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FAQs about Investing in a Multifamily Home

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Nice home investmentIf you are considering buying a multifamily home, understand that there are two types of multifamily properties: residential and commercial. Residential properties have two, three, or four units, while commercial properties have five or more units representing the investment of the owner.

We look at the second type of multifamily property and explore the most common questions investors ask about it.

What is a multifamily loan?

A multifamily loan works just like a conventional single-family mortgage. It is a type of financing for properties with anywhere from five to 5,000 units, including small and large apartment complexes.

Approval for a multifamily loan largely depends on the value and earning potential of the property, although personal credit and income are a significant consideration.

Who can apply for a multifamily loan?

Multifamily loans are for investors who would like to invest in a property that generates income. Most lenders prefer to approve loans for seasoned real estate investors, although new programs are now available for first-time investors looking into the rental industry.

Keep in mind, as an investor, you cannot live in the property.

Where can I apply for a multifamily mortgage?

Outside of Freddie Mac loans, a Fannie Mae multifamily loan provides the best fixed-rate options for investors. Bonneville Multifamily Capital says this allows lenders to reinvest the money they acquired by lending it to others.

The mortgage can run anywhere from seven to 30 years, and borrowers have the option to avail of a floating rate that can be adjusted every six months after the first seven years.

How can I successfully apply for a multifamily loan?

Lenders prefer borrowers who can prove they can pay back the loan with little risk and operate a financially viable rental property. To do this, you must be able to show a track record of success in real estate investment.

Moreover, for new investors, you need to show appropriate transferable skills, such as employee management, property management, or sales and leasing.

If you are thinking of applying for a multifamily loan with Fannie Mae, get in touch with a loan officer who can help you weigh your options and help you compose a loan application that will guarantee approval.

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