Types of Multi-Family Financing: Rates, Terms and Qualifications

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Multi-family properties can be a great way to enhance your finances. They can be a valuable form of income. Of course, it is essential to get the right financing for your building. Whether you need a mortgage to buy a new investment property, an estate loan to buyout siblings on an inherited property or any other type of financing, it is important to understand your options.

Conventional Mortgages

Conventional mortgages on investment properties are a lot like the mortgage on your home. They are typically used for a building that does not require significant renovation to be rentable. The loan is based on the market value of the building.

As conforming loans, conventional mortgages adhere to the standards set by Fannie Mae. These are in place to help protect both lenders and borrowers. If you are expecting to own a rental property for a long time, this may be the right option for you.

Expect to require a 20% down payment. Conventional loans carry 15- or 30-year terms and have interest rates between 4.88% and 7%, typically. You will likely need a credit score of at least 680 to qualify.

Hard Money Loan

A hard money loan can get you financing for properties that wouldn’t qualify for a conventional mortgage. For example, you can use one for a fix and flip or for a building that needs significant renovation to be rentable.

This type of loan is also available if you wouldn’t qualify for a conventional mortgage. The credit score required is much lower, around 600. However, it is worth noting that interest rates, terms and qualifications all vary depending on the lender.

You may be familiar with some of the hard money loans California residents use to make money on the booming real estate market. You may be able to pay a much lower down payment and can potentially get a term as short as a few years. However, expect these loans to have higher interest.

Short-Term Financing

If you have an opportunity that you want to move quickly on, bridge loan companies may be able to help. This form of short-term financing can get you a loan for as little as six months. The funding time is much faster, sometimes as little as 10 days.

People use this type of loan to quickly make an offer on a property while still getting together the cash to pay a down payment on it. It can be relatively expensive with interest rates in the double digits. However, short-term loans can also help you make a lot of money by moving quickly on the right opportunities.

Expect to pay original fees and other costs with a bridge loan. You may need some previous experience in the market to qualify for this type of loan. However, the credit score requires can be as low as 550.

Discover More

There are plenty of ways to finance your multi-family property purchase. Understanding the different types of loans can help you get the right terms for your needs. Learn more and take the first step toward realizing your real estate goals.

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