5% down conventional loan on multi-family duplex?

10 Replies

Yep. Your lender is accurate.

It's possible to put down much less, like 3.5% - 5% on a non-conventional loan, like an FHA loan (as I did when I bought my first duplex). What confuses some people is the terminology used by lenders. 

"Conventional" really refers to the standard types of financing where people put down 15, 10, or even 25% and get a loan on the property - factors like good credit scores, tax returns, personal guarantees, etc are usually involved, and you can get this from most banks around the country at comparable rates - make sure to shop around anyways though!

If you want to go outside of these terms and do something a little different - put less money down, get different terms, use it for different types of properties, NOT personally guarantee the loans, etc then you will need non-conventional financing. 

Non-conventional financing is just that - non-conventional. The terms are limited only by your creativity and the relationships you form, but are much harder to come by. 

A good starting point for a newer investor that is looking to put down less than the standard 15-20% is the FHA loan for a 2-4 unit building as I mentioned earlier. You will, however, be subject to special terms that produce drawbacks - for example, you are compelled to move into and live in the subject property for a full year.

Lynzie,

For a Conventional loan on investment property, 2-4 units, requires 25% down. SFH on Conventional is 15% down.

Best wishes on your deal!

Tod Novak

Originally posted by @Lynzie Mackey :

Just talked to my lender who said I HAVE to put 15-20% down for a conventional loan on a duplex.  Is this accurate?

3.5% down if owner occupied, via FHA.

15% down if 2 unit owner occupied, Fannie.

25% down if 3-4 unit owner occupied, Fannie.

25% down if 2-4 unit investment property, Fannie.

For the FHA financed 2-4 unit property. If it is currently occupied in all units can you still purchase it with FHA financing and then move in after one of the tenants leases expires? In other words does that year living requirement have to start immediately after purchase? It's difficult in my market to find somewhere that is completely or partially unoccupied.

FHA requires owner occupancy within 60 days of closing unless there is a rehab loan involved, if all units tenant occupied, you can make that part of your deal that one unit becomes available once you close or you can pay one tenant to break lease and move, you will also have to 3 months of PIT ( principle, insurance, taxes) available for the loan

Originally posted by @Anthony Angotti :

For the FHA financed 2-4 unit property. If it is currently occupied in all units can you still purchase it with FHA financing and then move in after one of the tenants leases expires? In other words does that year living requirement have to start immediately after purchase? It's difficult in my market to find somewhere that is completely or partially unoccupied.

I've got a deal in the works right now in this situation. Close of Escrow is going to be drawn out until one of the tenant's lease expires and said tenant vacates. But the important thing is that it's tied up in contract & off the market NOW, meaning my client gets it unless HE wants to back out, assuming the inspections/appraisal/blablabla all line up.

thank you everyone! I'm glad to see that it's possible Chris. Was the seller at all reluctant to do this? If so did they fight back and how did you negotiate to have it agreed on?

That was a few dozen deals ago @Anthony Angotti ... but I don't remember it, so that means it either closed OR the buyer backed out for some reason and was happy to do so. Else, It'd be seared into my memory. 

Is it possible to secure a conventional mortgage on a duplex that considers the loan as a single family loan? If my income was high enough I didn't need the rental income from the second unit to live in the first, could I then put just 5% down?

Thanks!