When deciding on what type of property to buy for a home, part of the decision comes from what a homeowner specifically looks for. In the case for a multi-unit home, there could be more use to it than as a permanent residence.
If you’re thinking about being a homeowner and a landlord, this type of property is just what you need. After all, who would not want to have something for yourself while using it to turn in profit?
But before you start looking for a multifamily home, you might want to get to know what they are a little more and how you can get financing for it.
What is a multi-unit home?
A multi-unit home, also known as a multifamily home, is a property that has two to four units. Each unit has its own living space, kitchen, and bathroom.
Keep in mind that if a property has five or more units, it’s now considered as a commercial property. Financing for this kind of property would have to be commercial mortgages already.
Single-unit vs. Multifamily property. Which is which?
As an aspiring homeowner, you need to determine what type of property you want to purchase.
If you’re mainly focused on getting a home for you and your family, you could look at single-unit homes. This is also ideal if you want the home all for yourself or if you want to start a family with a new home.
If you want to get the best of both worlds by keeping a permanent residence while getting profit by renting out the rest, perhaps a multi-unit home is just for you.
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What are the financing options available for multi-unit homes?
Conventional Mortgage
Conventional mortgages that are used to finance a multi-unit home are called permanent conforming loans. These mortgages are usually long-term which could run between 15-30 years and are offered by traditional banks as well as lending institutions.
Government-Backed Home Loans
Multifamily properties can be financed through government-backed mortgages under Fannie Mae, Freddie Mac, and the FHA.
These loans have terms that can go from five years to 35 years and are issued by government-approved lenders. Remember that they have specific requirements and qualifications so make sure to talk to their trusted lenders on how to qualify.
Portfolio Loans
Portfolio loans are non-conforming loans that can be an option for borrowers with properties that have one to five, sometimes more, units in both good and poor conditions.
These mortgages are more flexible than government-backed mortgages and they can provide financing for more than 4-10 properties at once and are provided by traditional banks, private lenders, and credit unions.
Short-term Financing
These loans are non-permanent multi-home options that could range from 6-36 months and are usually interest-only. These are generally used to purchase a property before refinancing to a permanent mortgage later,
Ideally, borrowers use short-term financing to renovate or increase occupancy for their multifamily home in order to qualify a regular multifamily mortgage. Short-term loans for these properties can generally finance those that have two to five units.
Remember to research about the details of these multifamily mortgages and look for one that works perfectly for you.
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