Fannie Mae’s 5% Down Multifamily Loan: What You Need to Know

As you may already know, last year, Fannie Mae made a notable policy change. Effective from the weekend after November 18, it began accepting 5% down payments for owner-occupied 2-, 3-, and 4-unit homes. This marked a departure from the previous multifamily financing requirement of 15-25% down payments for duplexes, triplexes, and four-plexes.

This new option presents a great opportunity for individuals looking to invest in multifamily homes while also enjoying the benefits of homeownership. Prospective owner-landlords can now afford these properties more easily, thanks to the reduced down payment requirement by Fannie Mae.

How will Fannie Mae’s 5% down loan benefit multifamily homebuyers?

First-time buyers and those looking to reduce high mortgage payments can now benefit from Fannie Mae’s improved financing options. Here are the key changes introduced by the new policy:

• The policy applies to standard purchases, no-cash-out refinances, HomeReady, and HomeStyle Renovation loans for owner-occupied 2–4 unit properties.
• Maximum loan limits now vary by unit count and location, with higher caps than in prior years, allowing buyers to finance larger and more expensive multifamily homes within conforming limits.
• The FHA self-sufficiency test no longer applies to conventional 3–4 unit loans, reducing approval hurdles and simplifying the qualification process.

How to apply for the new Fannie Mae 5% down loan

Thinking about using this new low-down payment loan to purchase your own rental property? Now is the time to apply, as Fannie Mae has already integrated these changes into their system. Here’s how to get started:

Step 1: Find a lender: Look for lenders approved by Fannie Mae who offer multifamily loans. They can guide you through the application process.

Step 2: Check your eligibility: Ensure you meet Fannie Mae’s eligibility criteria, which typically include credit score requirements, income verification, and property guidelines.

Step 3: Complete the application: Complete the loan application provided by your lender. Be ready to disclose details about the property and your financial situation.

Step 4: Close the loan: If all goes well and your application is approved, finalize the loan by signing the necessary documents and paying any closing costs.

The bottom line

For owner-occupant landlords, this policy shift represents a significant opportunity to reduce mortgage payments by leveraging rental income. The ability to make a smaller down payment not only makes multifamily homes more accessible, but it also allows home buyers to gain valuable landlord experience, as they have the opportunity to collect rent from other units while simultaneously building equity in their own property.

Fannie Mae’s move to lower the down payment requirements for multifamily homes is a promising step towards improving access to credit and affordable rental housing. With this progressive policy change, the dream of owning a multifamily home while generating rental income is becoming more attainable for mortgage loan borrowers.