Multi-Family Mortgage Loan Requirements | Down Payment Options

Multi-Family Mortgage Loan Requirements | Down Payment Options

• Multi-family mortgage loan requirements depend on the mortgage company and agency guidelines.
• Finding the right multi-family rates and multi-family mortgage company can be a difficult task.
• The problem is multi-family property guidelines vary depending on guidelines and lenders.
  • Understanding the requirements will save time and effort.

Multi-Family Mortgage Down Payment

• The biggest factors that determine down payment options for multi-family property is credit, capacity, collateral, and intentions.
• Borrowers may get better terms when it comes to meeting traditional multi-family mortgage loan requirements.
  • The biggest factor on down payment options is occupancy type.
    • Occupancy type can be broken down into:
      • Investment multi-family property
      • Primary residence/owner occupied
      • Secondary residence
    • Traditional mortgages require full documentation of income and debt-to income ratios.
    • Non-traditional mortgages have debt-service coverage qualifying factors of the property and do not account for personal debt-to-income ratios.

Traditional Multi-Family Mortgages

• Primary occupancy requires lower down payment options than the others.
  • FHA multi-unit mortgages require as little as 3.5% and borrowers can apply for a home grant.
    • This includes financing for 1 to 4 units.
  • Conventional multi-family mortgages depend on the number of units and loan program.
    • As little down payment as 5% for 2-4 units for a primary residence.
    • 25% down for investment 2 -4 unit properties.

2 to 4 Unit FHA Multi-Family Mortgages

• FHA loans come with stipulations when it comes to financing for multi-units.
  • Cases depend on the Automated Underwriting System (AUS), which is run during the pre-approval process.
  • 3 to 4 units require the property to pass the self sufficiency test.
    • Total mortgage payment (PITI) divided by the monthly net-self sufficiency income cannot exceed 100%.
  • A minimum of three months mortgage payment (PITI) must be available and documented for reserves.
  • Rental income may be used when verified by the mortgagee.

2 to 4 Unit Conventional Mortgage Options

• For primary residences, Freddie Mac’s Home Possible program allows as little as 5% for the down payment for 2-4 units.
  • There are income restrictions on this loan program.
• Investment options:
  • Freddie Mac
    • Purchase and no cash out refinance:
      • 2 unit primary residence – 15% down
      • 3 and 4 unit primary residence – 20% down
      • 2 to 4 unit investment – 25% down
    • Cash Out Refinance:
      • 2 to 4 unit primary – up to 75% loan-to-value
      • 2 to 4 unit investment – up to 70% loan-to-value
  • Fannie Mae
    • Purchase:
      • 2 unit primary – 15% down
      • 3 to 4 unit primary – 25% down
      • 2 to 4 unit investment – 25% down
    • Cash out refinance:
      • 2 to 4 unit primary – up to 75% loan-to-value
      • 2 to 4 unit investment – up to 70% loan-to-value

Non-traditional Multi-Family Mortgage Loan Requirements

• Loan-to-values go higher than traditional loans, but often depend on the debt-service ratio.
• These loans are financed and available through wholesale portfolio lending or Non-QM loans.
  • They have a more common sense approach to underwriting and every borrower’s case scenario is different.
  • Underwriters will determine eligibility based on the ability to repay.

Multi-Family Rates

• Nationwide mortgage rates change throughout the day.
• A borrower can get connected with a licensed Loan Originator and get live pricing.
  • Live pricing is determined by the pricing adjustments.
• Early locks are made available when proper disclosures are signed.
  • Rates are final when an interest rate is locked and the loan funds.