Sometimes borrowers become concerned about the property type that they are purchasing and whether they can get a mortgage loan. Just as there is no “one size fits all” situation for a mortgage loan, so it is with residential units. First, all residential mortgage loans will have somewhere between 1 and 4 residential units. All residential (with some minor exceptions) loans must be for residential purposes only. Properties which have a commercial component are not eligible for residential financing. In addition, properties with 5 or more Units are not eligible for single family financing. These can only be through a multi-family or commercial program.
While many homebuyers prefer a 1-unit property, others may prefer to purchase a home to occupy but which also has other units available for them to rent. Due to the differing nature of 2-4 Unit properties, there will be some difference in requirements for a mortgage loan. 2-4 Unit properties are considered a higher risk for default by lenders, so they may have more post-closing reserves required for qualification. Other items can include lower loan-to-value ratios (higher down payment) or limitations on cash-out refinancing.
However, 2-4 Unit properties can be especially attractive to homebuyers in areas where real estate and housing costs are high. The homebuyer can use the rent received from the other units to offset their mortgage payment, which under certain circumstances, may allow the borrower to qualify for a higher mortgage amount than they normally would. This is in addition to the income producing potential of the non-owner-occupied units.
When considering a purchase of a 2-4 Unit Property, it is very important that the homebuyer consult with a qualified mortgage professional. The Loan Officers at Googain, Inc. are well-versed in 2-4 Unit Properties and can assist the homebuyer to make informed decisions about 2-4 Unit Properties. Call on them today for more information.