Seattle Bubble Forum Archive

Here is a little background:
I am 28, engaged, and living with my fiancé in a rental house in Bellevue, we pay $1,100/mo, for a 3 bedroom (plus office), house. I am not a real estate agent, a mortgage broker, or an employee in any aspect of the real estate industry. I am a first time home buyer.

My view of the market, is like many others on the board, pricing increases were not (and are not) fueled by fundamentals. As a result, a contraction in the market is inevitable. I just don't know how far it will drop. I think one or two more interest rate increases and we will hit the "event horizon" (Point of no return when entering a black hole).

I have gone through the Acorn program, and I have my mortgage pre-approved through Bank of America. I am going with a 30 year fixed (currently at 5.75%). I plan to put down 5-10%.

Here is where I'm looking for advice:

Acorn is limited to people who have a household income of less than 92k/year. If I combine my fiancés income with mine, we are over that limit. So I talked to Acorn, and explained that I want to be the only one on the mortgage. They said that was fine, I would be under the max income limit. I went to their classes, and I got approved.

My goal is to buy a duplex, and live in for a period of time (1-3 years). The whole time, I would be renting out the other side of the duplex. Once my fiancé and I save up enough for another down payment, we would get a renter to move into our side of the duplex.

At that point, my fiancé would go through the Acorn Program (as a first time home buyer), then she would get a mortgage for our primary home (a single family residence).

Has anyone done something like this? If so, what are the pitfalls I should be aware of? Are there are legal issues I should be concerned with?

I would like to keep the discussion related to the topic above only, and not get derailed by discussing weather or not this is a good market to buy. As Buffett said "be fearful when others are greedy and greedy only when others are fearful.""

I'll take a stab at this.

First, I'm unfamiliar with the program you reference. Sounds like a very good program though and your pre-approval rate of 5.75 almost sounds too good to be true, particularly for a duplex.

Overall, I think your plan is sound. It appears that you are a frugal borrower who is placing value on putting some money down. Good for you!

When you are ready, I would encourage you to shop around and get at least one more good faith estimate from a lender so you can compare rates, fees and loan programs. And shop for third party services as well: title and escrow, for example. If for nothing else, it would confirm the merits of your loan pre-approval with your Acorn program.

Do you have a link to the program?

PS. I'm not an agent or lender, but the escrow office my wife and I operate closes scores of purchase transactions, so we get to see who has the very best rates with the lowest fees. Fun position to be in.

Acorn stands for Association of Community Organizations for Reform Now

They define themselves as "The country's largest grassroots organization working for the empowerment of low and moderate income people.". The main focus is not actually housing. They also offer credit counseling, and all other sorts of stuff people need when they do not manage their money.

As one of their services, they offer a program for first time home buyers. Income limits, and loan limits do apply. If you currently own a house, have household income of >$92K/yr, or need a mortgage for more than $417K, you can not go through the program.

Acorn is a non-profit, so the only thing it cost me was $15 for them to pull my credit. The main benefit is that you DO NOT have any PMI (even if you put zero down), and they say your quoted rate will be ¾ of a percent lower than their standard market rate.

Acorn does NOT fund the loans, for that you have to work with one of the lending institutions that have agreements with Acorn. For me, I saw Bank of America offered the best deal.

I am NOT going to do the following, but my contact at BoA, said I can do any of these:

Buy a duplex, with 3% down, of that, the seller can contribute 1.5%
Buy a triplex, with 4% down, of that, the seller can contribute 2%
Buy a Fourplex, with 5% down, of that, the seller can contribute 2.5%

All at the rate I mentioned above.

Link to the main Acorn organization:
http://www.acorn.org/

Link to the housing division of Acorn:
http://www.acornhousing.org