What is The Minimum Down Payment on 2-to-4 Unit Multi-Family Mortgage Loans
Any property up to four units is considered a residential property. If a home buyer plans to purchase a 2-to-4-unit property, HUD requires a minimum down payment of 3.5% on two-to-four-unit multi-family homes.
The home buyer needs to occupy one of the units. The remaining units can be rented and used for income.
Up to 85% of the potential rental income of the other units can be used towards income. Fannie Mae guidelines on multi-family homes require a 5% down payment on owner-occupant multi-family two to four-unit homes. Conventional loans require a 5% down payment for 2- to 4-unit residential properties that are owner-occupant. Up to 75% of the potential rental income can be used towards the income calculation of the borrower’s debt-to-income ratios.
Jumbo Mortgage Loans
Any mortgage loan limits of over $766,550 are considered non-conforming since they do not conform to Fannie Mae and Freddie Mac loan limit guidelines of $766,550. It is often called a jumbo loan. The minimum down payment for jumbo mortgage loans is 20%.
Some jumbo mortgage lenders will lend up to 90% loan-to-value, thus requiring only a 10% down payment. 90% LTV Jumbo Mortgages require 720 credit scores.
Again, a lower down payment means higher mortgage rates because the mortgage lender has more risk. Gustan Cho Associates has Non-QM Jumbo Loans with credit scores down to 620 FICO. However, the lower the credit scores, the higher the down payment requirement.
Minimum Down Payment on Condotel Financing and Non-Warrantable Loans
Condotel mortgage loans require a 25% down payment. Non-warrantable condominium loans are portfolio loans and require a minimum down payment of 20%. Portfolio loans are 30-year mortgage loans.
Only adjustable-rate mortgage products are available on condotel and non-warrantable condo loans. There are 3/1 ARM, 5/1 ARM, and 7/1 ARM mortgage loan programs.
For example, on a 7/1 ARM with a starter interest rate, the mortgage rate is fixed for the first seven years. We will adjust from years 8 to 30 based on the index. The index is normally based on the Cost Maturity Treasuries (CMT). The total plus the index is the new rate. The margin is constant.
Minimum Down Payment On Condotel Financing and Non-Warrantable Loans, Click Here
Minimum Down Payment on Investment Property Mortgage Loans
A 20% minimum down payment is required for investment homes. Certain investment loan programs allow for potential rentals to be used. For 75% of the potential rental income to be used, the minimum down payment required on investment homes is 25%. For example, here is a case scenario: If an investment home has a potential rental income of $1,000. The borrower must use the potential income to qualify for their debt-to-income calculations.
The home buyer needs to put in a 25% down payment instead of 20% down payment to use potential rental income as qualified income.
By making a 25% down payment, 75% of the potential $1,000 or $750 can be used as part of the borrower’s income to qualify for their debt-to-income ratio. If the home buyer of the investment home only puts down a 20% down payment, the potential rental income cannot be used. Gustan Cho Associates offers multiple investment property loan programs. We have fix and flip financing for real estate investments, asset depletion, P&L investor loan programs, bridge loans, apartment building loans, and other investment property or commercial loan programs.