One of my favorite blogs to follow, Get Rich Slowly, recently published Reader Stories: I bought a duplex to save money on rent. The author of the post describes how he used an FHA mortgage to buy a duplex and with renting out the unit he was not living in, he wound up paying less for his housing than when he was renting.
Before I bought my first duplex, I was spending $525 per month to rent a studio apartment that consisted of a kitchen, bathroom with stand-up shower, and an all-purpose room that held my bed, dresser, couch, and a small TV placed on top of my file cabinet. After buying, I was now living in luxury. I had two bedrooms, a living room, a spacious kitchen with laundry hookup, and a full bathroom. I was now renting out a one-bedroom apartment below me for $425 per month, and my mortgage payment was $653 per month, which included real estate taxes, mortgage interest and insurance. This meant that my effective cost of housing per month went from $525 while renting to $228 for more space and home ownership.
I’ve written about how to buy a 2-4 plex with minimum down payment using an FHA loan. I thought this would be a good opportunity to revisit buying a duplex for your primary residence (to occupy) using an FHA mortgage.
As of 8:30 am on April 26, 2013, I’m quoting:
3.250% for a 30 year fixed FHA mortgage based on a credit score of 720 or higher and buying a duplex located in the greater Seattle/King County area (apr 4.203%).
Currently there is enough rebate pricing at this rate to cover all of the estimated closing cost, reserves and prepaids so the buyer just needs their 3.5% down payment of $17,500 to buy a duplex priced at $500,000 based on current pricing. NOTE: pricing below is from April 26, 2013, for current pricing for homes located in Washington, click here.
The total estimated mortgage payment is $3,260.30. I say estimated because we don’t know the exact property taxes or home owners insurance.
Principal and interest: $2,136.61
Mortgage insurance: 537.86
Est property taxes: 520.83 (I’m using 1.25% of the sales price/12 months)
Est. hazard insurance: 65.00
TOTAL PAYMENT: $3,260.30
The home buyer can use rental income from the unit they are not going to occupy to qualify for the mortgage.
If you are interested in buying a home, including a duplex, located anywhere in Washington state, I’m happy to help you!