Buying 2 To 4 Unit Property And Mortgage Guidelines

This BLOG On Buying 2 To 4 Unit Property And Mortgage Guidelines Was UPDATED And PUBLISHED On July 3rd, 2020

Any property up to 4 units is considered a residential property. Residential mortgage lending guidelines apply to buy 2 to 4 unit property.

Homebuyers thinking buying 2 to 4 unit property can purchase the property as owner-occupied units
Down payment required depends on the type of mortgage loan program they choose
Buying 2 to 4 unit property can also be purchased as investment property mortgage loans
However, with investment homes, FHA Loans are not eligible
This because FHA Loans and other government loans only apply to owner-occupied properties
2 to 4 unit property as owner-occupied homes is a great way to get rental income
Many 2 to 4 unit property homeowners can often times live rent-free
This is because the rental income offsets the mortgage payments

In this article, we will discuss and cover Buying 2 To 4 Unit Property And Mortgage Guidelines.

Table of Contents Click Here

FHA Loans On Buying 2 To 4 Unit Property

FHA allows 2 to 4 unit property home buyers to purchase them with a 3.5% down payment.

There are no reserve requirements on a two-unit property
However, three months reserves of principal, interest, taxes, and insurance are required on 3 to 4 unit properties
The down payment of 3.5% can be gifted when buying 2 to 4 unit property
However, the three months reserves cannot be gifted
Reserves need to be the borrower’s own funds
Reserves do not have to be cash
Can be liquid assets such as IRA, 401k, Keogh, and investment accounts

Minimum credit scores to qualify for 2 to 4 unit properties with FHA Loans are 580.

Conventional Loans On Buying 2 To 4 Unit Property

Conventional Loan programs require a 15% down payment on 2 to 4 unit property purchases and also require reserves for 3 to 4 unit properties.

Minimum credit scores to qualify for a conventional loan for 2 to 4 unit properties are 620

Potential Rental Income On 2 To 4 Unit Properties

Potential rental income can be used to qualify for buying 2 to 4 unit properties.

FHA allows up to 85% of the potential rental income of 2 to 4 unit properties to be used to qualify for the borrower’s income in calculation their debt to income ratios
Conventional loan programs allow up to 75% of potential rental income to be used to qualify for the borrower’s income in calculating their debt to income ratios

Landlord Experience

Many mortgage lenders will require two years of landlord experience from the mortgage loan borrower of a 2 to 4 unit property purchase in order for them to count the potential rental income, especially with conventional loans.

If you run into a situation where the mortgage lender has overlays on landlord experience, please contact me at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, including holidays.

How Long Do I Need To Be Owner Occupant

Homebuyers purchasing a 2 to 4 unit property via an FHA insured mortgage loan or other government loan programs need to be an owner-occupant for at least 12 months.

After 12 months living on the 2 to 4 unit property, they can qualify for another owner-occupied home loan
Homebuyers may be eligible for another home loan after 12 months as long as do not purchase another multi-unit property and purchase a single-family home
The United States Department of Veterans Affairs allows home buyers to purchase two to four-unit properties with 100% financing
VA has one of the most lenient mortgage guidelines out of any loan program, especially when buying 2 to 4 unit property

There are no credit score requirements or debt to income ratio caps on VA Home Loans.

Qualifying With Lender With No Overlays On Multi-Family Homes

Gustan Cho Associates Mortgage Group are direct lenders with no overlays on government and conventional loans. When buying 2 to 4 unit multi-family property and needing to qualify with a direct lender with no mortgage overlays on multi-unit homes, contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are experts in originating and funding 2 to 4 unit properties and are available 7 days a week.