Two-To-Four Unit Multi-Family Mortgage Guidelines

This guide will cover qualifying for a two-to-four-unit multi-family mortgage loan. HUD Multi-Family Mortgage Guidelines enable home buyers to purchase 2 to 4-unit properties with a 3.5% down payment. John Strange of Mortgage Lenders For Bad Credit explains the definition of residential owner-occupant mortgage loans:

Any properties with up to 4 residential units are considered residential homes if owner-occupied. Multi-Family Mortgage Guidelines on down payment depend on the individual loan program. Buyers can purchase 2 to 4-unit homes with a 3.5% down payment.

Fannie Mae and Freddie Mac require a 15% down payment on two-unit properties on conventional loans. Fannie Mae requires a 25% down payment on financing 3 to 4-unit owner-occupant multi-unit properties. Freddie Mac requires a 20% down payment on 3 to 4-unit properties. This holds true even though it is owner-occupied multi-unit properties of up to four units. This article will cover and discuss qualifying for 2 to 4-unit multi-family mortgages.

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HUD Multi-Family Mortgage Guidelines On FHA Versus Conventional Loans

HUD, the parent of FHA, allows home buyers to purchase 2 to 4-unit owner-occupant properties with a 3.5% down payment. One of the units needs to be occupied by the owner. FHA minimum down payment requirement is 3.5%, but borrowers need a minimum credit score of 580 FICO. With Freddie Mac’s Conventional Home Possible mortgage program, a borrower is eligible for up to 95% loan-to-value on single-family homes but not 2 to 4 units.

When purchasing, Fannie Mae’s conventional guidelines allow a maximum loan-to-value of 85% for two units on conventional loans. Maximum loan-to-value is capped at 75% for 3-4 units on conventional loans. Maximum cash-out refinance loan-to-value limits are 75% for 2-4 unit multi-family properties.

Freddie Mac’s Multi-Unit Mortgage guidelines for a 2-unit primary residence, the maximum loan-to-value is 85%. It is 80% for 3 to 4 units. Homeowners may be eligible to cash out refinancing up to 75% LTV on multi-unit properties.

Investment Multi-Unit Mortgage Guidelines

Investment home financing is for conventional loans only. Government loans do not allow for investment property financing. For a purchase, Fannie Mae and Freddie Mac’s maximum multi-family loan-to-value ratios are capped at 75% for 2-4 unit properties. Homeowners may be eligible to cash out up to 70% for 2-4 unit investment homes. Mortgage Lenders For Bad Credit offers non-QM and portfolio financing for loan-to-values above 75% on multi-unit homes. All non-QM and portfolio loans are underwritten based on a case-by-case scenario.

Mortgage Guidelines On Reserves

Multi-Family home financing is considered a riskier investment by all lenders. All lenders require reserves on 2 to 4-unit loans. Two-unit homes may require one month of PITI reserves. 3 to 4 units will require three months of PITI Reserves. Reserves cannot be gifted funds. It needs to be the borrower’s funds

Lender Overlays Versus Agency Multi-Family Mortgages

Most lenders will have overlays on multi-unit financing. Mortgage Lenders For Bad Credit is one of the few national mortgage lenders with no overlays on government and conforming loans. This includes no overlays on 2 to 4-unit financing. Here are some typical multi-family mortgage overlays, and some common overlays include:

Requiring higher credit scores
HUD allows up to 85% of potential rental income to be used as qualified income
Fannie/Freddie allows up to 75% of the potential rental income to be used
However, many lenders will not allow borrowers with no rental or property management experience to use potential rental income
Debt to income ratio overlays
No manual underwriting

The team at Mortgage Lenders For Bad Credit has a national reputation for being able to do loans other lenders can’t. Over 80% of our clients are borrowers who could not qualify at other mortgage companies either due to a last-minute mortgage loan denial or stress during the mortgage process. Mortgage Lenders For Bad Credit are experts in multi-unit property financing. Please contact us at 800-900-8569 or text us for a faster response to qualify with a direct lender with no overlays. Or email us at gcho@gustancho.com. The Mortgage Lenders For Bad Credit team is available seven days a week, evenings, weekends, and holidays.