Fannie Mae 5% Down Multifamily Loan for Buyers

Buying a multifamily home no longer requires a massive down payment. With the Fannie Mae 5% down multifamily loan, eligible buyers can purchase a 2–4 unit property while putting down as little as 5%*, as long as they live in one of the units.

This program has become one of the most powerful tools for repeat and first-time buyers who want to offset their mortgage with rental income and start building long-term wealth through real estate.

This guide breaks down exactly how the program works, who qualifies, and how to use it strategically.

Key Takeaways at a Glance

• Buy a 2–4 unit multifamily with as little as 5% down
• Must be owner-occupied (live in one unit)
• Rental income from other units can help you qualify
• Conventional loan with no upfront mortgage insurance
• Strong alternative to FHA multifamily loans

What Is a Multifamily Home (and Why It Matters for This Program?)

A multifamily home is a residential property with two to four separate units under one legal title. These properties sit in a unique space that are residential financing with income-producing potential.

Owner-Occupied vs Investment Multifamily Properties

The 5% down option is only available for owner-occupied purchases. That means:

• You must live in one unit as your primary residence
• The remaining units can be rented out
• Pure investment multifamily properties require higher down payments (typically 15–25%)

Eligible Property Types (2–4 Units)

Eligible properties include:

• Duplexes (2 units)
• Triplexes (3 units)
• Four-plexes (4 units)

Mixed-use, commercial properties, or buildings with 5+ units do not qualify under this program.

How the Fannie Mae 5% Down Multifamily Loan Works

This loan is a conventional mortgage backed by Fannie Mae, not a government loan like FHA or VA.

Minimum Down Payment Requirements

• 5% down for owner-occupied 2–4 unit properties
• Higher down payments may be required for:
  • Lower credit scores
  • Higher debt-to-income ratios
  • Certain property risk factors

Credit Score, Income, and Reserve Guidelines

While exact requirements vary by lender, typical guidelines include:

• Minimum credit score: often 620+
• Stable, documentable income
• Cash reserves (usually several months of mortgage payments)

How Rental Income Is Used to Qualify

One of the biggest advantages of this program is that future rental income can be counted.

Our wholesale Lenders may:

• Use existing leases, or
• Use projected rent from the appraisal (market rent schedule)

This can significantly improve your debt-to-income ratio and purchasing power.

Fixed-Rate vs Adjustable-Rate Options

Buyers may have access to:

• 30-year fixed-rate mortgages
• Adjustable-rate mortgages (ARMs)

Your choice depends on long-term plans, risk tolerance, and interest rate strategy.

Benefits of Buying a Multifamily with 5% Down

Live in One Unit, Rent the Others

This strategy, often called house hacking, allows rental income to:

• Offset your mortgage
• Cover taxes, insurance, and maintenance
• Reduce your effective housing cost

Lower Barrier to Entry Compared to 20–25% Down Loans

Traditional multifamily investment loans often require:

• 20–25% down
• Higher interest rates
• Larger cash reserves

The Fannie Mae 5% down multifamily loan dramatically lowers that barrier.

Wealth-Building Through House Hacking

Over time, you can benefit from:

• Tenant-paid mortgage reduction
• Property appreciation
• Future refinancing or converting to a full investment property

How Long Do You Have to Live in the Property?

Owner-Occupancy Rules Explained

You must:

• Intend to occupy the property as your primary residence
• Typically live there for at least 12 months

What Happens If You Move Out Early?

Moving out too soon can:

• Violate loan terms
• Trigger loan fraud concerns
• Cause issues during future refinancing or audits

After meeting occupancy requirements, many buyers later:

• Move out
• Rent the remaining unit
• Keep the property as a long-term investment

Step-by-Step: How to Apply for a 5% Down Multifamily Loan

Pre-Approval and Documentation Checklist

• Income documents (W-2s, pay stubs, tax returns)
• Asset statements
• Credit review
• Rental income analysis (if applicable)

Finding the Right Multifamily Property

Key considerations:

• Market rents
• Unit condition
• Local zoning and compliance
• Long-term rental demand

Underwriting, Appraisal, and Closing Timeline

Multifamily loans can take slightly longer than single-family, but with strong preparation, many close smoothly and on time.

Common Questions About Fannie Mae 5% Down Multifamily Loans

Is 5% Down Really Possible on a Multifamily?

Yes, for owner-occupied 2–4 unit properties, this is an approved Fannie Mae option.

Can First-Time Buyers Use This Program?

Absolutely. Many first-time buyers use this loan to enter real estate investing responsibly.

Can You Buy with a Partner or Family Member?

Yes, as long as at least one borrower occupies the property as a primary residence.

What Are the Risks Compared to Putting 20% Down?

• Higher monthly payment
• Mortgage insurance
• Less initial equity
  But for many buyers, the rental income offsets these factors.

Fannie Mae vs Other Multifamily Loan Options

Conventional vs FHA Multifamily Loans

FHA loans allow low down payments but come with:

• Upfront mortgage insurance
• Lifetime monthly mortgage insurance
• Stricter property standards

Conventional Fannie Mae loans often win long-term.

VA Loans for Multifamily Properties

VA loans allow up to 4 units with 0% down, but are limited to eligible veterans and service members.

When a Larger Down Payment May Make Sense

In some cases, higher down payments can:

• Lower monthly payments
• Reduce risk
• Improve cash flow

Real-World Scenarios and Buyer Tips

First-Time Buyer Strategy

Focus on:

• Conservative rent estimates
• Strong cash reserves
• Long-term livability

House Hacking for Long-Term Wealth

Many buyers repeat this strategy multiple times, building a portfolio over years.

Cash Flow vs Appreciation Considerations

Some properties prioritize:

• Monthly cash flow
• Long-term appreciation
• Or a balance of both

The Bottom Line

The Fannie Mae 5% down multifamily loan is one of the most effective ways to buy a small multifamily property with limited upfront cash. For owner-occupied buyers willing to live on-site, it offers a rare combination of low down payment, rental income, and conventional financing stability.

Used correctly, it can be the foundation of long-term financial growth, not just a place to live.

Ready to see if a Fannie Mae 5% down multifamily loan is right for you?

‍At Onshore Mortgage, we specialize in helping Massachusetts buyers use smart financing strategies to purchase owner-occupied multifamily homes with confidence. Whether you’re a first-time buyer or looking to house hack your next property, our team will walk you through your options, run the numbers, and help you move forward with clarity. Get pre-approved today and find out how little you may need to put down to start building long-term wealth through real estate.

*Credit and income restrictions do apply. Please visit our Disclosures page for a detailed breakdown of all loan types.