Multi-Family Mortgage Pre-Approval Essentials: What You Need to Know

Chad Rankin / May 16, 2023 / Expert Articles

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We frequently get questions about multi-family homes, and today, I want to share some wisdom to help you navigate this complex process.

Multi-family homes are a popular choice, especially for first-time homebuyers. They're an excellent option for those looking to invest in real estate while simultaneously securing a place to live. However, choosing and financing a multi-family property isn't as straightforward as buying a single-family home.

Let's consider a prospective buyer looking for a three or four-unit property in Central Massachusetts. They've got their sights set on Worcester, Leominster, Fitchburg, Webster, Southbridge—you name it. However, one key detail that's easy to overlook is that rents and property taxes can vary significantly from town to town.

It's also important to remember that not all multi-family homes are created equal. You might imagine the ideal property as a three-story building with three bedrooms per unit— a common setup. Still, over the years, many multi-family homes have been converted and reconfigured, resulting in a diverse range of property types.

These variations can significantly impact your mortgage pre-approval. You might find yourself comparing a four-unit property, where the owners live in a spacious four-bedroom unit with three attached one-bedroom apartments, to a four-unit property with twelve bedrooms in total. The difference in potential rental income between these two scenarios could alter your pre-approval by six figures. Suddenly, you're looking at a $150,000-$200,000 difference in purchasing power.

This is why it's crucial to work with an expert in multi-family lending. Your lender should understand the specificities of this process— the property type, number of units, local rents, and even the number of bedrooms. All these elements play into your mortgage pre-approval and overall financial planning.

Also, don't be afraid to ask your lender about the specifics of the property. Will this property work for your financial goals? What about the current occupants? Are any units vacant, or do any units have rent-controlled tenants? As a buyer, you need to be aware of all these details. If a unit is rented at a low rate that doesn't match the market, it could affect your rental income and the financial feasibility of your investment.

The world of multi-family properties is complex, but it's also full of opportunities. The key is to ask the right questions and work with a knowledgeable team that can guide you through the process.

At the Rankin Mortgage Team, we're here to answer your questions and guide you through your multi-family property purchase. Whether you're local or elsewhere on the East Coast, feel free to reach out. Even if we're not licensed in your state, we'll connect you with someone who is. We're here to help you navigate the maze of multi-family home loans, so you can make the most of your investment.

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Chad Rankin

Hi, I'm a mortgage expert living in Massachusetts. I am also licensed to help with your home loan in several other States across the Country. Do you have mortgage questions? How can I help? View Profile

Chad Rankin NMLS # 490282 Senior Loan Officer 324 Grove Street Worcester, MA 01605 (508) 928-4141

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About Chad Rankin

Hi, I'm a mortgage expert living in Massachusetts. I am also licensed to help with your home loan in several other States across the Country. Do you have mortgage questions? How can I help?