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Is House Hacking Residential or Commercial?

House vs. commercial building
Residential vs. Commercial real estate

Most home buyers are looking for single family homes or individual condos, but with prices so high many buyers are more interested in an alternative to make home ownership more affordable - House Hacking.

House Hacking is when you buy a multi-family property so you can rent some of the property to offset your mortgage cost. This can be done with a single family house with an accessory dwelling unit (ADU) like a garage apartment or with a duplex, triplex or quadriplex. With these properties, you can still use traditional financing including FHA or VA loans as long as you will be residing in one of the units.

What about buying a property with more than 4 units, though? Any property with more than 4 residential units is considered commercial property, so you can not use traditional financing even if you will be residing in one of the units. That doesn't mean you can't still house hack in multi-family commercial properties. It just means you'll have to get a commercial loan.

Commercial loans typically require at least 20% down (some require 25% - 30%), whereas residential mortgages can be as low as 0% down with VA loans, 3.5% down with FHA loans, or 3-5% down with conventional loans. Not only will you need to have good credit, but the property will have to produce a sufficient income to prove it can cover the debt. Commercial loans are more complicated than residential mortgages, so please be sure to find an expert to help you if you're interested in buying commercial property. Also, be sure to hire an experienced commercial real estate agent rather than a residential agent.


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