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Owner-Occupant Multi-Family Mortgage Guidelines On 1 to 4 Units

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This BLOG On Owner-Occupant Multi-Family Mortgage Guidelines On 1 To Four Units Was Written By Gustan Cho National Managing Director at Loan Cabin Inc. NMLS 1657322

Any property between one to four units is considered residential properties.

  • Home buyers and first time home buyers can qualify for owner-occupant financing on one to four unit properties
  • Government and Conventional Loans has its own Owner-Occupant Multi-Family Mortgage Guidelines
  • Owner-Occupant Multi-Family Mortgage Guidelines will dictate the minimum down payment requirements
  • Owner-Occupant Multi-Family Mortgage Guidelines will also dictate whether or not borrowers can use potential rental income as qualified income

We will cover Owner-Occupant Multi-Family Mortgage Guidelines on this article.

Owner-Occupant Multi-Family Mortgage Guidelines Depends On Loan Program

Most buyers purchase two to four-unit residential buildings as rental properties. However, per Owner-Occupant Multi-Family Mortgage Guidelines, home buyers can qualify for owner-occupant financing if they live on one of the units as their primary residence:

  • Owner-Occupant Multi-Family Mortgage Guidelines is dependent on the loan program borrowers chooses
  • There are Owner-Occupant Multi-Family Mortgage Guidelines and Lender Overlays
  • All lenders need to meet Owner-Occupant Multi-Family Mortgage Guidelines
  • However, it is up to an individual lender to have higher lending requirements
  • These higher mortgage requirements above and beyond Owner-Occupant Multi-Family Mortgage Guidelines is called lender overlays
  • Gustan Cho Associates Mortgage Group has no lender overlays on government and conventional loans

Government Loans are FHA, VA, USDA Loans. Fannie Mae and Freddie Mac Guidelines applies to conventional loans.

Owner-Occupant Multi-Family Mortgage Guidelines On Down Payment Requirements

Down payment requirements on owner occupant financing is much lower than investment properties:

  • HUD, the parent of FHA, requires 3.5% down payment on one to four unit owner occupant properties
  • All government loans are for owner-occupant financing
  • Per Fannie Mae-Freddie Mac Owner-Occupant Multi-Family Mortgage Guidelines, Conventional Loans require 15% down payment on two unit properties
  • Fannie Mae-Freddie Mac allows investment property financing on conventional loans
  • Conventional Loans require 25% down payment on investment property 2 to 4 unit financing
  • VA Loans allows 100% financing on one to four unit owner occupant properties

USDA Loans do not require any down payment like VA Loans. Home buyers can qualify for USDA on one unit properties only with no down payment. However, borrowers need to meet USDA Mortgage Guidelines and the property needs to be in a USDA designated area. USDA does not allow two to four unit financing.

HUD Owner-Occupant Multi-Unit Mortgage Guidelines

HUD, the parent of FHA, requires 3.5% down payment on all one to four unit properties.

  • FHA allows 85% of potential rental income to be used as qualified income on debt to income ratio calculations
  • FHA loans come with stipulations when it comes to financing for multi-units
  • Potential rental income is derived by the home appraiser
  • Two unit properties require one month of reserves
  • Three to four units will require three months of reserves

One month of reserves is one month of principal, interest, taxes, insurance. It is often referred to as PITI.

Owner-Occupant Multi-Family Mortgage Guidelines On Conventional Loans

Freddie Mac Home Possible Conventional Loan Programs allow 5% down payment on multi-family property financing.  Freddie Mac Home Possible loan programs program allows as little as 5% for the down payment for 2-4 units with no income restrictions.

Freddie Macrequires 15% down payment on two unit owner-occupant home purchases. 3 to 4 units require 20% down payment. 2 to 4 unit non-owner occupant investment properties require 25% down payment.

Freddie Mac allows up to 75% LTV on cash-out refinance on owner occupant properties. Investment properties cash-out Freddie Guidelines allows up to 70% loan-to-value.

Fannie Mae primary owner-occupant multi-family mortgage guidelines require 15% down payment. 3 to 4 units require 25% down payment. Investment properties require 25% down payment on 2 to 4 units. Fannie Mae owner-occupant multi-family mortgage guidelines on cash-out refinance on 2 to 4 unit homes allow up to 75% LTV. 2 to 4 unit investment properties allows up to 70% LTV.

Borrowers who need to qualify for owner-occupant multi-family mortgage loans with a direct lender with no overlays on 2 to 4 units can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are direct lenders with no overlays on government and conventional loans. We also offer non-qm, bank statement loans, and alternative financing mortgage programs. We are available 7 days a week, evenings, weekends, and holidays.

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