Single family homes, condominiums, planned unit developments….. and then there’s 2 to 4 unit properties, often called duplexes, triplexes and fourplexes. A 2-4 unit property is the oddity of the various property types, it’s this property type that has the most confusion when it comes to securing mortgage loan financing.
A 2-4 unit property is a quasi mini-apartment complex however, it still considered to be a residential and as a result, is eligible for premium fixed-rate mortgage loan financing through Fannie Mae and Freddie Mac.
*For our purposes, a unit is defined as an area that contains at least one bedroom, a full working kitchen and a bathroom. As long as a unit has these three components it’s considered to be a unit for income qualification purposes so long as the property is zoned as one of the following:
- two units
- three units
- four units
*Mortgage Tip: If the property is zoned as a single-family, the single-family zoning takes precedence even it there is a granny unit and the income from the granny unit cannot be used to secure the loan.
Following are unique characteristics of duplex loans and 2 to 4 unit financing..
*Whether purchasing or refinancing, the interest rate and/or costs are the loan will always be a bit higher on any property with more than one unit when it comes to securing a mortgage. Fannie Mae and Freddie Mac charge a risk-based premium into how these loans are priced and as a result the rates are always going to be higher on multiple unit properties down a single-family residence.
*The income from the additional units can be used to help you qualify for purchasing or refinancing the property. In other words, 75% of the gross rent received per unit can be used to offset the total monthly mortgage payment in qualifying for the loan.
*2-4 Unit appraisals cost more because comparable market surveys have to be included for the additional units. If the additional units are not presently rented, income can still be used for these units because the use is income producing. Lease agreements will be requested for each occupied unit.
Mortgages for multi-unit properties including Santa Rosa, California
If you’re looking for the opportunity to reduce your house payment by virtue of renting out the other unit, a multifamily property is an ideal choice.
Following are the appropriate mortgage types for such properties..
Conventional Mortgage-can purchase a multiunit property with the standard conventional mortgage with 10% down, and monthly mortgage insurance so long as the property is your primary residence. If the properties for investment purposes, you’ll need 25% down and fair market rents can help offset the mortgage payment.
FHA Mortgage-as little as 3.5% down as long as the property will be your primary home.