Multi-Family less than 25% Down

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Multi-Family less than 25% Down

Dan Hoehn

Investor · St. Louis, MO · Member since 2017 · 37 posts · 31 votes

Has anyone had luck securing conventional financing for 4 family properties with less than 25% down?

If you happen to have a lender contact in St. Louis, please pass it on.

Thanks,
Dan

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Andrew PostellPro Member

Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes

@Dan Hoehn if you are not occupying the property the Fannie Mae/Freddie Mac minimum down payment requirement on a 2-4 unit property is 25% down. If you occupy the property the minimum is 15% down. A bank is allowed to be more strict than this (so 30% down if they wanted to require it) but they are not allowed to be less strict. The alternative here would be to use a "portfolio" loan. A portfolio loan falls outside of the Fannie/Freddie guidelines because it's terms come from the bank itself. It is money from the bank's portfolio of money...thus the name. However, if you find a portfolio loan that does allow 20% down then you will pay a difference in the rate being higher, or the rate might be adjustable, or it might be a shorter term (which will make your payment higher) and sometimes it's all three of these features. This may not be what you want to hear but it's the right information to have. If you have more questions feel free to ask. Thanks!

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Andrew PostellPro Member
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
9y
@Dan Hoehn if you are not occupying the property the Fannie Mae/Freddie Mac minimum down payment requirement on a 2-4 unit property is 25% down. If you occupy the property the minimum is 15% down. A bank is allowed to be more strict than this (so 30% down if they wanted to require it) but they are not allowed to be less strict. The alternative here would be to use a "portfolio" loan. A portfolio loan falls outside of the Fannie/Freddie guidelines because it's terms come from the bank itself. It is money from the bank's portfolio of money...thus the name. However, if you find a portfolio loan that does allow 20% down then you will pay a difference in the rate being higher, or the rate might be adjustable, or it might be a shorter term (which will make your payment higher) and sometimes it's all three of these features. This may not be what you want to hear but it's the right information to have. If you have more questions feel free to ask. Thanks!
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
Here's a quote from @Austin Fruechting:- "I buy with 10% down with my bank, portfolio lender... so long as their max LTV is 70%".
https://www.biggerpockets.com/forums/49/topics/441...
The clue is in his portfolio Lender's assessment of "LTV" (rather than purchase price). Good luck...
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Dan Hoehn
OP
Investor · St. Louis, MO · Member since 2017 · 37 posts · 31 votes
9y
Andrew Postell and Brent Coombs thank you for the clarification, that is exactly the info I was looking for. I have heard of other investors in my area securing SFH at 15% and I wasn't sure if regulations were loosening.
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
@Dan Hoehn, getting in for just 15% down for SFR investing is NOT a loosening of Fannie Mae rules, but, if they were to allow that for 2-4 MFRs, then THAT would be!
Regarding investments, here is the Fannie Mae Eligibility-Matrix link which mentions 85% loans for Single Units ONLY:- https://www.fanniemae.com/content/eligibility_info...
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Eric James
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
9y
@Andrew Postell , a mortgage broker I am currently using to purchase a SFR told me if I would later like to purchase a 2-4 apartment property I could finance with 20% down. Do I understand you are saying he is incorrect?
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
@Eric James, I just read what Andrew wrote, and he did NOT suggest that your mortgage Broker would be wrong about you being able to finance a 2-4 MFR investment with just 20% down.
BUT, at a higher interest rate? An adjustable interest rate to boot? A shorter term?
I suggest you start now, and save up an extra 5% deposit for when the time comes.
(Or, you could try to find the same portfolio Lender as @Austin Fruechting uses?)...
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Eric James
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
9y
@Brent Coombs mortgage broker quoted 30 year fixed at 4.125%. Is it that a lender has to require 25% down if they are lending at a certain lower rate?
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Jeffrey VanGilder
Enfield, CT · Member since 2017 · 73 posts · 26 votes
9y
I drove by a billboard for a local bank here in Connecticut that is offering 1% down on a 4 family.
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
Originally posted by @Eric James:
@Brent Coombs mortgage broker quoted 30 year fixed at 4.125%. Is it that a lender has to require 25% down if they are lending at a certain lower rate?
The devil can be in the detail, but if you can find investment 4-plexes for just 20% down, 4.125% fixed for 30 yrs - but can't find ones that'll cash flow well, how hard are you really trying?
Just get it done!...
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
Originally posted by @Jeffrey VanGilder:
I drove by a billboard for a local bank here in Connecticut that is offering 1% down on a 4 family.
What I just wrote above can equally (or perhaps more so?) apply to you? Cheers...
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Eric James
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
9y
@Brent Coombs . I don't think I have said I can't find properties that cash flow.
1 Reply
John Knight
Flipper · Bridgeport, CT · Member since 2017 · 21 posts · 9 votes
9y
Jeffrey VanGilder what was the name of that local bank?
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Andrew PostellPro Member
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
9y
@Eric James are you going to occupy the property? 30 year fixed rate at 4.125% on a multi-family property sounds strange. Something is up with those numbers. It is possible for a bank to offer a 20% down option but it would not be a conventional loan. I would love to speak with that bank. Not only would that be the best rates in Texas, that would be the best rates in the Nation. I have a feeling something was misquoted. Would you mind PM me that bank's info?
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Jason A.
Investor · NY · Member since 2014 · 67 posts · 24 votes
9y
it may have been covered here but as you may know, if you occupy the property you may consider an FHA loan. typically this would require 3.5% - 5% down payment - as long as you can satisfy the "occupancy" criteria for whatever period of time, could be something worth considering.
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David Krulac
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
9y
We did a deal recently on a multi-family non-owner occupied conventional mortgage from a credit union, where the CU financed 80% LTV the buyer put up 10% and the seller took a second mortgage for 10% and the CU was ok with that arrangement.
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Dan Hoehn
OP
Investor · St. Louis, MO · Member since 2017 · 37 posts · 31 votes
9y
Jim Blackburn that would be a great deal, but there is no way my wife would live in one of these units.
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Jim BlackburnBusiness Member
Lender · Florida Based (48 states Puerto Rico) · Member since 2017 · 321 posts · 121 votes
9y
@Dan Hoehn - lol. I hear ya on that!
954-993-1625
Stairway Mortgage, a Division of NEXA Mortgage LLC597 Reviews
Website View Page
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Jeffrey VanGilder
Enfield, CT · Member since 2017 · 73 posts · 26 votes
9y
Sorry guys I was mistaken on the rate posted in on the billboard in Hartford. 5% multi family
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Miguel M.
Rental Property Investor · Lynn, MA · Member since 2014 · 37 posts · 4 votes
9y
@Jeffrey VanGilder What bank? Would love the name, even if now it's 10% and not 5% ;-) Thanks.
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Jeffrey VanGilder
Enfield, CT · Member since 2017 · 73 posts · 26 votes
9y
American eagle federal credit union.
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Jon Robbins
Investor · Lancaster, PA · Member since 2013 · 21 posts · 2 votes
9y
@David Krulac Awesome! Mind sharing which credit union you used for that deal?
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John Gach
Buffalo, NY · Member since 2017 · 62 posts · 56 votes
9y
I'm trying to research, so I apologize if I am hi-jacking this thread.
If I already have an FHA loan on a house with my girlfriend that we have been living in for 3 years, would I be able to qualify for a conventional or FHA loan on a multiple family home with less than 25% down by saying I will live in it (owner-occupy), and actually living in it? I was told no lender would believe that I would live in the multiple family home unless I sold my house.
Basically I found a house I like, and I wasn't really planning to buy an investment property so I don't have any money saved up, but I have my 401k I would borrow from if it would some how make it work out.
thx
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
@John Gach, your story reminded me of this thread:- https://www.biggerpockets.com/forums/49/topics/442...
But as you can see, Christian HAS run into loan Officers who question his reason for moving. Banks retain their own rights as to who they loan to. Why not "interview" a few different Banks?
There shouldn't be anything "technically" stopping you from getting a new FHA loan once you refinance out of your first one. (But of course, that refi wouldn't be an owner-occupier loan at lowest interest, unless you wanted to see out ANOTHER 12+ months there after refinancing).
How's your current equity situation shaping up? More than 20% already? All the best...
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John Gach
Buffalo, NY · Member since 2017 · 62 posts · 56 votes
9y
@Brent Coombs if I refinanced out of my current one I would have to pay closing costs again right? Or could I just deed the house to my girlfriend who bought it with me 3 years ago, would that allow me to do a FHA loan OO for the house with very minimal down?
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
@John Gach, I don't personally recommend that couples should try to skirt the intention of FHA by getting TWO concurrent FHA loans for different addresses, when they clearly live with each other.
Paying a loan fee every time you refi is part of the cost of doing business. Treat Banks as if you were car shopping: ie. research the best value / lowest cost available. Cheers...
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