The Right Way to Finance a Duplex or Multi-Unit Home

Mortgage loan on a keyboard

For buyers of three or four unit homes and duplexes, mortgages are available. You would have to do your part in researching what you need before investing in something. This is because the choices for funding homes will rely on you if you plan to stay in one of the units.

Owner or Investor Occupants

Owner occupants can select between conventional financing, Veterans Affairs (VA) loan and an FHA multifamily loan, but they can only limit themselves to typical mortgage loans. According to Peter J. Boyle, a senior loan originator from a mortgage lending firm, the best means of financing for owner-occupants is through an FHA loan. With this loan, they only have to provide a 3.5% down payment even if they are buying a multi-unit building.

On the other hand, investors must utilize conventional financing and place a down payment of at least 20% for a duplex. If they prefer a property that has more units, the lenders require a minimum down payment of 25 to 35%.

Greg Altemus, a loan originator from a different mortgage lending company, remarks that lenders are hesitant in approving investor loans because they come with higher risks. These investors would need to have more cash reserves and have a higher credit score to qualify for a multi-family mortgage.

Qualifying for a Multi-family Mortgage

Individuals who want to buy multifamily homes are required to comply with the standard guidelines for conventional mortgages and FHA loans. The best rates will go to the borrowers who have an excellent credit score. The FHA requirements for multifamily and single-family properties are alike, but the buyers must have an occupying co-signer for the FHA loan on a multifamily home.

For buyers who want to own multifamily homes, they must study the city and county programs that can offer low-cost loans or down payment assistance. This way, they can be ready to avoid future financial setbacks.