Investor · Bay Area, CA · Member since 2023 · 15 posts · 9 votes
Hi BP,
I've applied for the new 5% down multifamily primary residence loan option for a 3-unit property, but keep getting denied at the Automated Underwriting System (AUS) stage.
I have good credit (690), 24 months of reserves, and something like 40% DTI... and the lenders I am working with are not sure why the AUS is denying my application with these specs.
I've heard 3-4 unit conventional/primary residence loans are more difficult to achieve with the new low 5% down payment option... I'm wondering if anyone has been successful at closing with this type of loan product and if so, what factors (credit/DTI/reserves, etc) were required for you to be approved? I'd like to understand which factors are weighed most heavily in the underwriting stage so I can try to get approved.
Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
2y
It would be hard for anyone on here to speculate with any degree of certainty. However I will say financing 95% at today's high interest rates with 33% of the units not generating income sounds like a tough hurdle to overcome in this market, even if you're pulling in strong W2 income.
I've applied for the new 5% down multifamily primary residence loan option for a 3-unit property, but keep getting denied at the Automated Underwriting System (AUS) stage.
I have good credit (690), 24 months of reserves, and something like 40% DTI... and the lenders I am working with are not sure why the AUS is denying my application with these specs.
I've heard 3-4 unit conventional/primary residence loans are more difficult to achieve with the new low 5% down payment option... I'm wondering if anyone has been successful at closing with this type of loan product and if so, what factors (credit/DTI/reserves, etc) were required for you to be approved? I'd like to understand which factors are weighed most heavily in the underwriting stage so I can try to get approved.
A few tricks that I like to use that will often get the AUS to approve, after it denies at first cut due to "risk layers" (low fico + using rental income to qualify + 5% down + 2-4 unit + 1 borrower):
- Document add'l reserves. On your end, did you upload *all* bank and retirement account statements? And, if so, did the LO document that for the AUS? The AUS likes solid reserves.
- Increase the down payment. Maybe it denies your profile at 5% down, but approves at 10%.
- Shorten term. 30YF is at 40% DTI, maybe 25YF is at 44% DTI, and it likes that better. Just giving the AI Overlords the option.
- Adding the non-income-generating spouse. The AUS likes having multiple borrowers, even if the 2nd borrower adds no income.
If/when your FICO score pops up, I suspect all of this will go away and you won't need to "coerce" the AUS into approving you.