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.
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.