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Hello and welcome or welcome back wherever you are viewing this video. Some big new exciting changes coming from Fannie Mae. And if you’re looking at multi-unit, so two to four unit properties, if it’s five units plus that’s considered commercial. Another realm of financing. So two to four unit properties. Previously, if you were buying a property owner occupied, buying a duplex or a two unit minimum down payment on a conventional loan was 15%. If you were looking at a three to four unit residence, 25% was the minimum down. All changing here now allowing 5% down, so buying a multi-unit, two to four units, you can put down as little as 5%. Now there’s been the F H A product that allows for three and a half percent down, but on that F H A product, three to four units, there is a self-sufficiency test. And right now it’s very difficult to pass that test.
They basically look at the rents for the property, take 75% of those rents, and that amount needs to be equal or greater to the mortgage payment on the home. And with just three point a half percent down home prices today, interest rates, that’s difficult to have happen. The new product with conventional financing, 5% down does not have that. So if you qualify and you can use the rental income from the unit, you’re not occupying. So buying a two unit, you have another unit where you can use that rental income, a three to four unit, you have those other units, you can use that rental income to help qualify. And if you as an owner occupied using that other rental income, qualify with 5% down, that’s a realistic option nowadays. And again, before 15% down on a duplex or 25% down on a three to four unit.
So in a lot of markets, and you compare that to, hey, if I’m buying a single family residence versus if I’m buying say a duplex, more than likely that duplex is going to be going at a higher price. But when you look at the rental income you can receive from that other unit, whether it’s long-term rent, maybe a short-term rental, when you look at the rental income and factor that into your overall financial picture, oftentimes there’s greater affordability, more affordability when it comes to purchasing multi-unit properties. I personally own and live in a duplex. I live in one of my units and I do short-term rental on the other unit for this duplex, and it works out great and overall it’s having me pay less personally out of pocket compared to owning a comparable single family residence in the area. And I think we’re going to see more home buyers that weren’t even really looking at the two to four unit properties because of those larger down payments. It just hasn’t been something that a lot of say real estate agents really discuss with first time home buyers. I think we’re going to see more individuals look
At that opportunity, say, Hey, if I can manage another unit or two, rents are good in the area, what does that do to my overall picture and will this property work for my family? And I also looking at multi-generational living when you’re living with mom, dad, grandma, grandpa, senior living, senior care is quite expensive. So this allows opportunity for a lot of families to get in and decide what use they may want with that other unit or two that’s coming along with the unit that they themselves are going to be living in. Really a cool update for the overall lending environment for the real estate industry. If you have questions on this product, reach out, happy to help. But if you’ve been looking to purchase a single family residence, perhaps in the area, look at units, look to see what opportunities there are there. There’s a lot of really cool properties that are multi-unit that in a lot of ways there’s a unit or two that look and feel much like a single family residence and then you have a unit or two that you can rent out and rents across the us certainly here in Southern California where I’m at, are continuing to go up.
They’re very stable and we’re seeing an increase in rents because affordability is tight. Not a lot of inventory out there, whether you’re buying or renting. So to be in control of another unit, a hedge against inflation, inflation goes up. That typically causes things to get more expensive, including rent. That’s one of the biggest drivers that impact inflation. You are now in the game, you’re along for the ride, and you can do this all on a 30 year fix where each and every month your mortgage is being paid down. So reach out with any questions or at least look into the option if you haven’t already. Take care.
Senior Loan Originator
Over the past 15 years as a mortgage professional, closing on average 150 loans per year, I have gained a wealth of knowledge and experience about the mortgage industry. My goal with this website is to give you just the INFORMATION you need about mortgages with ZERO sales pitch. I hope you find my posts of value and share it with 1 other person who might find value in it as well.