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Fannie Mae Saves the Day
Their New Loan Limits Allow Buyers to Purchase 4-Unit Properties With Only 5% Down
Michael Campbell
26 Nov
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Their New Loan Limits Allow Buyers to Purchase 4-Unit Properties With Only 5% Down
Fannie Mae was established by the Federal Government in the late 1930’s in an effort to spur home purchases and increase liquidity throughout the housing market. Their flexible loan guidelines helped open the door to home ownership by allowing first-time home-buyers to purchase a house with as little as 3% down (downpayment). However, these favorable terms were only offered to those purchasing a single-family primary residence. Anyone looking to buy a multi-family property - between 2 - 4 units - was required to put forth at least a 15 to 25% downpayment.
But this past weekend, Fannie Mae rolled out their new loan guidelines. As of November 18th, homebuyers can now purchase a multifamily property - whether it be 2, 3, or 4 units - with a 5% downpayment.
To put this into context: If you were to purchase a $750K four-family property, under Fannie Mae’s previous guidelines, you may have been required to bring nearly $200,000 to the table. But under the new guidelines, your downpayment can be as low as $37,500.
This has forged an entirely new pathway of entry to the market for investment focused buyers and those looking to house-hack in an effort to reduce or offset their living expenses.
Furthermore, the influx of viable buyers, equals increased demand; which sellers desperately need in one of the slowest housing markets we’ve seen in decades. Despite their being limited inventory, listings aren’t flying off the shelf as they were in the tail end of 2020 and much of ‘21.
Fannie Mae’s new loan limits are a breakthrough that was way over due and highly anticipated for both buyers and sellers in today’s tough market.
Quick Takeaways
Fannie Mae’s Former Lending Limits Allowed Home Buyers to Put Down (Downpayment) As Little As 3%
But This Was Only An Option for Those Purchasing a Single-Family Primary Residence
Anyone Purchasing a 2 - 4 Unit Property Was Required to Put Forth At Least a 15 - 25% Downpayment
But As of November 18th Fannie Mae Will Now Allow Buyers to Put Down As Little As 5% Even When Purchasing a Multi-Family Property (2 - 4 Units)
On Another Note
✺ Investor Purchases Are Poised to Pick Up: As we approach Q1 of ‘24, real estate investment purchases have fell to a 7-year low; down 30% over the last 12 months. However, Redfin reports show that a rebound may be approaching. — Redfin
✺ Will You Ever Sell Your House the Same?: This is the question top of mind amongst both homeowners and Realtors across the country. With the $1.8B lawsuit that recently came down on the NAR (National Association of Realtors), the answer may be - No. — Business Insider
✺ JP Morgan Reports Interest Rates May Be High, But Home Prices Will Climb Higher: Despite the Fed’s onslaught of interest rate hikes, experts at JP Morgan Chase are confident that the tight housing supply will keep home values strong, if not push them higher. — JP Morgan
✺ 95% of Buyers Would Pay An Agent Out of Pocket for Their Professional Help: The outcome the latest lawsuit against the NAR (National Association of Realtors) has placed the traditional buyer agent commission structure - which is traditionally paid by the seller - in jeopardy. However a recent survey carried out by Inman concluded that 95% of home purchasers would step in and pay an agent themselves to enlist their help. — Inman
✺ UBS’ Bold Bet: The global banking giant predicts that the Fed will drop rates by as much as 3% if that’s what it takes to pick the market back up. — Business Insider
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