Buying property serves many purposes. Many people want to become homeowners because they appreciate the chance to build equity and have a place of their own. People may also choose to buy property as a form of investment. Investing in property can help create a well balanced portfolio that can easily withstand any downturns in the market. One of the easiest ways to invest in property directly is by purchasing a multi-family property. A multi-family property is one in which in the owner typically lives in one unit and then rents one or more of the other available units.
Purchasing a multiple-family home has many advantages. The buyer gets to occupy one unit and then also gains additional income from one or more tenants. This can help any buyer afford a house in a better neighborhood than they would have been able to afford on their own with no additional income. In many cases, the buyer can use the renter's income to cover their entire mortgage.
Financing a Multi Family Home
In order to finance a multi family home, most people will need to take out a mortgage. Multi family home buyers will find that multi family mortgage rates can run slightly higher than standard mortgage rates. Applying for a mortgage for a multi family home is also similar to applying for a mortgage on a single family home. However, the buyer can expect to endure more scrutiny from lenders as this is a larger investment.
Two Types of Mortgages
In general, a multi family buyer can expect to face higher income requirements to buy a multiple family home as opposed to purchasing a single family home. Your primary home is one form of mortgage while a multi family mortgage is categorized differently. Buyers may be required to demonstrate that they can afford a large mortgage as well as out of pocket costs such as maintaining the property and the possibility of a delay in rent payments from their tenants.
Qualifying for a Multi Family Mortgage
Anyone buying a multi family home should have the required documentation on hand. A lender will want to see that the buyer plans on filling the available units with reliable, paying tenants. Buyers will also need to have excellent credit scores and a larger down payment than is standard on a primary residence mortgage. Multi family buyers can expect to put at least 25% of the purchase price down to get approved for this type of mortgage. A buyer can also expect to be asked to demonstrate they have low debt to income ratio and funds to make necessary building repairs and upkeep.
If you’re interested in learning more about qualifying for single or multi family mortgages and what types of interest rates would be associated with these products, schedule an appointment with a trusted mortgage lender today!