The guidelines to get a mortgage on a multi-unit property are different than a single family residence, especially here in Los Angeles County. Let’s look at what the particulars are.
Generally, and it depends on the lender, you will need 10% as a down payment at minimum. If the loan is a FHA it requires only 3.5% down and if you’re looking to use a VA loan it allows 100% financing.
It’s not necessarily hard to get a mortgage on a duplex, nor are the mortgage rates much more expensive, but guidelines are different and rules differ. Let’s take a deeper look:
One advantage to a duplex or multi-unit house is that the max loan amount is higher. For example, for Fannie Mae and Freddie Mac it’s currently set at $453,100 for a one-unit property, but its $580,150 for a 2-unit property, and even larger loan amounts are permitted in high-cost regions. For example Los Angeles qualifies are one of the higher cost regions in the Country.
For the FHA, it varies but to give you an example, a regular home in Phoenix is capped at a $294,515 loan amount, where a duplex allows loan amounts as high as $377,075.
That means you might be able to borrow more and stay out of jumbo loan territory, which means you save money in every way.
If you the big down payment is an issue for you, there’s another options. You can apply for an FHA loan and put down just 3.5% down, even if it’s a four-plex.
To make that deal even sweeter, the FHA doesn’t even require reserves for two-unit properties, so you don’t need extra cash on hand to qualify.
If you happen to be active duty military or a veteran, you might be able to purchase a duplex with zero down using a VA loan, as long as you occupy one of the units.
Sometimes the lender will allow you to use the potential rental income you will generate to offset your mortgage costs, but they might require you to have prior landlord experience. After all they want you to know what you’re doing. Keep in mind the more you ask your loan office here at Huntington Mortgage the more you will learn. Call us today to learn more!