Conventional MF guidelines?

[Bruno C.]

Hi all! 

I'm looking to put an offer on my second property, a 3-unit in the MA/RI area. However, I'm just curious about lending guidelines on conventional mortgages that are non-owner occupied. Is there a minimum down payment % requirement? 

Historically I've seen 20% but I'm curious if it's more like 25% or 30% depending on the number of units or number of properties you have. 

Anyone who could point me in the right direction (even just with) would be greatly appreciated! 

-Bruno

[Kelly N.]

Hi Bruno,

For 2-4 units you have to put 25% down, 30% if it is loan number 5-10.  I just heard that Freddie Mac is changing this rule allowing 6 financed properties with 25% down on the multifamily starting Oct 26, 2015.

The lenders claim the reason for the increased down payment is that this is a higher risk loan and they want you to have more skin in the game.  You can also expect about .5% higher interest rate than if this were your primary residence- again due to risk.

Other things to know- you can't use borrowed or gifted funds for your down payment.  

You need 2 months' reserves for all mortgaged to qualify for loans 1-4, 6 months after that I believe.  

Max DTI (debt to income) ratio is 43%, but once you have been a landlord for 2 years (rental property on two tax returns) they will start to count the property's income instead of just putting the PITI on the debt side of the equation. I don't have a clear picture after the first two years about when a property is considered for income vs. expenses- it might depend on whether it is underwritten by Freddie or Fannie- but the new property may have to be "seasoned" for another 2 years before it helps your DTI or it may count to qualify for the loan you are trying to obtain.

Max # of conventionally financed properties is 10- including your primary residence.   Until recently (Feb 2015) there was a loop hole allowing married couples to have 10 mortgages in each name, and the first 4 for each with only 25% down, but alas no more.  

Kelly