Fannie Mae is being celebrated for the changes coming November 18th to conventional loan down payments for owner occupied 2-4 unit purchases. The key to this change is it is not intended for investors but for homeowners looking to either supplement their mortgage or begin investing while still having the perks of home ownership. This change may only be effective for 3-4 units though as the FHA loan (up to 2 units for owner occupancy) still allows for a 3.5% down payment and may be a better alternative.
Fannie Mae Conventional Loan
Typically, or before November 18th 2023, a home buyer purchasing a multifamily property would need to be able to have a down payment of 15%-25% depending on the number of units. In a city like San Diego, where appreciation is consistent and property owners can rely on increasingly high rental rates, the down payment can be a daunting figure. After the effective date Fannie Mae’s new down payment amount will drop drastically to 5% allowing owner occupant investors a much better chance at purchasing. The current, on market, median 4 unit property in San Diego County is priced at $1,999,999 which means the difference in down payment after Nov 18, 2023 is nearly $400,000. In real loan terms (based on max loan amount) the difference would be $280,000 on a $1,396,800 loan. By saving on down payments new owners have:
Much easier access to begin property investing as an owner occupant.
More available funds for upgrades or improvements to help achieve market rents.
Available funds for buyout agreements and lawyer fees if the property has under market tenants.
Carrying capital while improvements go on or while trying to fill a vacant unit.
Owner Occupied Loan Options
Even though this is great news for investors it is important to look at the options for owner occupant investment properties. Keep in mind a huge benefit for the Fannie Mae loan is NO self sufficiency requirement which would usually be a hurdle for previous loans.
VA Home Loan - 0% down up to 4 units
FHA - 3.5% down up to 2 units (
Fannie Mae - 5% down 2-4 units
Fannie Mae Loan Amounts (Assuming 5% down):
$978,785 maximum price for 2 units
$1,183,050 maximum price for 3 units
$1,470,315 maximum price for 4 units
While this limits what you can buy in San Diego County it still gives you access to 86 active on market options. This is where San Diego Apartment Brokerage can help. 86 options can be daunting and you’ll want an expert evaluating what’s available. Schedule a call HERE so Christina can start learning about your situation and help you find your new home and start your journey as an owner landlord.