Demand for triplexes and quadplexes to increase

Fannie Mae recently unveiled new guidance that allows for 5% down payments for owner-occupied 2 to 4 unit multifamily properties and crucially, no self sufficiency test.

This change is a very big deal for 2-4 unit property financing. FHA financing allows for 3.5% down for 2-4 unit properties, but for 3-4 unit properties (triplexes, quadplexes), FHA has a hurdle: the self-sufficiency test. This test requires that the property be able to cover the mortgage payment (PITI including principal, interest, taxes, and insurance) after a 25% vacancy factor. In the 2023 high rate environment, this test is very difficult to pass.

With the new Fannie Mae guidelines, borrowers can put 5% down and purchase a triplex or quadplex without needing to pass the self sufficiency test. Previously, Fannie Mae required a 25% downpayment.

This change opens up triplexes and quadplexes to many more owner-occupant borrowers. Owners of triplexes and quadplexes should expect to see a meaningful increase in demand for their properties as a result of the change.