New Loan limits on multifamily homes are a gamechanger

I wish I would have known this when I was getting started in real estate.

Many young people think that buying a home is not even a reality given prices the way they are. They put it off for years, paying rent, in turn paying down other people’s loans. Let’s face it, home prices are likely to go up in the next ten years so by paying rent all those years and waiting to buy is not only depleting savings, but slowly decreasing your buying power.

Parents, if you have grown kids and you’re wondering how they will ever afford a home these days, then maybe they can consider a multi-family unit with as low as low as 5% down.

By living in one unit and renting the rest out, borrowers can qualify for more as the income the property produces can offset the mortgage. Investors know this term as “house hacking” and thanks to the new loan limits by Fannie Mae and FHA, duplexes, triplexes and quadplexes are now options for home buyers who may not have thought they could qualify for them.

Remember if these were investment properties the cash down would be at least 20%, if not 25%. When the rental income is used as qualifying income on the loan, a lender can give you up to 75% of the rental income to add to your qualifying income.

Right here in the Jacksonville Metro our new FHA loan limits are:

$722,850 duplex

$873,750 triplex

$1,085,900 quadplex

These are higher on Conventional loans. Check with your lender on what the loan limits for your local area are.

To qualify you will likely need to show leases for the other units, purchase in an area with renter demand, and the units need to be rent-ready, however this is an incredible opportunity to build wealth right off the bat.

On Fannie Mae or Conventional loans, the cash down is also 5% for multifamily so your lender will be able to advise what works best for your situation.

Remember, you have to live in one of the units. I would also caution that being a landlord is not everyone’s cup of tea and I’d advise considering a property manager even just for the first year so you can get the right tenants in and learn the ropes.

If you are not seeing a lot of duplexes, triplexes or quads in your area, you can also look for properties with ADU units, also known in-law suites, where you can use that as rental income to offset the mortgage payments.

Parents can be cosigners on these loans and don’t have to live in the property. This may be a viable option to get started and they can be removed during a refinance down the line.

I wish someone told me about this, if it was an option, when I bought my first condo. Buying a multifamily property right now could be an incredible way to build wealth over time.