Despite high interest rates, HouseHackers have a reason to celebrate this week - On November 18th Fannie Mae, one of the government organizations that regulates mortgages, is reducing the amount of down payment required for owner-occupied conventional loans on 2-4 units!
Why does this matter? Typically, conventional 3% and 5% down loans were an option for Single Family Properties with or without ADU’s, but could not be used for true Duplex’s, Triplex’s, and Quadplexes. To do a lower downpayment on these properties we would have to use a 3.5% down FHA loan, which has permanent mortgage insurance, a “Self Sufficiency Rule”, and other factors that are less favorable than a conventional loan for most buyers.
What’s the self sufficiency rule? The self sufficiency rule says that 75% of the estimated rental income from the property must be greater than the monthly loan payment. This becomes a problem when interest rates rise, as the monthly payment with 3.5% down can be quite high, and 75% of the gross rents often fall short of covering that payment.
So what changed? Fannie Mae, one of the government organizations that regulates mortgages, is changing the rules so that you can now do a low down payment conventional loan on a multifamily property - and unlike FHA loans, conventional loans do NOT have permanent mortgage insurance, and do NOT have a self sufficiency rule!
What does this mean for you? In Seattle, single family homes with ADU’s and DADU’s have been highly popular, and prices have risen to reflect that. This new rule makes true multifamily properties more affordable to HouseHackers - so if you are looking to househack, talk to our team about the new strategies this opportunity opens up!
