Fannie Mae Announces 5% Down Payments
You aren’t just hearing things, Fannie Mae recently announced a huge policy shift when it comes to down payments for multi-family.
Previously, the down payment requirement for multi-family homes was 15%-25% of the property’s sales price.
In November Fannie Mae introduced a 5% down payment option for owner-occupied 2-, 3-, and 4-unit properties. This policy change opens a lot of doors for investors, especially those who are new to the market. Let’s look at the details.
FHA Rule Eliminated
The recent change to FHA Rule 75 has brought relief to buyers who are interested in investing in 3-4 unit multifamily properties. This rule, which required 75% of rental income to exceed the monthly mortgage payment, is no longer a requirement for 3-4 unit properties.
This change simplifies the process and creates an easier path for investors. It allows them to secure pre-approvals for multifamily properties with greater ease.
New Loan Cap Amount
The new policy applies to standard purchases, no cash-out refinances, HomeReady and HomeStyle Renovation loans for owner-occupied properties.
First-time homebuyers and borrowers looking to offset high mortgage rates can now benefit from a conventional loan and use rental income to pay a portion of their mortgage.
The new loan caps are:
2-unit homes: Maximum loan of $929,850
3-unit homes: Maximum loan of $1,123,900
4-unit homes: Maximum loan of $1,396,800
More Qualifications to Meet
There are a few additional requirements to qualify:
- You must pay closing costs. Approximately 2-4% of purchase price.
- Must have a reserve of six months of full payments.
- Must have existing housing expense(e.g. rent payments)
Who Does This Appeal To?
This is a great chance for first time investors or even first time property owners to get their foot in the door, literally.
Millennials and Gen Z are specifically going after these types of options, and have even coined it “House-Hacking.”
Due to high interest rates and high price points, these generations are less able to afford their own homes compared to other generations.
Renting out a room or being a live-in, multi-family investor is a great way for them to be able to afford buying.
This 5% down payment is a game changer, especially for newer investors or even new property owners.
While you have to have some capital up front, these interest rates simply cannot be beat- especially when you are also living on-site.
Do you see this raising the bar with multi-family properties?
Are you now more interested in multi-family investment due to the new rates?
Let us know in the comments!