Buying Multifamily Housing with Low Down Payment

Is Multifamily Housing Right For You?

We are constantly told that investing in real estate can help build long term wealth. And while this can be true, there isn't necessarily one "best" way to invest in real estate. For many buyers that don't need a big home to live in, buying a multi-unit property can be a great way to leverage real estate investing. Multifamily housing can be an amazing way for first time buyers and others to go big with their real estate investment early.

If someone is willing to live in one of the units of a multi-unit complex as their primary residence, there are a few different low down payment options. This typically applies for anyone looking to buy a 2 unit (duplex), 3 unit, or 4 unit complex which qualifies for residential financing. Anything larger than 4 units ends up being treated as commercial or multifamily in most cases.

How Many Units, and What Size Down Payment?

If you live in the building, FHA allows financing up to 4 units with as little as 3.5% down. For example, in a fourplex, a buyer moves into one unit and then they have 3 other units to potentially generate income for them. If buying a 3-4 unit property with FHA, buyers need to be careful of FHA's self sufficiency rule: 75% of the market rent for all the units has to cover the full mortgage payment, and lenders will want to see a few months of payments in reserves after closing.

Conventional Now Allows 5% Down on 2-4 Units

This is the big change since we first wrote this article. Since late 2023, Fannie Mae allows just 5% down on 2, 3, and 4 unit properties when you live in one of the units as your primary residence. It used to require 15% down on a duplex and 25% down on a 3-4 unit property. The loan does need an automated underwriting approval, mortgage insurance applies with less than 20% down, and the loan amount has to stay within the standard conforming limit for the property size (for 2026 that's $1,066,250 for 2 units, $1,288,800 for 3 units, and $1,601,750 for 4 units; larger high balance loans in high-cost counties don't qualify for this option).

Income-limited programs like HomeReady® and Home Possible® can also work on 2-4 unit owner-occupied purchases and may offer discounted rates and mortgage insurance if your income qualifies.

The bottom line is: if you're considering purchasing a home to move in to but would also like to create long term wealth, consider talking to us about financing multiple units. It could be the perfect fit for you!