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95% Conventional Financing for 2-4 Unit Properties – Special 5% down 2-4 Unit Financing

If you are a potential buyer seeking residency, a 2-4 unit multifamily property is considered an excellent investment for the future. They also have the highest benefits, with the fewest drawbacks. Often called duplexes, triplexes, and fourplexes, this type of property delivers the most confusion in regards to securing mortgage loan financing. 

Though a 2-4 unit is considered a semi mini-apartment, it is still considered a residential property. As a result, it becomes eligible for premium fixed-rate mortgage loan financing through government-sponsored enterprises – Fannie Mae and Freddie Mac. Conventional loans are called conforming loans because they “conform” to the Fannie and Freddie standards. This type of loan is especially useful for first-time borrowers who’ve established decent credit and saved for a hefty down payment. 

5% Down for 2-4 Unit Buildings

In recent years, Freddie Mac has changed its rules to permit borrowers to purchase 2-4 unit buildings with as little as 5% down through it’s Home Possible program. With this type of mortgage, no upfront mortgage insurance is needed, and monthly insurance can be removed once there is 20% equity on all types of loans. Additionally, there is no self-sufficiency rule, and the borrower must have a credit score of 700 or higher for 2-4 unit properties.

If you have diligently saved for a down payment or have a little more saved than you expected, consider a standard loan that requires only 5% down. For instance, if your loan is $150,000, you’ll only be required a down payment of $7500. Compared to the value of the home, the amount you borrow is known as the loan-to-value ratio (LTV). That affects your eligibility for specific mortgage programs, interest rates, and fees. 

Lenders base Private Mortgage Insurance (PMI) based on your LTV and credit score. Only a down payment of 20% will eliminate mortgage insurance. With a conventional loan, a 5% down payment gives you a 95% LTV. The higher the LTV, the greater the risk the lender takes. With a lower LTV, you may pay less in insurance, secure a lower interest rate. 

If you have questions, concerns, or need help with conventional financing for a 2-4 unit property, contact us directly so we can assist.