Is anyone still offering 5% down for owner occupied multifamily?

[Harry McNamara]

Hello BP lender community!

I am an agent in the Hudson Valley area. I currently have a client who is in contract on a very interesting multi use property, and we're running up against this issue with more than one lender. They have both come back with 15% minimum down payment on multifamily. Is anyone still offering 5% down on multifamily, with owner occupying the property? 

Right now we are hoping for the appraisal to come back as single family with accessory apartment, which will clear the buyers with these current lenders, but if the appraiser sees highest and best use as a multi-family, we may be looking for backup lenders. Must work in NY. 

Thanks all!

[Chris Mason]

Quote from @Harry McNamara:

Hello BP lender community!

I am an agent in the Hudson Valley area. I currently have a client who is in contract on a very interesting multi use property, and we're running up against this issue with more than one lender. They have both come back with 15% minimum down payment on multifamily. Is anyone still offering 5% down on multifamily, with owner occupying the property? 

Right now we are hoping for the appraisal to come back as single family with accessory apartment, which will clear the buyers with these current lenders, but if the appraiser sees highest and best use as a multi-family, we may be looking for backup lenders. Must work in NY. 

Thanks all!

 Sounds like your client read some BP content from before July 2019. Prior to that, Freddie Mac's Home Possible would go for that scenario if the census tract was low income, even if the borrower was high income. Then a bunch of people, myself included, started talking about it too much on BP, and putting high income persons in triplexes with 5% down. The powers that be got wind of all this, and changed the rule.

After that change, they must now be "very low or low" income relative to the census tract. But that creates a "goldilocks zone" issue - they need to be low enough income to use the program with 5% down, but high enough to qualify for a loan of the size needed to buy a duplex, triplex, or fourplex, in that same area. 

Other than that, as you already know, you could pivot to FHA. Reminder that conventional appraisals can't be used for FHA loans, but FHA appraisals can be used for conventional loans. So you are likely looking at another appraisal if you do this pivot.

However, most of the time the SFR w/ ADU is correctly appraised as an SFR w/ ADU, and it's a non-issue.

Good luck.