25% Down Payment Required for Multi-Families? New Fannie/Freddie Rule?

28 Replies

I'm currently in on the hunt to purchase my first Multi-Family property and am going through all my pre-approvals with lenders so I can put an offer in on a Tri-Plex. I plan to "House Hack" and live in one of the units and rent out the others. 

My plan WAS to put 5% down and use a conventional mortgage HOWEVER I'm just now finding out that Fannie & Freddie now require a minimum of 25% down for 3 and 4 unit properties.

Have any of you ran across this same problem recently? When was this "rule" changed?

25% vs 5% is a significant difference that makes me re-evaluate if this is a good decision for me or not. I asked if this was specific to the Omaha, Nebraska area and was informed by several lenders that it was a national Fannie / Freddie stipulation. 

Any advice here would be greatly appreciated.

Tyler Bain


I am currently under contract for a 4 unit property and I'm able to get 20% down.  I spoke to several lenders and only 1 of 5 I talked to was willing to allow a 20% down payment.  Based on the lenders I spoke to, I felt fortunate to only put 20% for 4 units.  I also notified the bank that I would live in one of the units.  If you want to do better than 20%, you may need to shop around and expect a high rejection rate. 

perhaps nowadays, most 3-4 fams will be jumbo not conventional.

put down 20%+ and avoid mort insurance anyways

Not for owner occupant. We are putting 15% dwn. Double check your lender .

@Bryan Williamson  

Is that for a duplex or a 3/4 Unit? 

I was told for a duplex you're allowed to put down 15% but 3/4 units require 25% due to Fannie and Freddie regulations. 

I don't mind paying mortgage insurance if it means I only have to come up with $5,000 down rather than $25,000. My preference is to keep as much capital I have freed up for other investment opportunities rather than dumping a large portion of it into one property. 

@Lee G.

That's good to hear you were able to go below that 25% at least, gives me hope. Are you using conventional financing or FHA?

@Tyler Bain my mortgage broker is working through an FHA 3.5% down for me for an owner occupied duplex. Not sure about 3-4 units, they're still considered residential as far as I know. Definitely talk to some other brokers. The big banks are whack.


Fannie Freddie loan

Do the houses need work? If so try using a FHA 203K loan. If you use the standard variety, you should be able to get away with 3.5% down. You have to be an owner occupant though (looks like that is your plan). Some additional upfront cost and PMI for the life of the loan. But if it is a good deal, so it and refi latter

Are you planning on occupying one of the units?  Thats the only way you're getting anything close to 5% down.  That's not a change.  20% has been standard for some years now for investment properties.  

The type of loan you apply for will matter.

I suggest, given you only want to spend 5%, you ask for an FHA Loan.

An FHA loan, with an owner occupancy, will allow for a lower down payment, and in your case, it would be ideal.

Good luck!

@Jon Holdman

 Yes I plan to live in one of the units for the sole reason of taking advantage of the low down payment options. I'm still being told 25% is the minimum even with applying as owner-occupant.

@David G

That's good advice, it looks like my only option may be to go with FHA financing. The PMI for the entirety of the loan is what turns me away the most from FHA, however, as someone mentions above I could always refi later.

For a low down payment, OO loan, you want FHA. Not a fannie/freddie (i.e., "conventional") loan. That's where you're going wrong. AFAIK fannie/freddie have no low down payment (5%) programs for any size property. There may be VA or USDA programs with low down payments, too, if you and the property qualify. Sorry, not familiar with the details of those.

Fannie does have a 5% down loan, for a SFR only, and credit scores north of 680 I believe.

Originally posted by @Wayne Brooks :

Fannie does have a 5% down loan, for a SFR only, and credit scores north of 680 I believe.

 They actually have a 3% down program now.

Originally posted by @Jon Holdman :

@Wayne Brooks @Stephen Chittenden are those OO only programs? Is that a recent change or have I just not been paying attention?

 Yes, I believe so.  So, you would have to live in them for some time.

It is true.  I took out a loan on a duplex in Minneapolis last year and put 25% down.   Now that I know that's what I need for the next one, I have a lot of saving to do.  Work, work, save, save.  

@Tyler Bain I just bought a duplex a few weeks ago, I'm under contract for another, and am actively looking to move my personal residence. If you are planning to occupy the property, there are loans available where you can put anywhere from 0% (USDA, probably rural areas only), 3.5% FHA, and 5-10% conventional. You might have to look but they are out there. I would certainly look at FHA and just plan to refinance if you can't afford to do 10-25% down.

If you are NOT going to live there you will be required to put 25% down to get a conventional loan on a small multi, and 20% on SFR. Though I talked to one bank yesterday who said they may allow me to do a 75% first and 15% second and take the second out for the purchase - I was stunned (happily). I'm also talking to the same bank about getting a line of credit on an investment property I own, they are saying they may go up to 90% LTV. We'll see, hopefully it goes through.

@Tyler Bain

I am currently in the same boat. I was looking for a multiplex 2-3 unit house for my mother in law to live in and rent out the others so she was rent free. She got preapproved and my lender said on numerous occasions FHA was good up to a fourplex with 3.5% down. I was checking up on that online and found the same thing. However I actually found a good triplex and got the "Oh I looked back into the guidelines and now they only apply to SFR." Pretty ticked off. A duplex should still be doable with the low down payment FHA owner occupied though. All I can figure is the rules must have changed somewhat recently. Good luck!

@Jeremiah Perry

 That's exactly the same way it happened to me as well. First the banks were saying "No problem, 5% down is the minimum we require." Then once I started going through the approval processes each one started coming back saying their Underwriters recently informed them that 25% down is the minimum on a 3-4 unit. I'll keep pushing back on them and talking to other banks and report back my findings.

@Jon Holdman

3% down payment program is new. I did an OO 5% down conventional loan last fall. However, like it was mentioned, you must have high credit and it is only for single units.

@Tyler Bain I'd be quite surprised if you find a lender who will do a (Fannie/Freddie) conventional with less than 25% down on a multi, but you should be able to get an FHA loan with 3.5% down on a 1-4 unit property that you are going to occupy. FHA is a part of HUD, that is not the same as Fannie/Freddie conventional.

"Buying your first home?

FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price. Available on 1-4 unit properties."


@Dan B.

 Can you share which lender? I'm looking at small multi-families in the Twin Cities as well, and a 15% second would be a nice option.

You can find some lenders that will do 20% instead of 25% but you have to really look. I found two in the Washington and Idaho area that will do it out of the 10-15 I checked with.

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