Conventional loan for 3-4 plex?

Question

Hi All,

OK so I'm a first time home buyer, I have couple of 3-plexes on my list and need to make up my mind now.  I'll be an OO landlord.

I thought that up to 4-plex I could use conventional loan with 5% down.  My mortgage broker says that in this case I can do FHA loan and a conventional one doesn't apply to multi-unit unless I'm putting down 20-25%.  Can someone in give me a word of advice here?  Thanks!

I know FHA is only 3.5% down, however higher PMI.

Patrick Britton · Answer

I think I should post a blog about this because I find myself answering these types of questions 2 to 3 times a day.

Conventional loan, owner occupied:

one unit - 95% LTV

two units - 85% LTV

3 to 4 units - 75% LTV

Conventional loan, non-owner-occupied (rental property)

one unit - 85% LTV

2 to 4 units - 75% LTV

This is straight from Fannie Mae's guidelines.  They do not vary from company to company.  If a bank or credit union or somewhere else is offering something different they are not selling that loan to Fannie Mae.  So, they must be a portfolio lender and hold mortgage on their books and charge a higher rate.

Sebastian, have your mortgage broker go over the following options (think monthly payment including taxes and insurance and mortgage insurance as well as down payment):

1.  3.5% down FHA loan

2.  Owner-occupied conventional

3.  Non-owner-occupied conventional/investment property

Ask your broker about any grant or bond programs that might be available to people like you in your state.  I can tell you that here in Washington state I have something that for owner occupied, 1-4 units, allows for 0% down... So long as you make less than about $82,000 a year, total household income.

So yeah how about the 0% down loan on a four-plex?  :)

Patrick Britton · Answer

hi Bao.

sorry about your experience.  I have bad news though.  It has come to my attention that the program which would allow this HAS RUN OUT OF MONEY.

It was the NHF Platinum program and apparently they are out of funding :(

Interestingly, they were out of california, but helped OR and WA state homeowners.  i'd google them and check their site to see if they have received additional funding, but last time I checked (3 weeks ago) they were out :(

Will F. · Answer

I'm currently trying to pull a conventional loan for to owner occ a 3 unit. Live in one house rent out the other 2 SFDs on the lot.... Man it's much harder than several years ago.  I don't really want to put 25% down, but it looks like we have to as stated above.

Seems like it would have been much easier if I didn't own properties already.  Doesn't make much sense to me as far as vetting for financial stability.

Albert Bui · Answer

HI Patrick,

Currently  in WA the NHF Platinum 3-5% grants (free money not need to be repaid) allowed 3-5% down FHA and conventional loans to be 0% down because the grant often times is higher than the min down payment needed to purchase.

Currently in WA, NHF has no more funds last I heard however it should be renewed each year or refunded soon.

In CA there are plenty of funds left for NHF Platinum.

This is an owner occupied program for 1 unit only in CA and up to 2 units in WA (not sure about OR).

Bao Huynh · Answer

@Patrick Britton  I was able to get a Owner-Occupied Conventional Loan for 10% down for a 4 plex from US Bank. We closed on Dec 30 2015. They initially quoted me for 5% down but when we were going through a pre-underwriting process they bumped it to 10% which was a very stressful time.. I also got a letter in the mail recently stating the loan was sold to Fannie Mae. Your owner occupied on a 0% down loan for a four-plex brought me here. Do you believe they would offer that in California?

Sebastian Naczas · Answer

Thanks for the info Patrick!

Yes she has gone over all those with me.  I'll ask her for possible grants.

But yeah 0% down on a 4-plex = WOW!

Sebastian Naczas · Answer

Thanks! @Brie Schmidt @Albert Bui

Albert is this available in NY?

Albert Bui · Answer

Hi there Brie,

I have a program that can go to 95% loan or as low as 5% down payment on conventional for owner occupied but the buyer has to have not owned a primary residence in the last 3 years  and meets area median income limits.

I've been researching the program and MI companies are saying they will only insure it with a min down payment of 10% so if any update comes up I'll let you know.

This means the borrower could pay monthly MI or buy a single premium (no monthly MI) policy.

Brie Schmidt · Answer

5% conventional is under 2 units I think..... @Albert Bui ?

Conventional loan for 3-4 plex?

Most Popular Reply