House Hacking With 5% Down
Courtesy of Fannie Mae
The loan giant’s new investor-friendly loan program allows owner-occupants to purchase with a low, low downpayment.
New 95% LTV Program For House Hackers
Effective November 18th, Fannie Mae lowered the down payment requirement for multifamily property loans with the proviso that the borrower be an owner-occupant.
As home prices in the DC area and across the nation have escalated beyond affordability for most in the past few years, ‘house hacking’ has become the ownership model of choice for many savvy property buyers. The timing of this decision helps address high-interest rates, home prices, and–potentially–the need to pay buyer agent commission on top of down payment and closing costs.
If you purchased a multifamily home in the past, even earlier this year, you know that down payment requirements were steep–15% to 25% of the purchase price. The new 5% downpayment is valid for purchases of duplexes, triplexes, even fourplexes.
The Nuts & Bolts
Owner Occupants Only
You’re moving in. At least to one unit, acting as a resident landlord, and at least for one year. Downside? Your tenants live next door to you. Also, the loan may restrict cash-out options. Upside: Along with the low down payment, their rental income can be used to help you qualify for the mortgage loan. That’s right, you can buy more house with the lower down and boost from future rents. Of course, you have to meet the standard loan qualifications, but having these two benefits can make a huge difference.
FHA Self-Sufficiency Not!
That annoying FHA ‘self-sufficiency test’ for 3-4-unit property loans is not a requirement! What was it? The FHA self-sufficiency test for 3 to 4 unit properties requires 75% of rental income to tally up to more than the monthly mortgage repayment amount. Fannie Mae’s 5% down program says 3-4-unit properties don’t not need to meet the requirement. That alone makes the pre-approval process for a multifamily property up to four units a lot easier!
Loan Limit
There’s a top limit of of $1,396,800. for the program. This allows buyers in significantly more expensive location like Washington DC to purchase 2-4 unit properties.
Special Programs That Qualify
Low-income buyers and those interested in RFF (resident-fix-flip) or BRRRR (Buy-Rehab-Rent-Refinance-Repeat) properties will be happy to know that the HomeReady and HomeStyle Renovation programs qualify for the new Fannie Mae 5% down loan. There are a few caveats; Be sure to check cash-out options, renovation costs factor into the HomeStyle Renovation loan, both HomeReady and HomeStyle Renovation programs exclude high-LTV refinancing.
Exclusions
Manufactured homes.
When Is It Available?
Now! Be sure to ask your lender about MIP (mortgage insurance premium) rates and factor that into your spreadsheet.