Investing in multi-unit properties presents a unique option for investors opting for FHA financing, especially in 2024. FHA announced its new loan limits for its HECM and Single Family Title II and they have increased in most cases around the country. This primarily reflects how FHA loans are being taken for continual rises in home prices from 2023.
For example, the loan limits for two-unit properties have risen to $637,950 in low-cost areas and up to $1,472, 250 in areas that have higher costs. With these factors in mind, it would make sense to understand the home loans changes for first-time buyers as many would opt for FHA loans next year
Why Is This A Great Year To Invest In Multi-Unit Properties?
Investing in multi-unit properties that are owner occupied, such as a duplex, triplex, or even fourplex is an attractive option. These properties are generally considered “residential properties” and are backed by government agencies like Fannie Mae, Freddie Mac, and the FHA. First time home buyers can benefit from the perks that are offered on loans that you can take to purchase these homes.One of the best reasons to opt for multi-unit properties is that you can live in one of these units and rent out the other. This setup, which is also known as “house hacking,” is a clever way to make money without leaving your house. In comparison to conventional loans, FHA loans are attractive to a large number of investors. Their reduced down payment requirement and the ability to seek greater closing expenses are the main attractions. Borrowers who are not members of the military are usually required to put down 25% on a conventional loan, while an FHA loan just requires 3.5%.
Here are a few more reasons to opt for multi-unit properties this year:
Fighting Against Economic Uncertainty:
Multi-unit properties have historically shown that they work well against economic fluctuations. They can help owners generate a different income stream, and also offer stability during downturns. This isn’t the case with single-family homes as they could be repossessed by mortgage companies if owners face financial crunches.
Growing Demand:
There has been a sizable shift for buyers to opt for renting over ownership. This is primarily due to higher interest rates, a preference for flexibility and job mobility as well. This ensures there are regular tenants and offers consistent rental income that could go into paying mortgage lenders.
Appreciation Benefits:
Multi-unit properties have the benefit of appreciating over time, especially in up-and-coming neighborhoods. This, combined with regular rental income, increases the ROI and acts as a long-term investment.
Tax Advantages:
There are tax benefits and deductions that come with owning multi-unit properties. These include deductions related to property depreciation, operating expenses, mortgage interest etc. thus reducing the tax burden overall.
How Will The New Loan Limits Affect Multi-Unit Investments?
With the FHA increasing the loan limits, two-unit properties now have a range of $981,500 up to $1,472,250 based on the area. These limits increase for three- and four-units. They also allow for the financing of more expensive, larger properties, especially in markets that are competitive. Further, the raise in the loan limits can sustain the overall housing demand as well as the market activity. People can purchase them at a lower down payment than what would be possible with jumbo mortgage rates, which require at least 10-20% on average.
An FHA Multifamily Loan With Many Facets
Borrowers with an FHA multifamily loan can essentially be both homeowners and investors. This is a fantastic plan for people who want to live in and make money from their home since you may buy up to four units without changing any rules. The ability to include rental revenue as personal income is a major perk, especially for those seeking larger loans. There are more advantages than that. A greater minimum loan amount is required to qualify for an FHA loan for the purchase of multiple units.
The Advantage Of FHA Loans For Multi-Unit Properties
The increased loan limits as well as favorable FHA loan options, including better interest rates and lower down payments have their own advantages. They allow for a broader range of homeowners who are looking for lower mortgage rates. They tend to be younger, with less cash saved and also include those who couldn’t qualify for conventional or FHA loans because of the earlier lower limits. FHA loans have also increased in popularity, especially in scenarios where there are high-interest rates. They become accessible to those with higher debt-to-income ratios or lower FICO scores. In fact, the demand for FHA loans comprised up to 26.3% of new-home purchase applications in October of 2023 – that’s highest in over a decade.
Why Is This The Perfect Time To Invest?
Those first-time homebuyers who are struggling to come up with a substantial down payment due to the high cost of housing are in luck. A larger or more costly house may be within your reach with a low-down payment program now that lending restrictions have increased. Two great lending programs, “Home Possible” by Freddie Mac and “Home Ready” by Fannie Mae, let homeowners put only 3% down, up to their conforming loan limitations. Consider the following scenario: from now until 2024, you can place a 3% down payment on a new home. The current CLL is $766,550, therefore the highest purchase price you can achieve is $790,371. Fortunately, a donation of $23,711 (790,371 – $766,660) from a suitable donor can cover the entire down payment.
Up to their conforming loan restrictions for high-cost locations, Fannie Mae and Freddie Mac provide 5% down payment programs that you could be eligible for if you chance to reside in a high-cost area. Consider this scenario: you’re looking to buy a property in a high-cost neighborhood for up to $1,210,342 but you only need a down payment of $60,517 (or 5% of the buying price). The down payment can, once again, come entirely from a donor who is considered appropriate.
To Conclude
An indication of how ever-changing the housing market is, the 2024 rise to the conforming loan limits opens up exciting new opportunities for both homebuyers and homeowners. Knowing how these changes might affect your shopping, personal, or investing plans is vital, so keep informed. To learn more about how these new restrictions can influence your individual circumstances, we suggest contacting local lenders or financial experts. If you want to make the best selections possible while purchasing a house or investing in real estate, you should keep up with the newest trends and financing possibilities.
Are you prepared to take full advantage of the real estate market in 2024? Visit Munshi.Captal right now to learn more about your financing choices and take advantage of the chance to profit more from the ever-changing real estate market.
