Know Your Mortgage Limitations When Purchasing an Investment Multi Family Home You Will Live In
One of my favorite mortgage lenders, George Soutu, is sharing requirements home buyers must know to purchase owner occupied investment property (more than one family unit in a home) in this blog.
Buyers lack of understanding of mortgage financing requirements for different types properties. Recently Ginny Gorman asked me to write a blog on mortgage financing requirements for investment properties. There is a lot to cover in this topic so I will be splitting it into two blogs. The first blog will be on Mortgage Financing Requirements For Owner Occupied Investment Properties. The second blog will be on Mortgage Financing Requirements For Non-Owner Occupied Investment Properties.
Properties which have 1-4 units in them are classified as residential properties. Properties which have 5 plus units are classified as commercial properties and require commercial financing. In these blogs George will only address financing for residential properties.
If a borrower is purchasing a 2-4 unit property and they will be occupying one of the units, they can obtain mortgage financing through VA, FHA, and Conventional Loan Programs. USDA/Rural lending does not lend on multi family properties.
VA Loan Programs on 2-4 Unit Property Requirements:
VA loan programs is the only one that does not add additional requirements than they do for single unit properties. VA does not:
- Require reserve funds
- It does allow Seller Paid Costs are the same, 4%
- All required closing funds can be gifted (are allowed).
So on VA mortgage financing all the guidelines are the same for 2-4 unit properties as it is for 1 unit properties which the Borrower will occupy.
FHA and Conventional Loan Programs on 2-4 Unit Property Requirements:
Mortgage financing requirements for FHA and Conventional Loan Programs are much stricter for 2-4 unit properties which the borrower will occupy. Also besides the FHA, and Conventional Loan Program Guidelines, Investors (those who Lenders sell loans to after they are closed) will also impose additional requirements on 2-4 unit properties.
For example, some of the FHA and Investor requirements maybe:
- 3 months of buyers’ reserved funds on 3-4 unit properties.
- Reserved funds cannot be gifted.
- Reserved funds cannot be contributed from the Seller.
- Only 75% of the income from rented units maybe used.
- On 3-4 Unit properties the Principle, Interest, Taxes, & Insurance (PITI) cannot exceed the rental value of all the units.
Conventional Loans have even stricter requirements imposed by Fannie Mae, Freddie Mac, and Investors. Some of these requirements are:
- 80% maximum financing of the selling price or appraised value on 2 unit properties, whichever is the lowest.
- 75% maximum financing of the selling price or appraised value on 3-4 unit properties, whichever is the lowest.
- 5% of the down payment funds HAVE to be the borrower’s own funds 2-4 unit properties. These funds cannot be gifted.
- Reserves on 2-4 unit properties are determined by Automated Underwriting.
- On Fannie Mae backed loans, an additional 1 point Loan Level Price Adjustment (LLPA) is applied.
The above mortgage financing requirements for FHA and Conventional Loan Programs for Mortgage Financing Requirements For Owner Occupied Investment Properties, are not a complete list, but they are the most common.
Info about this blogs mortgage author and guest blogger, George Soutu:
Is a mortgage Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County. George Soutu can be contacted at (860) 573-1308 or firstname.lastname@example.org.
I appreciate George’s shares on mortgage information in the current real estate times with my web site readers at www.RIHouseHunt.com
Multi family mortgage requirements on owner occupied investment purchases are more involved than home buyers believe unless you can buy it with cash.
Rhode Island real estate agent, Ginny Lacey Gorman, lists, markets and successfully sells homes and waterfront property at top prices in Rhode Island at 401-529-7849 or email at Ginny@RiHouseHunt.com today. Real estate expertise that works for you the seller.