Do 5% down multi family loans even exist?

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Do 5% down multi family loans even exist?

Rental Property Investor · Temecula, CA · Member since 2019 · 128 posts · 54 votes

Hello BP collective genius,

I bought my first duplex 10 years ago and was able to secure a loan with only 5% down. Do these loans even exist anymore? Appreciate any help.

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Kevin Romines

Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes

FHA 1-4 Unit (only for owner occupied) is 3.5% down. Freddie Mac Home Possible (again, only for owner occupied) is 5% down. A conventional purchase as an investment would be 15% down for a single family and 25% down for a 2-4 unit property. Some portfolio will go to 80 or 85% on a 1-4 unit non-owner occupied without MI, but at higher rates than conventional loans.

I hope this helps?

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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
@Chris Mason would know. FHA is the loan that pops to mind, but thats for owner occupants.
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Kevin Romines
Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
7y
FHA 1-4 Unit (only for owner occupied) is 3.5% down. Freddie Mac Home Possible (again, only for owner occupied) is 5% down. A conventional purchase as an investment would be 15% down for a single family and 25% down for a 2-4 unit property. Some portfolio will go to 80 or 85% on a 1-4 unit non-owner occupied without MI, but at higher rates than conventional loans.
I hope this helps?
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Paul Choi
Rental Property Investor · San Ramon, CA · Member since 2017 · 350 posts · 611 votes
7y
Just to add, 5+ multifamily units will need 25% min. down typically.
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Stephanie MedellinBusiness Member
Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
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Only for owner occupants.
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Account Closed
United States · Member since 2015 · 47 posts · 28 votes
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Waiting for @Chris Mason’s response as well. He always provides informative/solid financing advice on BP.
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Chris MasonPro Member
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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
Originally posted by @Account Closed:
Waiting for @Chris Mason’s response as well. He always provides informative/solid financing advice on BP.

It's just FHA as of a few weeks ago. The loophole was closed.
The way it plays out in California:
95% LTV FHLMC Home Possible caps your income at 80% of census tract median income (as of a few weeks ago). If you can qualify for the mortgage amount without "counting" the rental income, you will be over that limit. If you need to "count" the rental income, it will push you over that limit.
So it's FHA, get a PHENOMENAL deal rendering my above statement untrue (off-MLS, like if the seller is your drinking buddy or something), or put down a large down payment, for the time being.
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Lien VuongBusiness Member
Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
7y
Yes - FHA or HomePossible has those programs that would help, they have min. 3.5% down for multi family purchases.
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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@Chris Mason That loophole helped some of my clients get owner occupant financing the last couple years. The last couple weeks as you mentioned because of their situation we had to submit offers as FHA financing. Not the end of the world but not ideal.
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Rebecca Rogers
Member since 2019 · 3 posts · 1 vote
7y
@Matt Everling
We were going to do a Home Possible conventional loan, 5% down, owner-occupied, had to take a couple online quick courses. We ended up having to switch our loan type so we didn't go through with that one in the end.
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Matt Everling:
Hello BP collective genius,
I bought my first duplex 10 years ago and was able to secure a loan with only 5% down. Do these loans even exist anymore? Appreciate any help.

Owner occupied 2-4 units yes you can get several loan products similar to that. Non owner occupied no. Min 25% down on those.

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Matt Everling
OP
Rental Property Investor · Temecula, CA · Member since 2019 · 128 posts · 54 votes
7y
@James Wise
@Chris Mason
Thanks to you all for helping me figure this out! I guess that door has closed. Really appreciate your solid direction.
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Xavier Randall
Insurance Agent · Lakewood, CA · Member since 2013 · 171 posts · 98 votes
7y
@Matt

@Matt Everling If you go mainstream, as mentioned by some already, you have to be OO and 25% down. I did that on my last 4 unit. But I was able add value and increase the rents and my return. So I'll get the down payment back in 4 years easy. The only other options are if you find a local community bank that will give real estate loans under their business loan category. Next would be to negotiate an owner finance for 5% - 10% then refi out. I did that on my first 4 unit. Whenever I make an offer, owner finance for a year is my first ask. Lastly, the are companies like Corvest, Finance of America and some others that offer what is called a line of credit. Once you get approved for the line of credit (let's say $1M)...each transaction is 10%-20% down. Some will even convert you to a 30 yr fixed.
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Matt I.
Architect · Philadelphia, PA · Member since 2016 · 50 posts · 36 votes
7y
Follow up to this post... Can the owner occupant loan be used if you already own a house? Or is it strictly first Time buyers
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Brandi Scharrer
Northwest Arkansas · Member since 2019 · 43 posts · 23 votes
7y
Similar question to @Matt I. Can you have more than 1 owner occupant loan? For example, if you buy multiple properties that you live in but do STRs on as well.
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Matt Everling
OP
Rental Property Investor · Temecula, CA · Member since 2019 · 128 posts · 54 votes
7y
@Xavier Randall Thanks for your reply Xavier! You given me options to think about.
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Shawn Rasmussen
Revillo, SD · Member since 2016 · 33 posts · 14 votes
7y
@Matt I.
It depends on your current mortgage situation. If you have a conventional mortgage, not FHA, you can rent your house out, buy the multi-family with a FHA loan and move into one of the units.
If your current mortgage is FHA, you would need a valid reason, see FHA website, to have two FHA loans at once, or you could refinance the current house with a conventional mortgage.
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Chad McLeod
Member since 2019 · 58 posts · 60 votes
7y
Originally posted by @Brandi Scharrer:
Similar question to @Matt I. Can you have more than 1 owner occupant loan? For example, if you buy multiple properties that you live in but do STRs on as well.

Somebody can correct me if I'm wrong, but as far as I know you can only have one owner-occupied (primary residence) property. All other homes would either be designated non-owner occupied (investment) or vacation home.

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Matt I.
Architect · Philadelphia, PA · Member since 2016 · 50 posts · 36 votes
7y
@Chad McLeod right! But in my scenario I would move out of my current residence and owner occupy my next purchase. I would technically only owner occupy one residence
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Chad McLeod
Member since 2019 · 58 posts · 60 votes
7y
Originally posted by @Matt I.:
@Chad McLeod right! But in my scenario I would move out of my current residence and owner occupy my next purchase. I would technically only owner occupy one residence

Sorry, I was responding to Brandi's post. I probably should have made that more clear!

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Tashina Taylor
Gillette, WY · Member since 2019 · 85 posts · 18 votes
7y
Originally posted by @Xavier Randall:
@Matt

@Matt Everling If you go mainstream, as mentioned by some already, you have to be OO and 25% down. I did that on my last 4 unit. But I was able add value and increase the rents and my return. So I'll get the down payment back in 4 years easy. The only other options are if you find a local community bank that will give real estate loans under their business loan category. Next would be to negotiate an owner finance for 5% - 10% then refi out. I did that on my first 4 unit. Whenever I make an offer, owner finance for a year is my first ask. Lastly, the are companies like Corvest, Finance of America and some others that offer what is called a line of credit. Once you get approved for the line of credit (let's say $1M)...each transaction is 10%-20% down. Some will even convert you to a 30 yr fixed.

What kind of down are you looking at for owner financing?
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Nate Marshall
Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 736 votes
7y
On Multi Family you will need 20-25% down. No matter if you finance it or use a syndication you will need to take 20-25% to the closing table.
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Matt Everling
OP
Rental Property Investor · Temecula, CA · Member since 2019 · 128 posts · 54 votes
7y
@Nate Marshall I made a visit to Navy Federal Credit Union and they told me that they do investment property loans for 15% down. There is no PMI and they do not limit the number of loans.
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Nate Marshall
Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 736 votes
7y
@Matt Everling That's cool. They're not available to everyone though. I have an account with them.
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Jim Murphy
Jackson, NJ · Member since 2016 · 7 posts · 2 votes
7y
@Matt Everling I recently spoke to my mortgage broker I used for an FHA on a two-family back in November. She said that she would be able to approve me for 5% down on a two-family, or 10% on a three-family, owner occupied, but the property needs to be in a low to moderate census tract. Not sure if there is any special name for this type of loan, but I think there was some recent change in legislature or something to allow this. Wish I had more details for you but that's all I've got to run with for now! Goodluck!
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John Corey
London · Member since 2019 · 722 posts · 386 votes
7y
Originally posted by @Matt Everling:
@Nate Marshall I made a visit to Navy Federal Credit Union and they told me that they do investment property loans for 15% down. There is no PMI and they do not limit the number of loans.

The devil is in the detail. You need to check how many units on 1 title they will fund. 1-4 units will be handled differently than 5 or more. See what their limits are as they will have limits. If nothing else, they have a capital reserve limit and likely have a limit tied to the exposure to any one borrower. These limits come from the regulator for credit unions.
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