Fannie Mae Introduces 5% Down Payment Option for Multifamily Homes

January 5, 2024 - 2 min read

Lowered down payment requirements for multifamily homes

In a significant policy change, Fannie Mae has announced that, starting from the weekend after November 18, 2023, it will accept 5% down payments for owner-occupied 2-, 3-, and 4-unit homes. This marks 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.

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Expanded financing choices and easier approvals for multifamily homes

The policy change applies to standard purchases, no-cash-out refinances, HomeReady, and HomeStyle Renovation loans for owner-occupied transactions. This means that first-time buyers and individuals seeking to offset high mortgage payments can take advantage of Fannie Mae’s more accessible financing options.

The maximum loan amount allowed for these 2-4 unit properties is set at $1,396,800, ensuring that larger and more expensive properties can be purchased with flexibility. Additionally, the elimination of the FHA self-sufficiency test for 3-4 unit properties means that buyers will face fewer hurdles when seeking pre-approval for these types of multifamily homes.

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Taking advantage of Fannie Mae’s policy change

Mortgage loan borrowers interested in taking advantage of this opportunity can apply now, with the changes set to take effect in Fannie Mae’s system after November 18, 2023. This gives potential buyers a chance to prepare and gather all the necessary documentation before the new policy implementation.

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.

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Aleksandra Kadzielawski
Authored By: Aleksandra Kadzielawski
The Mortgage Reports Editor
Aleksandra is the Senior Editor at The Mortgage Reports, where she brings 10 years of experience in mortgage and real estate to help consumers discover the right path to homeownership. Aleksandra received a bachelor’s degree in finance from DePaul University. She is also a licensed real estate agent in Arizona and a member of the National Association of Realtors (NAR).