In a momentous shift in policy, Fannie Mae has made an exciting announcement. Starting the Monday after November 18, 2023, Fannie Mae will update their automated system to now accept down payments as low as 5% down for owner-occupied 2, 3, and 4-unit (multifamily) homes. This marks a significant departure from the previous financing requirements that mandated down payments as high as 15-25% for duplexes, triplexes, and fourplexes.
This change extends to standard purchases, no-cash-out refinances, HomeReady, and HomeStyle Renovation loans for owner-occupied transactions. This means that first-time buyers and those seeking relief from high mortgage payments can take full advantage of Fannie Mae's more accessible financing options. The maximum loan amount allowable for these 2-4 unit properties is capped at $1,396,800, ensuring that larger and more costly properties can be acquired with greater flexibility. Furthermore, the removal of the FHA self-sufficiency test for 3-4 unit properties means that potential buyers will encounter fewer obstacles when seeking pre-approval for these multifamily homes.
Understanding the FHA Self-Sufficiency Test for 3-4 Unit Properties and it's Affect on 2-4 Unit Mortgage Financing:
Prior to this change from Fannie Mae, most borrowers were forced to have to take an FHA loan on the 2-4 unit multifamily property. To meet the low down payment requirements, FHA"s "Rule 75" stated that 75% of the properties total rental income must exceed the monthly mortgage payment. This percentage had to be enough to cover the full payment, which includes Principal, Interest, Taxes, and Insurance (PITI).
Fannie Mae's policy change presents an incredible opportunity for home buyers interested in investing in multifamily homes while avoiding the need of a "self-sufficiency test". Aspiring owner-landlords can now more easily afford these properties, all thanks to Fannie Mae's reduced down payment and easier loan qualification requirements.
Mortgage borrowers looking to capitalize on this opportunity can submit their application today, with the changes set to be integrated into Fannie Mae's system after November 18, 2023. This allows potential buyers the time to prepare and assemble all the necessary documentation ahead of the new policy implementation. For owner-occupant landlords, this policy shift signifies a substantial opportunity to reduce mortgage payments by harnessing rental income. The ability to make a smaller down payment not only makes multifamily homes more accessible but also empowers home buyers to gain invaluable landlord experience. They can collect rent from other units while concurrently building equity in their own property.
Fannie Mae's decision to lower the down payment requirements for multifamily homes is a promising step toward enhancing access to credit and affordable rental housing. With this progressive policy change, the dream of owning a multifamily home while generating rental income becomes more accessible to mortgage borrowers. Onshore Mortgage is eager to help you navigate the process and achieve your goal of becoming the owner of a multi-family home. Contact us to find out if you are eligible to purchase a multi-family residence today.
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