How Do I Qualify for a Multi-Family Loan?
Buying a multi-family property can be a great way for investors to build wealth and experience in real estate. Of course, if you want to start, you need to understand what is available. With these tips, you will know how to get a loan for a multi-family property, as well as ways to determine which one is right for your project.
What Is a Multi-Family Property?
Benefits of Owning Multi-Family Homes
Owners of multi-family properties can get numerous practical benefits. These include:
- Reliable income
- Experience managing a property
- Tax incentives
- Better long-term financial security
Many people begin in real estate investment by buying a multi-family property. With multiple units, you can predict a higher rate of occupancy than you would renting out a single unit.
Occupancy and regular rental income may count on your mortgage applications, giving you an easier path to approval. As you pay the loan, you accrue equity in addition to the property’s appreciation. With a successful investment, you may be in a better financial position to buy more properties.
Types of Multi-Family Loans
- Conventional loans: You can apply for a conventional loan to buy a multi-family property, much as you could for buying a single-family residence. The organizations that set lending standards for conforming loans — Fannie Mae and Freddie Mac — have options for multi-family properties of less than four units, and limited options for investors buying properties with five or more. These loans typically have strict limits, and qualifications are usually based on the buyer’s income, debt and credit.
- FHA loans: Loans guaranteed by the FHA offer similar benefits to conventional loans, with requirements that may be more affordable. Intended for people with low or moderate income, FHA loans may not require a down payment of 20% to 30%, which is common for other loan types. In exchange, buyers and their selected properties must meet additional requirements. The approval process often takes longer, sometimes up to a year.
- Bridge loans: Bridge loans are a popular choice for multi-family property purchases, for a variety of reasons. Bridge loans are short-term loans, usually less than two years. They allow borrowers to buy a property, rehabilitate it if necessary, and refinance the loan into a permanent mortgage. Since they aren’t mortgages, they are not bound by many of the common requirements of a mortgage. Renovo Financial’s short-term loans for multi-family properties offer financing tailored to the project with competitive rates and faster closing.
- Non-conforming loans: Although most borrowers think of banks when they consider applying for a mortgage, many private lenders also offer similar terms. These loans might look like a mortgage you apply for to buy your home — adjustable-rate options, 30-year fixed rate and more. Renovo’s multi-family loans come in short-term and full-term options. The difference is that you’re working with a lender that isn’t bound to follow the same lending and underwriting standards created by Fannie Mae or Freddie Mac. Closing can be much quicker, allowing you to catch a great opportunity.
How to Qualify for a Multi-Family Loan
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