Two-unit properties (duplexes) financed with owner-occupancy status receive better pricing and higher LTV options than investor loans. The key is that the borrower must genuinely occupy one of the units as their primary residence.
Occupancy Requirements
For owner-occupied 2-unit loans, the borrower must intend to occupy one unit as their principal residence. Fannie Mae and Freddie Mac require this to be the borrower's primary residence -- not a second home or investment. Lenders may include occupancy certification in closing documents and may have policies to follow up post-closing if there is evidence the occupancy representation was false.
Down Payment for Owner-Occupied 2-Unit
- ✦Conventional: Minimum 15% down for 2-unit properties, 85% LTV max. HomeReady allows 5% down for 2-unit with income limits.
- ✦FHA: 3.5% down, but FHA imposes a self-sufficiency test: net rental income from the non-occupied unit must cover the total monthly PITI on the property.
- ✦VA: 0% down is available for 2-unit owner-occupied, which is one of the most powerful features of the VA benefit for veterans purchasing a duplex as a house-hacking strategy.
- ✦USDA: USDA does not finance properties with more than one unit.
Rental Income from the Second Unit
Agency guidelines allow a portion of the rental income from the non-occupied unit to be counted for qualifying. Fannie Mae allows 75% of the market rent (from an appraisal) when the unit has no rental history or 75% of actual leased rent with a signed lease and security deposit. The 25% vacancy and maintenance factor is the standard haircut.
Aria on vicariointel.com can walk through the income calculation and program options for a specific 2-unit purchase scenario including rental income qualification.
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