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Duplex & Multifamily Mortgages in FL: What You Need to Know

Ahh, sunny Florida — when the winter winds are whipping up and down New England, it’s all we can do not to hop on a plane and leave it all behind for warmer climes. Fortunately, if you’re looking to invest in the Sunshine State, Florida offers a multitude of multifamily properties and attractive loan options to match.

Why invest, you ask? Owning a multifamily property has multiple benefits. As a landlord, you can:

  • Generate passive income
  • Build your real estate and asset portfolio
  • Reduce your living costs by dividing utilities with your tenants
  • Qualify for more multifamily loan options in the future by gaining experience

Before you pack up your flip flops and stock up on sunscreen, review these need-to-know facts about multifamily mortgages in Florida.

Multifamily Loan Options in Florida

There are several standard loan options available throughout the U.S., but it pays to research state-specific loan options when you’re thinking of buying across state lines. As long as you meet the standard loan requirements, you should have no problem finding a loan option that will work for you.

  1. Federal Housing Administration (FHA) Loan: Available in every state, FHA multifamily loans are a great option for first time multifamily home buyers. For as little as 3.5% down, you can buy a property with up to four units — as long as you (or a co-borrower) can occupy the building for at least one year. The FHA loan cap for a four-unit property in Florida is currently $1,169,900, though this amount varies by county. FHA loans are not available for investment-only properties.
  2. Department of Veterans Affairs (VA) Loan: Requiring $0 down, a VA loan is designed for veterans, active military personnel and surviving spouses. Borrowers can buy a property with up to four units, but one unit must be occupied by the owner for the duration of ownership. Owners cannot use the income from the other rental units for mortgage payments unless they have at least two years’ prior experience as a landlord. Florida also offers a similar Community Heroes loan meant for civil service professionals, such as healthcare workers, police, firefighters and educators.
  3. Conventional Loan: Enter Fannie Mae and Freddie Mac. The most common type of loan, these non-government-backed loans have slightly stricter guidelines than either FHA or VA loans. But there are perks for each:
    1. Freddie Mac’s Home Possible requires multifamily home buyers to put 15% down on properties with two to four units, as long as they occupy one. However, there is an income limit: Borrowers’ incomes cannot exceed 80% of the Area Median Income (AMI). First-time home buyers must take a homeownership education course to qualify.
    2. Fannie Mae will provide up to 3% cash assistance toward closing costs as part of their HomePath first time buyer program. Borrowers (or at least one co-borrower) need to complete the HomePath education course.
  4. United States Department of Agriculture (USDA) Loan: This loan assists mid- to low-income home buyers who live in suburban or rural areas. The USDA offers interest rates as low as 1%, and applicants can qualify with a minimum credit score of 640.

Florida also offers several state-specific loan options and cash assistance programs:

  1. Florida Assist Loan Program
    1. 0% interest
    2. Up to $7,500 cash assistance
    3. Deferred payments
    4. Must apply loan to an initial mortgage
  2. Homeownership Assistance for Moderate Income Loan
    1. Low fixed-rate second mortgage
    2. Up to $5,000 cash assistance
    3. Term limit 10 years
  3. Florida First
    1. Low fixed-rate first mortgage
    2. Borrowers eligible for Florida Housing cash assistance
  4. Florida Advantage
    1. Designed for borrowers with a disabled household member
    2. Borrowers must earn <80% AMI
    3. Borrowers qualify for Florida Housing cash assistance
  5. State Apartment Incentive Loan
    1. 0% interest if 80% of residents are farmworkers, commercial fishermen or homeless.
    2. 20% of units must be reserved for families earning <50% AMI

If you’re looking into building your own multifamily property, the Sunshine State offers incentives for developers of low-income, multifamily housing.

Requirements of a Multifamily Mortgage Loan in Florida

In Florida, properties with two to four separate units are considered multifamily housing. The terms of multifamily loans require that:

  • The building has two to four separate units — this includes duplexes, triplexes, quadplexes, townhouses, renovated single-family homes or semi-detached homes (e.g., a garage apartment)
  • Each unit has its own kitchen, bathroom, entrance (usually) and address/unit number
  • The property can accommodate the owner full-time for at least one year (does not apply to investment-only loans)

The Difference Between Owner-Occupied & Investment Properties

Owner-occupied loan terms require that at least one owner or co-borrower live onsite for a certain amount of time. Investment properties can be owned by remote landlords who may work with a property management company to maintain the buildings and address tenant needs.
Most loan options (like FHA and VA) require owners to live onsite for at least a portion of their ownership, even if the resident is a co-borrower (or sometimes even a child of the borrower). Onsite owners should be handy, or have access to handy people, as they are responsible for building maintenance and repairs. Occupying owners qualify only for government-backed loans.

Investors qualify only for conventional loans. A property becomes an investment when the owner no longer lives onsite but still collects rent from tenants. Investment buyers in Florida usually need prior experience as a landlord in order to qualify for an investment loan. However, first time buyers can flip their owner-occupied multifamily home into an investment property after putting in their time onsite.

What Income Can I Use to Qualify for a Multifamily Mortgage Loan?

Besides your existing, traditional income — such as from your job or business — you can use rental income to qualify for a multifamily mortgage loan in Florida. When applying for an FHA or conventional loan, you can count 75% of your rental income from a property you already own or the rent you expect to receive from a future property, provided the income is properly documented and/or appropriately adjusted for market rent rates. However, you cannot use rental income to qualify for a VA loan.

Frequently Asked Questions

Q: Where in Florida should I look for multifamily homes?
A: When it comes to real estate, anything oceanside is generally going to be more of an investment up front than a landlocked property (sorry, Miami buyers). Luckily, Florida is home to many university towns and industrial hubs with very reasonable housing costs. Look around Tampa, Orlando or Jacksonville for affordable multifamily properties and booming rental markets.

Q: How much do I need in savings to qualify for a multifamily loan?
A: Besides your closing costs and fees, you will need to prove you have enough funds left over to put your mortgage lender at ease, in case of a loss of income. Depending on your loan type, you could need anywhere from three to six months’ worth of mortgage payments in cash reserves — assets like your car or other properties do not count.
 
Q: How do I finance a duplex or multifamily home?
A: Multifamily financing options vary between owner-occupied and investment property loans. Multifamily mortgages work much the same as single-family mortgages, with 30 years being the standard term. However, there is a national cap on loan rates; be sure to check state and county caps as well. See Multifamily Loan Options in Florida, above.

Q: Can I use rental income to qualify for a loan?
A: Yes, but with conditions. You can use both current and projected (future) rental income to qualify for FHA and conventional loans, as long as the income is properly documented and/or appropriately adjusted for market rent rates. However, this is not allowed under a VA loan.

Q: How long do I need to stay in the home if I have an owner-occupied loan?
A: If you have an FHA multifamily loan, you must live onsite for at least one year. For a VA loan, the owner must live on the property for the duration of ownership. Consult your mortgage broker if you plan to vacate your unit and rent it out to a tenant. Investment property loans do not require the owner to live onsite.

Q: What is a non-occupying borrower?
A: Say, for example, you want to purchase a multifamily home and occupy it as your primary, but your income or credit profile are not strong enough to qualify on your own. A non-occupying coborrower is someone who will not live in the home with you, but their credit profile and income are factored into the equation to help you qualify for a mortgage.

Blue Water Mortgage is your partner no matter where you’re looking to invest. We’re proud to deliver personalized, professional service backed by years of experience. Contact us today to start exploring your options.

Roger is an owner and licensed Loan Officer at the Blue Water Mortgage office in Hampton, NH. Roger graduated from the University of New Hampshire Whittemore School of Business and has been in the mortgage industry for over 15 years. Roger has originated over 1500 residential loans and is licensed in New Hampshire, Massachusetts, Maine, Connecticut and Florida.