Fannie Mae Multi-Family Mortgage on 2-To-4 Unit Homes

This blog will cover Fannie Mae Multi-Family Mortgage Guidelines on 2-to-4-unit homes. Fannie Mae Multi-Family Mortgage on down payment differs depending on owner occupant versus investment properties. Homebuyers can purchase both owner-occupant and investment Multi-Family homes with conventional loans.

Any two-to-four-unit multi-family home zoned residential is eligible for Fannie Mae Multi-Family mortgage loans. Fannie Mae only buys mortgage loans that are secured by real estate. Properties not eligible are timeshares, motorhomes, houseboats, boat slips, cabanas, mobile homes, and homes not on a fixed concrete foundation.

Owner-Occupancy Requirements for Multi-Family Homes

With owner-occupant, homeowners can live in one of the units, rent the other, and receive a rental income. Any residentially zoned properties with up to 4 units can qualify for owner-occupant conventional loans. Owner-occupant and investment multi-family properties can be great investments due to their appreciation of potential and instant cash flow. Fannie Mae Multi-Family Mortgage Guidelines on the down payment are much higher than FHA’s 3.5% down payment requirement.

Multi-family unit homes require reserves depending on owner-occupancy or the property being an investment home. Two-unit multi-family buildings require a one month PITI reserve. Three to four unit multi-unit family homes require a three month of PITI reserves. Investment multi-family homes require six months of PITI. PITI stands for principal, interest, tax, and insurance.

Fannie Mae Multi-Family Guidelines require a 15% down payment on two-unit owner-occupant homes with one months of PITI reserve. Three-and four-unit owner occupant primary homes require a 20% down payment with three months of reserves. Investment properties require a 25% down payment with six months of PITI reserves. In this blog, we will Fannie Mae’s Agency Guidelines and Requirements.

Purchasing Multi-Unit Properties As An Investment

Multi-Family Properties are becoming increasingly popular. Homebuyers who need an owner-occupant home and want a great investment can purchase multi-family homes. This also holds true for first-time homebuyers and those without a family. After one year, homeowners with a multi-family property can be eligible for another owner-occupant property as long as they are buying a single-family home.

Buying a multi-family home is an excellent investment. Two-to-four unit buildings cost less per unit than buying a condo, townhouse, or single-family home.

They can exit the multi-family owner-occupant unit and rent it out. Becoming a first-time landlord is ideal with an owner-occupant multi-family home because it is easier to manage multiple tenants in one location and live on the same property Down payment requirements differ based on owner-occupant versus investment homes.

Fannie Mae Multi-Family Mortgage Down Payment Guidelines

Fannie Mae Multi-Family Mortgage Down Payment Guidelines are different depending on owner-occupant versus investment properties. Loan-to-value caps is the difference when it comes to the type of refinancing as well. Here are the basic Fannie Mae Multi-Family Mortgage Guidelines on down payment and loan to value: Down Payment Requirements on owner occupant two-unit properties is 15% on conventional loans.

Conventional Loans require a 15% down payment on two unit buildings and 20% down payment on three to four unit multi-family unit homes versus HUD’s 3.5% down payment requirement on two-to-four unit homes. VA loans offers  100% financing with no down payment required on multi-family homes.

The maximum loan value on owner-occupant homes up to 2 units is 85% LTV and/or 15% down payment. 2 to 4 unit multi-family homes require an 80% LTV and/or 20% down payment. Gustan Cho Associates offers a 5% down payment for multi-family home financing contact us at Gustan Cho Associates at gcho@gustancho.com or call us at 800-900-8569. Text us for a faster response.

Fannie Mae Multi-Family Guidelines on Investment Homes

FHA and VA loans are the two government loan programs allowing multi-family home financing. However, all government-backed mortgage loans are for owner-occupant homes only. Fannie Mae multi-family mortgage guidelines allow owner-occupant and investment property multi-family home financing.

If you want to finance two-to-four unit multi-family properties, you cannot use FHA and VA loans. Conventional and non-QM loans allow for investment home multi-family home financing.

Unlike FHA loans, Fannie Mae Multi-Family Mortgage Guidelines allow for investment property financing on two-to-four unit multi-family homes. Investment property down payment requirements on 2 to 4 unit investment homes require a 25% down payment and/or 75% LTV.

Fannie Mae Multi-Family Mortgage Guidelines on Refinancing

Refinance Conventional Guidelines on 2-unit properties for rate and term refinancing loan to value is 85% LTV. Rate and term refinance guidelines on conventional loans for primary three to four unit multi-family homes is 80% LTV.

Multi-Family homeowners can do a cash-out refinance. On cash-out refinance mortgage loans on two-to-four unit multi-family homes, the loan-to-value is lower than rate and term refinance. The owner-occupant loan-to-value on primary multi-family homes on a cash-out refinance loan is lower than the loan-to-value cash-out refinance on investment multi-unit homes.

Owner-occupant cash-out refinance on 2 to 4 units is capped at 75% LTV. Cash-Out refinance loan to value on investment 2 to 4 unit properties is capped at 70% LTV.

Who Qualified For Conventional Loans

Borrowers of two to four-unit properties need to meet all FANNIE MAE Multi-Unit Family Guidelines Conventional loans has a minimum credit score requirement of 620 FICO. There are reserve requirements on multi-family homes. The minimum required reserve requirement on two-unit owner-occupant primary residence homes is one month of PITI  Reserve requirements on three to four unit owner-occupant multi-family homes is three months of PITI.  Reserve requirements on two-to-four unit multi-family investment homes is six month of PITI.

Reserve requirements by mortgage lenders mean one month of PITI. PITI is principal, interest, tax, and insurance. When a lender requires a three months of reserves, it means the lender requires the borrower needs to have three months of principal, interest, tax, and principal save.

With FHA, one-month reserves are required on two-unit homes and three months reserves are required on 3 to 4 unit homes. Debt-to-income ratios on multi-family home financing cannot be greater than 50%. Gustan Cho Associates, powered by NEXA Mortgage, are mortgage broker licensed in 48 states, including Washington, DC, and Puerto Rico with over 210 wholesale mortgage lenders. We have dozens of wholesale lenders with no overlays on government and conventional loans. We will go off Fannie Mae and Freddie Mac’s Automated Underwriting System’s findings and have zero lender overlays on government and conventional loans.

Can I Use Potential Rental Income From Multi-Family Home As Qualified Income

Potential rental income can be used as qualified income on multi-family properties. Fannie Mae and Freddie Mac allow up to 75% of potential rental income to be used as qualified income. The potential rental income is determined by the home appraiser. Potential rental income can be used even though the units are vacant. HUD, the parent of FHA, allow up to 85% of potential rental income to be used as qualified income.

Over  80% of our homebuyers at Gustan Cho Associates are borrowers who could not qualify at other mortgage companies either due to a last-minute mortgage loan denial or due to the lender having overlays. At Gustan Cho Associates, we have no lender overlays on government and conventional loans. We  just go off the agency mortgage guidelines.

Homebuyers looking to get pre-qualified on a two-to-four unit multi-family home, please contact us at Gustan Cho Associates. The team at Gustan Cho Associates are experts on two-to-four unit multi-family owner-occupied and investment homes. Contact us  at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.