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Short Summary
Main recommendation: Fannie Mae now allows 5% down payment conventional loans on two-, three-, and four-unit properties if the buyer occupies one of the units, a change from prior requirements of 15–25% down. Because this is a brand-new policy, the speakers say they are still interpreting the details, including how PMI will work. They frame it as a major opportunity for house hackers.
Key Points
- Previously, low-down-payment options for small multifamily were limited to FHA loans, which came with a self-sustainability rule (rents must cover the mortgage) and mortgage insurance that lasts for the loan's life.
- The older first-time buyer programs HomeReady and Home Possible allowed 5% down on multifamily but had area median income limits that most buyers in major metros could not meet.
- Conventional 5% down loans generally drop PMI around 78–80% loan-to-value, unlike FHA mortgage insurance that stays for the life of the loan.
- Waiting to save 20% down can be costly: the speaker says $100,000 in savings buys far less later, and the property may appreciate or the buyer may miss cash flow in the meantime.
- Conforming loan limits apply by county and differ by unit count, so buyers should check their county's multifamily limit rather than the single-family figure.
Details Worth Noting
- Concrete instructions: Look up your county's conforming loan limit by searching "[your county] conforming loan limit," and check the multifamily figure, not only the single-family figure. The speaker gives examples of typical jumps: if the single-family limit is $720,000, a duplex may allow about $900,000, a triplex about $1.1 million, and a quad about $1.4 million (these are rough example figures, not exact formulas). Limits apply to the loan amount, not the purchase price, so the down payment is factored in.
- Concrete instructions: Consider the 5% down option and compare it against saving for 20% down. The speaker's example: on a $500,000 Plex, 5% down is $25,000 versus $100,000 for 20% down. Factor PMI into your numbers, but weigh it against expected cash flow and appreciation.
- Concrete instructions: Get guidance specific to your situation before deciding to wait for 20% down because of PMI, as the speaker says it is not right for everyone to buy in every market.
- The speaker notes that under FHA you can only use one FHA loan at a time, which limits buyers who already hold one.
- The policy was announced by Fannie Mae in a press release the day before recording; the speakers say details are still being interpreted and more videos are planned.
Bottom Line
Fannie Mae's new 5% down conventional option for owner-occupied two-to-four-unit properties could make house hacking far more accessible, but buyers should verify county limits and PMI terms as the program details emerge.
