How to buy your first duplex with low money down

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Discover the strategies and tips for purchasing a duplex with minimal down payment and a low credit score. Learn how to invest in real estate with limited funds and still reap the benefits of rental income.

Buying your first duplex with little money down is possible and low credit score is possible.. Opt for a FHA loan. However, there are certain requirements and steps you need to follow. Here’s a general guide on how to buy a duplex with an FHA loan:

  1. Check FHA Loan Eligibility:
  • Make sure you meet the eligibility criteria for an FHA loan. This includes having a minimum credit score(not super high)…570 ish….(which is considered to be a low credit score) a stable employment history, and a debt-to-income ratio within acceptable limits.
  1. Find a Lender:
  • Look for a lender that is approved to originate FHA loans. Not all lenders offer FHA loans, so it’s important to find one that does. You can own another property as long as it is not inhabitable…wink wink. Also, each state has its own requirements for brokers and lenders. So basically, find a mortgage broker within the state you are looking to purchase
  1. Determine Your Budget:
  • Calculate how much you can afford to spend on a duplex. FHA loans typically require a minimum down payment of 3.5%-7% of the purchase price. You’ll also need to consider closing costs and other expenses.. Do your math. For example, if the mortgage (impound account) is going to be $1600 including taxes, insurance, PMI, make sure each unit has potential rentability for at least $800 each otherwise you will be upside down. At Least for a little while. You must live in one of the units for first year, which is fine, you are paying yourself rent basically.
  1. Search for a Duplex:
  • Start looking for a duplex that meets your criteria. Consider factors such as location, condition, and rental income potential.
  1. Get Pre-Approved:
  • Before you start making offers on duplexes, get pre-approved for an FHA loan. This will give you a better idea of how much you can borrow and make your offer more attractive to sellers.
  1. Make an Offer:
  • Furthermore, once you find a duplex you like, make an offer through your real estate agent. If your offer is accepted, you can move forward with the purchase process.
  1. Complete the FHA Loan Application:
  • Work with your lender to complete the FHA loan application. You’ll need to provide documentation of your financial history, employment, and income. DO NOT take out any new loans before closing. They will know.
  1. Appraisal and Inspection:
  • The property will need to be appraised to determine its value. You may also want to get a home inspection to identify any potential issues with the duplex.
  1. Underwriting and Approval:
  • The lender will review your application and the property appraisal. If everything checks out, they will approve your FHA loan. Remember FHA loans are great because they require little money down and allow for you to have a lower credit score.
newer paint and floor
  1. Closing:
    • Attend the closing of the loan physically or virtually , where you’ll sign the necessary documents and pay any closing costs and down payment. Now you can pop bottles!
  2. Move In and Rent Out:
    • Once the purchase is complete, you can move into one of the units and rent out the other(s) to generate rental income. Remember, make at least one of the units attractive to prospective tenants.
  3. MaKe any necessary repairs. (Husband shown below) If you can do them yourself or date/marry/associate one self with someone who is super handy. Worst case scenario hire out. I captured my husband below fixing the dead lock/ bolts for both units

Things to stay away from!

Remember FHA loans want the property to be plug n’ play.

Must be adequate property conditions and free of safety hazards

  • Failing roof,
  • broken windows
  • rotting foundation
  • rotting decks/ landings
  • broken handrails
  • knob and tube wiring
  • listing key words like,” as is”, “fixer upper.”

PS. Stay organized!

How about incorporating a planner to jot down quick notes while on the phone with mortgage brokers, real estate agents et all. All leather planners can be purchased here

crocodile embossed i leather planner

I have so many posts about my real estate journey. First, will we sell our huge California dream home?.

Can buying land be the key to legacy and long term wealth? Land buying hacks few know about.

How can AI help us in our real estate journey?. Is buying a fixer upper site unseen crazy? I have so much to share about our crazy real estate journey. Male sure to subscribe to the blog and my youtube channel Ten From The City to follow along.