Wednesday, January 15, 2020 / by Michael Vigdorov
None of these property types are exactly rare, but they are outnumbered in the market by single-family dwellings. As such, the loans that you’re likely most familiar with are geared more toward those properties than properties for multiple families or dual-zoned use. Because of this, you need to be prepared for potential hurdles when you start looking for a loan. Lenders may have different requirements for these loans than they would for mortgages on a single-family unit, and some lenders may not offer loans for multi-family units or similar properties. This doesn’t mean that there are no loan options available, but you should be prepared for the possibility of a different borrowing experience.
When it comes down to it, many of the same options are available for purchasing multi-family units, condos and other properties as you would find when shopping for a loan for a single-family dwelling. Organizations such as the Federal Housing Administration (FHA), the Department of Housing and Urban Development (HUD) and others that are commonly used for single-family purchases also offer loan programs or insurance to cover these types of dwellings. Most local and national banks offer these loans as well, as do other mortgage lenders. With that said, you may have to meet different qualifications to get these loans than you would if borrowing to purchase a single-family home.
Though specific qualifications may vary from one lender or program to the next, some of the most common items that are considered during qualification may include:
Qualifying for a Loan
- Larger down payments than what would typically be used for a single-family purchase
- Reserve requirements of at least 2 percent and as high as 6 percent of the unpaid principal balance
- For multi-family properties, a cap on the loan amount calculated on a per-unit basis
- Minimum or maximum numbers of units within a property
- Restrictions on any repairs that may be needed for the property
- There are other qualifications that may be required by specific lenders before authorizing a loan for a condominium, multi-family dwelling or other less-common property. Depending on the property and the amount of the loan, higher credit scores, co-signers or other additional requirements may also be necessary.