Connecticut Multi Family Homes

April 23, 2009
Matt Isleib

 

Even as the government is pulling all the stops to right the economy some Connecticut homeowners are still finding it difficult to obtain financing. For some Connecticut residents the American Dream of owning their own home is purchasing a multi-family dwelling. Especially in the states urban cities from Stamford and Norwalk to Bridgeport and New Haven to Hartford and New London multi-family dwellings are prominent. Getting a mortgage for these multi-family homes these days is still extremely difficult.

 

 

Multi-family homes are not just for the real estate investor to purchase and earn income from the rental of the property. In most cases if an individual wants to purchase a home in an urban area they might not be able to afford the prevailing single-family or condominium purchase prices leaving them with the option of looking to multi family homeownership. With buying a multi-family home the owner will collect rent for the other unit or units depending on whether the home is a two, three or four family home.

 

 

The difficult part now is the mortgage. Getting financing on multi-family homes is becoming increasingly difficult. At the height of the loose lending practices borrowers could get 100% financing for a two family home. Investors could get 100% financing in some cases for three and four family homes. Obviously the loose lending days are gone and we have come back down to earth with regard to the current lending guidelines. Even with the current mortgage guidelines that are conservative in comparison to a year or so ago financing is still difficult.

 

 

Investors who are looking to purchase a multi-family home are faced with a minimum down payment of 25% if they want a conventional mortgage. That was the guideline going back 10 years ago and in my opinion is within reason. You are making an investment. If you wanted to buy 1,000 shares of Home Depot it would cost you today roughly $25,000. If you had 12,500 and a margin account you could still buy the 1,000 shares and the brokerage firm would lend you the other 50% on margin. So if you are buying a stock and the minimum investment is 50% then plopping down 25% for an investment home seems pretty fair. The issue here is there are a lot of lenders and banks that simply will not lend for investment properties of any kind, single-family, condominium, multi-family it does not matter. The banks and lenders that are willing to mortgage an investment property have adjusted the interest rates as such that aside from some being anywhere from a half to some times even a point and a half higher than an owner occupied home you will have to pay points as well. The option of a no point loan does not presently exist for an investment property. I had a past client come to my mortgage company Everlsey Capital Mortgage LLC in Norwalk. CT and inquire about refinancing his multi-family investment property. The verdict was he was getting a rate in the low 5’s for a 30-year fixed mortgage and paying almost 2 points to get it. His options to say the least were limited.

 

Borrowers who are interested in purchasing a multi-family home as their primary residence and the property is a two unit home the minimum down payment for conventional financing is a 20% down payment. That is reduced from a very recent 10% down payment. If the home is a three or four unit the down payment is 25%. Interest rates will range anywhere from a half to three quarters of a percent higher than that of a single family or condominium that is a primary residence. There are options for no point loans for owner occupied multi-family homes. FHA, the (Federal Housing Authority) is the only outlet for a lower down payment on the purchase of a multi family home. The guidelines though are much stricter to be able to qualify. The bottom line here is in today’s market if you need to finance a multi-family you need to expect that there are going to be some roadblocks.