or two- to- four-unit property to repeat the process. House hacking can be a great financial strategy, but you still want to run the numbers before embarking on it to make sure you come out on top. However if you are looking to build equity in multiple properties, this may be something to consider.

SOURCE: Apartment Therapy

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