Only 5% down for duplex, triplex, 4-flex

Good news for people who want to invest in real estate or create more wealth through equity!

Fannie Mae announced that beginning November 18, 2023, they will reduce the down payment requirement from 15% to only 5% for an owner-occupied duplex, triplex, or 4-plex property.

How It Works

You put down 5% and Fannie Mae carries the rest of the loan. You must live in one of the units for a minimum of one year. After that, you may turn it into 100% rental, if you like. Your income must qualify, but rental income for the additional unit(s) does count. A rental appraisal or current rent-lease determines the income used; but be aware that only 75% of the rent is used for qualifying purposes.

As with all rental properties, 25% of the rent is considered “maintenance money” and isn’t used by underwriting for income. For example, if the rent you receive is $2,000/month, then your rental income will be $1,500 for qualification.

Your credit must qualify, also; and that can vary from lender to lender — which is why I highly favor going to a mortgage broker rather than a bank. A mortgage broker can shop wholesale lenders to get you the most lenient lender, if needed; or the strictest lender with the lowest rate, if your credit is stellar.

Where to Get It

All mortgage brokers and any bank or lender that uses Fannie Mae money for loans. Many credit unions don’t use Fannie Mae money, so they would be last on my list. I favor going to a local mortgage broker, as mentioned above.

This loan program will be available in all 50 states, come Monday, November 20th.

Why This is Important

The ability to buy a duplex, triplex or 4-flex and use your renter’s income to pay for your own unit is a fantastic opportunity.

“One of the surest ways to build wealth over time is to offset a liability with an income-producing asset,” says Donielle Geiser, Thrive Mortgage Chief Operations Manager. And I agree!

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