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?

A multi-family property is a single building with multiple units. Although people might think of condominium or apartment complexes under this heading, duplexes, twin homes and townhomes also count. Each unit has a defined floorplan and separate address. There’s a distinction between the number of units in multi-family properties, and it is important to understand because it changes your loan options. For many types of home loans, a property with up to four units can be classified as a single-family home. Properties with five or more units do not meet this classification.

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

To know how to get a loan for a multi-family home, you’ll need to explore loan options. Here are the most common choices for multi-family properties:

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.

Multi-Family Loans

It’s go big or go home with Renovo’s suite of multi-family property financing. Whether it’s a rehab, rental or new construction project, we can finance your 5-50 unit investment.

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How to Qualify for a Multi-Family Loan

If you’re wondering, “How do I qualify for a multi-family loan?” you should know that the answer relates to the type of loan. If applying for conventional or FHA loans, the criteria will rely mostly on your ability to repay. If you opt for a bridge loan or a loan from an asset-based lender such as Renovo, you may have to establish your ability to manage a rehab project and long-term rental property. In any case, plan to seek pre-approval and bring a significant down payment. The process can take several days or months, depending on the loan type. Finding the right multi-family loan for your project is simplified with Renovo Financial. Browse our locations, then contact us to learn more.

Contact Us

Ready to get started? Want to learn more about how we can help you grow your investment business? Call us at (888) 568-8894, email us at origination@renovofinancial.com or fill out the form below and a representative will be in touch within 1-5 business days.

What inspires me most each day is watching our clients achieve their real estate and life goals…and being part of helping them set new, higher goals. I love being able to create and deliver solutions other lenders can’t – the entrepreneurial focus of the company makes a huge difference.

Renovo Financial

222 W. Adams St, Chicago, IL 60606

origination@renovofinancial.com

(888) 568-8894