Fannie Mae Introduces 5% Down Payment Program for Multifamily Properties—Here’s What You Should Understand
Fannie Mae announced on Nov. 18 a decrease to its down payment requirement for owner-occupied multifamily property loans with Fannie Mae as an effective date.
Real estate investors and prospective homeowners alike have applauded this move as a breakthrough, as it makes purchasing investment properties with limited cash easier than ever before. Furthermore, its timing couldn’t have been more appropriate given today’s high interest rate environment which has put pressure on real estate affordability.
Borrowers of multifamily properties now need only 5% of the total home value as a down payment, instead of 15% to 25% required before this policy change took place. The change applies to loans on duplexes, triplexes and fourplexes.
What Are the Requirements of the Multifamily Home Loan Program? One key requirement of this loan program is owner-occupancy; that means borrowers must live at their property as resident landlords in order to qualify.
One advantage to meeting this requirement is using future rental income as part of qualifying for a mortgage loan. While future rental payments alone won’t guarantee qualification – meeting current income requirements is also necessary – they can count toward fulfilling the total income requirement for your loan application.
Fannie Mae recently eliminated the FHA self-sufficiency test requirement for 3-4 unit property loans, making getting pre-approved easier than ever! Under this new rule, 3-4-unit properties no longer need to meet 75% of rental income exceed their monthly mortgage repayment amount; under previous requirements this threshold had to be reached 75% of time in order for this requirement to apply; Fannie Mae’s removal will make loan approval easier for multifamily homes.
The program now limits loans of 2-4 unit properties at $1,396,800; this greatly expands investors’ pool of properties available for purchase to include more costly and luxurious homes – something which was once price out of multifamily unit markets for novice investors in more costly areas.
HomeReady loans for low-income borrowers and HomeStyle Renovation loans both qualify under this new policy change – great news for real estate investors pursuing house flipping or the BRRRR method!
HomeStyle Renovation loans factor the costs associated with proposed renovations into their total loan amount, unlike HomeReady and HomeStyle options which do not. Renovator-investors should note the owner-occupancy requirement.
Prospective borrowers should also be aware that high-balance loans and loans manually underwritten are excluded from this policy change.
