Fannie Mae unveiled a new policy this week that will significantly reduce down payment requirements for owner-occupied 2-, 3-, and 4-unit homes. Set to be effective from the weekend following Nov. 18, 2023, the down payment will now be 5%, a stark decrease from the previous 15-25% requisite for duplexes, triplexes, and four-plexes.
This policy shift presents an exciting opportunity for individuals aspiring to invest in multifamily residences, blending the advantages of property investment with homeownership perks. By diminishing the down payment barrier, Fannie Mae has paved the way for prospective owner-landlords to afford these properties more seamlessly.
Fannie Mae declined to comment further on why it made the decision, but it’s a decision being praised by some in the industry.
Thrive Mortgage’s Chief Operations Officer Donielle Geiser said they are thrilled about the announcement.
“Lowering the down payment threshold on 2–4-unit properties is such a critical enhancement to the guidelines for a host of reasons. Predominantly, it immediately becomes a golden opportunity for increased affordability due to the potential income generating possibilities,” Geiser said. “Especially for younger and prospective homeowners looking to engage in a smart way of not only building equity, but also adding an additional revenue stream. One of the surest ways to build wealth over time is to offset a liability with an income-producing asset.”
Geiser went on to explain: “It’s going to open new markets for prospective homeowners desperate to find their opportunity to own real estate, lenders like Thrive can now offer more affordable terms to clients, builders seeking to expand their portfolio of available new construction products have a new incentive to engage in multifamily developments, and Realtors now have new ways to market properties that previously had a limited pool of potential buyers.”
Jeff Onofrio, branch manager of Onofrio Mortgage Group at Guild Mortgage, said it could help people start an investment career by house hacking.
He said it could also offer competition to an FHA program, which requires a much higher down payment of 15%-20%, as long as it keeps the loan-level-price adjustments in line.
“It should give Fannie a nice leg up against the 203K,” Onofrio said.
Matthew Gavzie, vice president of Canyon Mortgage, said he thinks this could be good for buyers and help drive a little more business.
However, "I don't know what the lenders are going to add to this. Are there adjustments?"
But "we need all the help we can get," he added.
