You can get a bank loan to buy, refinance, or build a multifamily property, but the terms can be very strict. Loans are usually resource loans, that is. Loans are usually resource loans, which means that the bank could pursue all of the borrower's assets and not just the property that secures the loan in the event of default. In addition, banks are less likely to offer 80% leverage and interest only options and generally require tax returns as part of their underwriting.
Ultimately, your objectives or needs may be better met with a bank loan, perhaps due to the structure of the loan, prices, or restrictions imposed on the property in conjunction with certain Agency loans. Conventional mortgages are suitable for owner-occupiers and investors. You can apply for a mortgage for a multifamily home from a bank, credit union, or mortgage lender, just as you would for a single-family home. Conventional mortgages conform to underwriting guidelines set by government-sponsored mortgage giants Fannie Mae and Freddie Mac.
When you apply, the lender considers your credit rating, credit history, income, assets, and other debts. The multifamily housing market includes both “residential rental property (1-4 units) and “commercial rental property” (buildings with more than 5 units). The residential multifamily is the easiest to finance and has the lowest barriers to entry. This is how most multifamily investors usually start.
Some will even occupy one of the units in their first rental property as a way to secure the most attractive financing. Private money lenders who offer private money loans typically charge interest rates of between 8% and 12%. This type of funding is easier and faster to access than previous options. It is usually used as a short-term financing solution, before refinancing or reselling the property.
For multifamily homes, the down payment is usually higher than for single-family homes. A duplex generally requires a down payment of at least 15%, while a three- or four-unit property requires a 20% down payment, according to Loyd. Multifamily loans allow you to finance properties with two or more units, including condos, townhomes, duplexes, apartment buildings, and a portfolio of properties. FHA-insured loans for investors in multifamily properties are available not only for purchase and refinancing of properties, but also for ground floor construction and substantial rehabilitation work.
