BREAKING NEWS: FANNIE MAE RELEASES 5% DOWN, 2-4 UNIT PURCHASE PROGRAM
Imagine buying a 2-4 unit property with only 5% down and holding on to a cash flowing property for lifetime residual income.
To expand access to credit and provide support for affordable rental housing, the maximum allowable LTV, CLTV, and HCLTV ratios for two- to four-unit, principal residence, purchase and limited cash-out transactions will be updated to 95%. This change will not apply to high-balance mortgage loans and loans that are manually underwritten. The table below highlights the updated LTV ratios.
The new table on loan to value ratios on multi unit properties illustrates the change to 5% down on 2-4 unit properties as a primary residence.
Lowered down payment requirements for multifamily homes
In a significant policy change, Fannie Mae has announced that, starting from the weekend after November 18, 2023, it will accept 5% down payments for owner-occupied 2-, 3-, and 4-unit homes. This marks a departure from the previous multifamily financing requirement of 15-25% down payments for duplexes, triplexes, and four-plexes.
This new option presents a great opportunity for individuals looking to invest in multifamily homes while also enjoying the benefits of homeownership. Prospective owner-landlords can now afford these properties more easily, thanks to the reduced down payment requirement by Fannie Mae.
Example 2 unit property located at1322-1324 Wayburn Ave, Grosse Pointe, MI 48230, listed for sale by Jacob Davis 313-886-9030, Jim Saros Real Estate Services.
Expanded financing choices and easier approvals for multifamily homes
The policy change applies to standard purchases, no-cash-out refinances, HomeReady, and HomeStyle Renovation loans for owner-occupied transactions. This means that first-time buyers and individuals seeking to offset high mortgage payments can take advantage of Fannie Mae’s more accessible financing options.
The maximum loan amount allowed for these 2-4 unit properties is set at $1,396,800, ensuring that larger and more expensive properties can be purchased with flexibility. Additionally, the elimination of the FHA self-sufficiency test for 3-4 unit properties means that buyers will face fewer hurdles when seeking pre-approval for these types of multifamily homes.
Example 2 unit property located at 1251 Wayburn St, Grosse Pointe Park, MI 48230, listed for sale by Paula Draper 313-310-0211, Higbie Maxon Agney Inc 313-886-3400.
Taking advantage of Fannie Mae’s policy change
Mortgage loan borrowers interested in taking advantage of this opportunity can apply now, with the changes set to take effect in Fannie Mae’s system after November 18, 2023. This gives potential buyers a chance to prepare and gather all the necessary documentation before the new policy implementation.
For owner-occupant landlords, this policy shift represents a significant opportunity to reduce mortgage payments by leveraging rental income. The ability to make a smaller down payment not only makes multifamily homes more accessible, but it also allows home buyers to gain valuable landlord experience, as they have the opportunity to collect rent from other units while simultaneously building equity in their own property.
Fannie Mae’s move to lower the down payment requirements for multifamily homes is a promising step towards improving access to credit and affordable rental housing. With this progressive policy change, the dream of owning a multifamily home while generating rental income is becoming more attainable for mortgage loan borrowers.
Let’s chat.
Chris Thomas
Mortgage Loan Originator
313-655-2423
Individual NMLS# 1526088
Company NMLS# 2084716
