What is a Multi-Family Home?
A multi-family home is a property with two to four separate living units within the same structure. For example, a duplex is a popular building model for a two-unit home, often with the house split down the middle and a distinct living area on each side. Properties with five or more units tend to not be considered a multi-family home and they generally require commercial financing.
With a low current mortgage interest rate, now is the right time to invest in a multi-family home.
Benefits of Purchasing a Multi-Family Home
- As long as one unit is primary residence of homeowner the property is considered owner occupied
- Financing available for up to four units giving homeowner the opportunity to make rental income off of open units
- Higher conforming loan limits keep rates down for multi-unit properties without the need for Jumbo financing
How do the financing requirements differ for multi-family homes?
Home buyers often do not realize that many two- to four-unit properties can be financed using the same loan programs traditionally taken out on single family homes. Moreover, when the owner of the home will live in one of the units as a primary residence, the property will be considered owner occupied (even if the other units are rented), and may qualify for more favorable mortgage terms.
The higher cost of multi-family homes sometimes leads borrowers to worry that they will be required to take out a Jumbo loan and potentially pay higher interest rates. However, the conforming loan limits (the amount under which Jumbo financing is not required) are higher for multi-unit homes than for single family homes. Currently, the conforming loan limit for a one-unit property is $417,000, for a two-unit home $533,850, for a three-unit home $645,300, and the limit reaches $801,950 for a four-unit property. These numbers climb even higher in high-cost parts of the country.
Available Multi-Family Mortgage ProgramsSome of the loan types multi-family home buyers can choose from include:
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