One of the biggest challenges many buyers who hope to owner occupy a duplex have had is financing. After all, until recently those people really only had two mortgage options; FHA and conventional.
While FHA offered the distinct advantage of a low, 3.5 percent down payment, this was offset by increased mortgage insurance premiums of the life of the loan. For many, this made monthly mortgage payments unexpectedly expensive.
Of course, for those with the financial resources, there was always the option of putting 20 percent down on a conventional loan. However, for many would be owner occupants, looking at a down payment of $40,000 or more isn’t even conceivable, let alone possible.
However, as the real estate market recovers, banks have begun to look for better ways of doing business with prospective duplex buyers. The best example to date of that is US Bank’s American Dream loan.
The loan is really pretty remarkable. While a borrower cannot currently own any other property, he or she doesn’t have to be a first time buyer, have a minimum credit score, and may even use up to 75 percent of a duplex’s rental income to help qualify for the loan.
Better yet, US Bank will even give the borrower up to $3000 to be applied toward the down payment or closing costs, and may even allow up to $5000 to be escrowed for repairs.
According to US Bank loan officer Conor Hesch, borrowers are not required to have a minimum credit score, and may use alternative forms of credit (like cell phone bills) to qualify.
The loan has no mortgage insurance. Interest rates are typically .5 point higher than FHA loans.
Combined, all members of the buyer’s household must not earn more than $65,000. However, that requirement is waived if the duplex is in a neighborhood where census data indicates most of the neighborhood is of low to median income. This actually encompasses many of the Twin Cities’ most sought-after neighborhoods, as the census counts data from both tenants and homeowners to calculate household income.
The loan may be used to purchase 1-2 unit properties, townhouses and condominiums.