Buying 2 To 4 Unit Property And Mortgage Guidelines
Any property up to 4 units is considered a residential property. Residential mortgage lending guidelines applies on buying 2 to 4 unit property.
• Home buyers 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 applies 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
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 needs to be the borrower’s own funds
• Reserves does 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 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 on 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
Many mortgage lenders will require two years 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.
Don’t forget, Bruce Jay Associates offers Professional Property Management Services, which will satisfy this requirement.
Call us if you are seeking a 2-4 Unit Investment!