Multi-Family Residential Property Mortgage Loans Illinois

This ARTICLE On Multi-Family Residential Property Mortgage Loans Illinois Was UPDATED And PUBLISHED On January 27th, 2020

What are multi-family housing properties. Illinois Mortgages

HUD allows 2 to 4 Unit Multi-Family Residential Property Mortgage Loans Illinois with 3.5% down.

However, it only applies to owner-occupant multi-family residential property. It cannot be second homes or investment properties.

  • Illinois home buyers can purchase 2 to 4 unit multi-family residential property with FHA Loans
  • HUD allows owner occupant home buyers to purchase 2 to 4 Unit Multi-Family Residential Property Mortgage Loans Illinois with 3.5% down payment
  • One of the units need to be the primary home of the multi-family property owner:
    • The remainder residential units can be rented out

In this article, we will discuss and cover the guidelines on 2 to 4 unit multi-family homes.

What Classifies Multi-Family Residential Property Under HUD Guidelines

Any residential multi-family residential property under HUD Guidelines is a two to four unit property that is zoned residential with no commercial space.

If a property has commercial space, it is classified as mix-use and it would not be eligible for FHA Loans.

Here Are Common FAQ On 2 To 4 Unit Mortgage Loans

  • A common question I get asked by multi-family residential property home buyers is if they need to be full-time occupants of the property
  • The answer to that question is a definite yes
  • HUD requires that the owner need to occupy the 2 to 4 unit property for at least a year

After one year, the owner of the multi-family property can qualify for another owner occupant Conventional Loan:

  • But cannot be a multi-family residential home

A multi-family residential homeowner can qualify for another owner occupant home in one year:

  • But needs to be a single family home

A single-family homeowner cannot qualify for a multi-family residential property as a primary residence:

  • The mission of HUD, the parent of FHA, is to make housing affordable to all Americans with less than perfect credit, higher debt to income ratios, and low down payment
  • They are only available to owner occupied residential units and not second homes or investment properties

Homebuyers who are intending on purchasing 2 to 4 unit multi-family residential homes and do not intend on living there and renting out all of the four units would not qualify for the FHA multifamily Loans.

Can Rental Income Be Used On Proposed Multi-Family 2-4 Unit Homes

Can Rental Income Be Used On Proposed Multi-Family 2-4 Unit Homes

The great news for two to four unit home buyers is that they can live in one of the units and rent out the remaining units.

HUD allows 85% of the potential rental income on the rental units to be used as qualified income when lenders calculate borrowers’ debt to income ratios. The potential rental income figure is provided by the home appraiser.

Home buyers of multi-unit properties who intend on living in one of the apartments and renting the other units out for at least a year:

  • If homeowners intend to vacating the property and converting all of them as rental units, it is allowed
  • HUD requires for owners of multi-unit properties to live in one of the units for at least a one year period

Circumstances change and HUD realizes that and if the property vacates the multi-unit prior to the one year, that will be fine:

  • The four-unit multi-family homeowner might decide to move out of the multi-family residential property due to needing more space:
    • If that is the case, they can qualify for another owner occupant conventional mortgage

Borrowers will not be in violation of conditions of HUD if they need to move out of their multi-family residential property after they purchase due to them needing more space due to having a new baby on the way or other extenuating circumstances.

FHA Down Payment Requirements On Multi-Family Homes

Buying a multi-family home with only 3.5% down is a great way of being a homeowner and a property investor at the same time.

  • The rental units on multi-family homes can be used to qualify for an income
  • For FHA loans, 85% of the market rents can be used for debt to income ratios income
  • For conventional loans, 75% of the potential rental income can be used to qualify as income towards the debt to income ratios  
  • For conventional loans, a 15% down payment is required for an owner occupant two to four unit multi -family loans
  • Borrowers of 2 to 4 unit multi-family properties require reserves of principal, interest, taxes, and income

Buyers of multi-family homes can contact us at 262-716-8151 or text us for faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays.

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