NEW MULTI-FAMILY LOAN GUIDELINES
Currently in order to qualify for a conventional loan on a owner occupied multi-family property, a buyer must put down a minimum of 15% of the purchase price. Starting on November 18th, the minimum down payment for conventional owner-occupied multi-families will be reduced to 5%. This will have a significant impact on the market.
Owner Occupants Who Will Soon Qualify for Conventional Loans
Conventional loans are preferred over FHA loans since there are less restrictions on the property. Especially in a seller’s market, being able to compete with a conventional loan is an advantage.
FHA loans are simply loans for borrowers who have been considered high risk, so the mortgage insurance is more expensive than the mortgage insurance on a conventional loan. By using a conventional loan the buyer is saving money.
Sometimes buyers would have 15% down so they qualified for conventional loans. However, they were prevented from enhancing their terms with appraisal gap waivers or looking at fixer-uppers. With a 5% down payment requirement buyers can offer an appraisal gap, even if it comes in short, they can reduce their down payment from 15% to 10% but still remain as a conventional loan. Similarly, if they need to set money aside for repairs they have the flexibility to do so without changing their loan type.
Owner Occupants Who Already Qualified for Conventional Loans
You will now have more competition. From personal experience, I was surprised to see that most offers made on lower Bergen County 2 Family homes in the past year were FHA loans. This is going to change.
While the down payment amount is a considering factor (you will be putting down 15%+ compared to other who may only be putting down 5% or 10%) the seller walks away with a check for the entire price of the home anyway so it’s not the most important factor. If you haven’t been winning bids in the past, it’s going to get tougher. Give me a call and let’s figure out why your offers haven’t been accepted so we can adjust your strategy and get you a home.
Investors
In this market, with these interest rates, your strength was a conventional loan with 25% down. Most investors win properties on terms, not price and this just change lessens one of your terms compared to others, yet there is still a lot you can do.
Adjust your search criteria
Accept current tenants as a way to make your offer more enticing to sellers.
Give me a call and I can suggest a more specific strategy based on your idvidual situation.