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Fannie Mae announced a drastic policy change that will go into effect on November 18th 2023. The policy changes the current financing requirement for multi family homes which currently requires a 15-25% down payment for all owner occupied 2, 3 and 4 unit properties. The announcement was made that Fannie Mae will soon accept a 5% down payment for any owner occupied multi-family properties with 2-4 units.

Buying a Multi-Family Home

This policy change makes it easier to buy a multi-family home. The ability to buy a multi-unit property makes affordable housing more accessible in the Upper Valley by allowing more buyers the opportunity to leverage rental income to reduce mortgage payments. Owners also gain valuable landlord experience.

The current requirement of a 15-25% down payment can hinder a buyer’s options for purchasing since multi-unit properties can carry a higher price tag because of the earning potential. 

The change to a 5% down payment option on a property with multiple units will open up the possibilities for buyers with smaller down payments.

Previously the only option for a low down payment on a multi family property was FHA which was limited by FHA requirements such as property condition, loan amount and self sufficiency tests. These requirements could make it challenging for some properties and borrowers as not all qualify for FHA.

Too Good to Be True?

While Fannie Mae’s 5% down payment announcement is a huge change and a big opportunity for some, it is important to remember that interest rates and loan terms are determined by several factors. The property itself, the buyers credit score, the down payment amount and the occupancy of the property will all contribute to the specifics on the loan and translate into points and fees. 

A buyer may find that with a 5% down payment on a multi-unit property that the points scenario based on the factors above can make the loan more expensive and perhaps even unable to receive approval through underwriting with the smaller down payment. 

Keeping this in mind it is still an exciting change to how these properties are looked at and could increase opportunities for many buyers. 

If you’ve been considering buying a multi-unit property but do not have the full 15%-25% down payment currently required, reach out to one of our loan officers today to discuss your options and how a multi-unit loan could look for you with this down payment change.

The Bottom Line – Down Payment Amount

The current real estate market in the Upper Valley is highly competitive and according to the median sold home price in Lebanon, NH is $517,000 and the median sold home price in Hanover, NH is $765,000.

If you were to do the math on a $550,000 multi-unit property, a buyer today would need $82,500 – $137,500 for their 15%-25% down payment. Once the Fannie Mae change happens on November 18th 2023 the minimum down payment of 5% would be $27,500.

It is easy to see why this change could be a huge benefit for certain buyers. 

If you are looking to buy a multi-unit property in the Upper Valley, you need a team of local real estate experts on your side. Our team collectively boasts over a century of industry experience and is well versed in a variety of loan programs including fixed mortgages, ARMs, VA loans, FHA, first time homebuyer and more! We have the privilege of partnering with the best local agents, appraisers and attorneys the Upper Valley has to offer. When you work with Legacy Mortgage you are working with the best local professionals from beginning to end. Reach out to the Legacy Mortgage team to get the loan process started. Call us today, 603-643-7400.