Mortgage rates continued their climb past the 7% threshold this week, sidelining price-sensitive buyers in their wake.
The rate on the 30-year fixed rate mortgage rose to 7.17% on Thursday, up from 7.1% the week prior, according to Freddie Mac. Rates surged past 7% last week for the first time this year following a government report showing inflation remained hotter than expected.
A separate measure, which tracks rate changes daily, revealed even bigger swings. The daily rate on the popular 30-year fixed loan was 7.52% on Thursday, the highest reading since November 2023, according to Mortgage News Daily.
The uptick in rates was a sour note for would-be buyers hoping to get into the spring market, forcing some first-time and repeat buyers back on the sidelines.
Any hope of seeing rates stabilize will be contingent on inflation, said Jiayu Xu, an economist at Realtor.com.
“Unfortunately, the rising mortgage rates occurred during what is typically a busy time in the housing market, potentially giving pause to prospective homebuyers as they weigh their purchasing decisions,” Xu said. “Despite the increased mortgage rates leading to higher costs, it could also suggest a less competitive market where opportunities may exist for some homebuyers.”
Read more: Mortgage rates today, April 25: Rates increase for the 4th straight week
Buyers backpedal as rates soar
Demand for mortgages slowed last week as mortgage rates hit their highest levels since late 2023.
The volume of applications to purchase a home fell 1% during the week ending April 19, according to the Mortgage Bankers Association (MBA) weekly survey of applications. Overall, applications were down 15% compared to one year ago.
Those purchasing turned to government-backed loans or adjustable-rate mortgages (ARMs), which offer slightly lower interest rates.
The ARM share of applications increased nearly 8%, the MBA noted, which was consistent with the uptick in rates as buyers searched for any measure of relief. The FHA share of applications also registered a modest uptick, rising roughly 13% for the week ending April 19.
But homebuyers weren’t the only ones halted by the uptick in mortgage rates. Refinance applications fell 6% last week, the MBA found, as homeowners lost hope of snagging a lower rate.
While mortgage rates are partially to blame for the lull in demand, the limited supply of homes on the market is a big factor. There’s still more demand than there is supply, keeping home prices from edging down.
It’s also fed the lock-in effect.
“The jump in mortgage rates has taken the wind out of the sails of the mortgage market,” said Bob Broeksmit, CEO and MBA president. “Along with weaker affordability conditions, the lock-in effect continues to suppress existing inventory levels as many homeowners remain unwilling to sell their home to buy a new one at a higher price and mortgage rate.”
Read more: Mortgage rates top 7% — is this a good time to buy a house?
A silver lining in new construction
While inventory of previously owned homes continues to hover near 30-year lows, sales of newly built homes in March surpassed expectations, seeing the largest increase since December 2022.
Sales of newly built, single-family homes in March rose nearly 9% to 693,000 on a seasonally adjusted annual rate, according to data released this week by the US Census Bureau and US Department of Housing and Urban Development.
The pace of new home sales last month was up just over 8% from a year earlier, though experts predict it may moderate.
Still, new homes represent a cushion for buyers facing low inventory on the existing home side.
New single-family home inventory in March sat at 477,000, up nearly 3% from February. That represents about 8 months of supply at the current building pace. As for existing single-family homes, data from NAR shows there were just over 3 months of supply in March — at least 5 to 6 months represent a balanced market.
Overall, the inventory of newly built homes in March was up just over 10% annually.
According to Sam Khater, Freddie Mac’s chief economist, buyers are coming to terms with higher rates, as evidenced by the recent uptick in sales for new homes.
“Despite rate increases more than half a percent since the first week of the year, purchase demand remains steady,” said Khater. “With rates staying higher for longer, many homebuyers are adjusting.”
Gabriella Cruz-Martinez is a personal finance and housing reporter at Yahoo Finance. Follow her on X @__gabriellacruz.
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Tony Anderson/GettyImages; Illustration by Hunter Newton/Bankrate
Key takeaways
HFA loans are mortgages available solely through state housing finance agencies.
Geared toward first-time and low- to moderate-income homebuyers, HFA loans feature low down payments, competitive interest rates and down payment and closing cost assistance.
HFA terms and qualifications vary by state, which may impose income and purchase price limits on borrowers.
No, “HFA loan” is not a misidentification of the better-known FHA loan. It’s a wholly different type of mortgage, offered through state housing finance agencies (HFAs) in partnership with major loan providers Fannie Mae and Freddie Mac. HFA loans help make homeownership more affordable for first-time homebuyers and low- to moderate-income borrowers, thanks to their reduced interest rates and closing costs, as well as their down payment assistance options.
What is an HFA loan?
HFA loans are conventional mortgages, issued by private lenders, which must conform to guidelines set by Fannie Mae and Freddie Mac.
HFAs support affordable housing initiatives, including helping homebuyers, homeowners and renters. While their exact function and relationship to their state government varies, HFAs typically act as independent organizations, overseen by a board of directors appointed by the state’s governor. They might be referred to as the state’s housing “authority,” “commission,” “corporation” or “department.”
Fannie Mae and Freddie Mac are two government-sponsored enterprises (GSEs) that back much of the mortgage market in the U.S. They work with state housing authorities (HFAs) nationwide to offer these loans. Fannie and Freddie design the loans and their terms, but neither they nor the state directly funds them or deals directly with applicants. Instead, they work through a selection of approved, private mortgage lenders.
How does an HFA loan work?
HFA loans come with many caveats. You have to meet your state program’s requirements for income and homeownership status (you typically can’t have owned a house within the past three years.) And you’ll probably need to take a homebuyer education course designed to prepare you for the homebuying process.
Once you’re approved, you can often finance the down payment with down payment assistance, which is provided through the HFA. The assistance could be in the shape of a second mortgage (with very generous terms), a forgivable loan (that doesn’t need to be repaid in full or in part if you meet certain conditions), or even an outright grant (like HFA Preferred grants), depending on what that particular state authority offers. Often this assistance is only available if you are financing with an HFA loan.
HFA loan requirements
To qualify for one of these mortgages, you generally must meet a few basic HFA loan requirements:
Down payment: 3 percent for single-family homes
Credit score: at least 620
Debt-to-income ratio: 45 percent
Occupancy requirement: At least one borrower must use the home as a primary residence
Your local HFA may have extra minimums you must meet. Often, you need to be within certain income and purchase price limits that vary by county/municipality and household size. And of course, you have to be buying the home within the state.
Types of HFA loans
There are two types of HFA loans: Fannie Mae’s (called HFA Preferred) and Freddie Mac’s (known as HFA Advantage). Some states offer both HFA Preferred and HFA Advantage loans; some opt to go with one type exclusively. Here’s how the two types compare.
Fannie Mae’s HFA Preferred
Freddie Mac’s HFA Advantage
Loan type
Conventional
Conventional
Rate type
Fixed rate
Fixed rate
Minimum down payment
3 percent
3 percent
Distinct features
These loans also allow for limited cash-out refinancing
People who do not plan to live in the home can serve as co-borrowers
HFA vs. FHA mortgage loans
An HFA loan and FHA loan might sound the same — and have similar characteristics, like a low down payment — but they are two separate types of mortgages. Let’s dive into some of the similarities and differences.
HFA loans
FHA loans
Sponsoring entity
State housing finance agencies (HFAs)
Federal Housing Administration (FHA)
Available from
State-approved lenders
Banks, credit unions, mortgage companies and other businesses that offer mortgages
Minimum down payment
3 percent
3.5 percent
Minimum credit score
620
580
Income and purchase price limits
Often imposed
Not often imposed
Mortgage insurance
Yes, but like with other conventional loans, private mortgage insurance (PMI) is cancellable once you have built up 20 percent equity in your home
Mortgage insurance premiums (MIP) required; may be permanent or cancellable, depending on the down payment size
HFA loan pros and cons
An HFA mortgage has its pros and cons to consider before deciding if it’s the best choice for you:
Pros of HFA loans
Low down payment requirement and closing costs: With an HFA loan, you can put down as little as 3 percent. Closing and upfront fees tend to be low.
Financial assistance: Many HFAs offer assistance with closing costs or down payments.
Lower mortgage insurance costs/easier insurance elimination: HFA loans charge less for mortgage insurance and eliminate insurance payments automatically upon reaching 80 percent loan-to-value (LTV) ratio. Other programs, like FHA loans, make it harder — if not impossible — to get out of mortgage insurance, as long as the loan is active.
Cons of HFA loans
Not widely available: You can only get an HFA loan from your local state agency. Other types of loans are more widely available.
Income limits: HFA loans are for people with incomes lower than the median of their geographic area.
Inconsistent rules: Each HFA can set different rules and requirements, so you need to check with your specific HFA to learn if you’re eligible.
Higher credit score requirements: Though low, HFA loans have higher credit score minimums than some alternatives like FHA loans.
Who is an HFA loan best for?
Getting an HFA loan might be a better idea for certain people. Consider an HFA loan if you fall into at least one of these categories:
First-time buyers. The definition is broad enough to include first-time homeowners and buyers who haven’t owned a home in the past three years.
Those with moderate incomes. To qualify, your income must fall within the HFA’s income limits, which are typically set yearly and vary from state to state — and even counties within the state. Those with high incomes should look elsewhere.
Owner-occupants. HFAs aren’t available for investment properties or vacation homes. Rather, they’re for principal residences.
House hackers. HFA loans do allow purchases of two- to four-unit residences, meaning you could finance a duplex, divided townhouse or small apartment building. You’d just need to occupy one unit and rent out the rest, a strategy sometimes known as “house hacking.”
How to apply for an HFA loan
Explore your HFA’s options. Each HFA has its own requirements for HFA loans, and could also offer alternative programs and assistance. You can find your HFA’s website through our guide to first-time homebuyer programs by state.
Contact the state housing authority. Depending on the HFA, you can either fill out a form online to get in touch for more information, or call the agency directly.
Find an approved mortgage lender. HFA loans are only offered through lending partners approved by your HFA. You can find a list of these lenders on your HFA’s website.
Compare lender reviews and testimonials to help narrow your options. From there, you can move forward with a preapproval and application, and a homebuyer course, if needed. When you apply for an HFA loan, be prepared to provide all of your financial information, including paystubs and tax returns.
Other low-down payment mortgages
Whether you’re a first-time or repeat homebuyer, there are several other low down payment mortgage options. Some of the most popular include:
FHA loans: More widely available than HFA loans. Lower credit score requirements. 3.5 percent down payment requirement.
VA loans: Only available to veterans and service members. No down payment requirement.
USDA loans: Only available in specific areas. No down payment requirement.
HomeReady/Home Possible loans: 3-5 percent down payment required. Lower mortgage insurance costs. Income limit of 80 percent of the local area median income.
Conventional 97 loan: Conventional mortgage with 3 percent down payment requirement.
HFA loan FAQ
HFA mortgage rates can vary with market rates and the HFA you work with. They tend to be quite competitive with national average rates. To find up-to-date rates, contact your state’s HFA.
Yes, you can use down payment assistance when applying for an HFA mortgage. Your HFA may be able to help you find assistance.
Yes, HFA mortgages require mortgage insurance payments. You can get out of these payments once you reach an 80 percent LTV ratio or 20 percent home equity.
Yes, it is possible to refinance to an HFA loan. Depending on the type of HFA loan you have, you may or may not be able to take cash out during closing.
It’s no secret that the price tags of single-family homes — the ideal dwelling in terms of space, independence, and resale value — have spiked, and many current homeowners have been reluctant to let go, but a buyer whose heart is set on a single-family home may be able to follow a playbook to find their prize.
Buying a single-family home isn’t dramatically different from purchasing another type of property, but the process has a few variations. Here are some guidelines.
What Is a Single-Family Home?
The definition would seem easy enough, but it does vary according to real estate experts and government sources. The U.S. Census Bureau says single-family homes include fully detached and semi-detached homes, row houses, duplexes, quadruplexes, and townhouses. Each unit has a separate heating system and meter for public utilities, and has no units above or below.
According to other definitions of a single-family home, the building has no shared walls; it stands alone on its own parcel of land. In some places, the number of kitchens the home has informs the definition.
Unlike a multi-family property, a single-family home is meant for one person or household. Among the types of houses out there, including condos, co-ops, townhouses, and manufactured homes, the single-family home remains the holy grail for many Americans. 💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.
First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.
Benefits of Purchasing a Single-Family Home
While condos and townhouses may come with shared amenities and lower maintenance, traditional detached single-family homes come with different perks. When people buy a single-family home, they’re looking for benefits specific to this property type.
Spacious, Quiet, and Intimate
A single-family home is typically larger than a condo or townhome. Moreover, since the property is often on its own lot without shared walls, a single-family home offers more space and more privacy inside and outside the home.
Possibly No HOA
A co-op association or a condo or townhouse homeowners association sets and enforces rules and collects fees to pay for shared amenities. Anyone who buys into an HOA community must live by the CC&Rs: the covenants, conditions, and restrictions. They can be lengthy, and the ongoing fees can constantly rise.
You may be able to buy a detached single-family home with no HOA and paint your mailbox, or house, pink or purple — unless you live in a city like Palm Coast, Florida, that allows only earth tones and light or pastel hues but no colors that are deemed “loud, clashing, or garish.”
Then again, HOAs are becoming more common for detached single-family homes in planned communities. In fact, about 65% of single-family homes built in 2020 were in an HOA, Census Bureau data shows.
Single-Family Home Appreciation
Generally, single-family homes are in higher demand than multi-family or other properties. Because of both the building and demand, when a person buys a single-family home, the value may increase faster.
Possibilities for Renovation and Expansion
When people buy single-family homes, they’re buying into the potential to expand or renovate extensively. If the lot is big enough, single-family homeowners could put an addition on the property.
Single-family homes can be an attractive buy simply because of the option to expand in the future, unlike properties with shared lots or walls. 💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.
How to Buy a Single-Family Home
Ready to buy a single-family home? Anyone from a first-time buyer to a seasoned investor may find appeal in a single-family home.
Recommended: First-Time Homebuyers Guide
1. Draw Up Your Financial Priorities
First, it’s important to look at finances. Your credit scores can have a significant impact on getting approved for a mortgage. To get a clear read on credit, but not scores, buyers can request free credit reports from the three major credit bureaus.
Additionally, it can be helpful for a qualified first-time homebuyer — who can be anyone who has not owned a principal residence in three years, some single parents, and others — to look into specialty mortgages to see if they qualify for them.
A loan from the Federal Housing Administration (FHA) may allow a down payment as low as 3.5%. A USDA loan (from the United States Department of Agriculture) requires nothing down, and a VA loan (from the Department of Veterans Affairs) also usually requires nothing down. Some conventional lenders allow qualifying first-time buyers to put just 3% down.
It’s important to know, though, that all FHA loans require an upfront and annual mortgage insurance premium, regardless of the down payment size. VA loans require a one-time “funding fee.” And borrowers with conventional conforming loans who put down less than 20% will pay private mortgage insurance until their loan-to-value ratio drops to 80% and they request removal, or to 78%, when it falls off.
2. Decide on Your Preferred Type of Housing
No two houses are alike, just as no two homebuyers are. Everyone has different tastes and priorities about where they want to call home.
Before hitting every open house in town, consider deciding on must-haves for a single-family detached home, including privacy, proximity to businesses, size, and style. This could help determine if a single-family home is the right fit.
3. Arrive at Your Price Point
Armed with an understanding of the type of house, it’s time to think about the price point. In addition to thinking about the down payment, buyers will want to calculate a monthly mortgage payment and total loan costs.
Figuring out a price point before looking at homes can take the emotion out of the process. That way, buyers have a budget in mind and a “do not exceed” amount before they fall for a home.
4. Search for a Good Real Estate Agent
Buying a single-family home can be fun, stressful, and fast-paced. Working with a trusted real estate agent can make the process a little easier.
To find a real estate agent, you might consider:
• Reaching out to friends for referrals
• Checking out local real estate association websites
• Using an agent selling homes in the area you want to buy in
You might want to interview more than one agent, asking about their experience, availability, and philosophy. The choice of agent will likely come down to a combination of personality match and experience.
5. Find Your Neighborhood
Armed with an agent and budget, it’s time to dive deeper into neighborhoods. Once again, the choice of where to search will come down to the buyer; there’s no one “right” place to buy a single-family home.
As buyers explore neighborhoods, they might prioritize the following:
• School district
• Walkability
• Proximity to workplace
• Community resources
• Budget
An experienced agent can help buyers distill their priorities and even point them in the right direction. Typically, buyers will have to balance the above elements, as it might not be possible to check all the boxes in a single neighborhood.
6. Tour Homes With Your Agent
Once buyers decide what neighborhoods they want to buy a single-family home in, it’s time to start touring properties.
When touring a single-family home with an agent, try to allot between half an hour to an hour. In the case of open houses, prospective buyers can walk in at any time, but private home tours require a buyer’s agent to gain access to the property.
When buying a single-family home, everyone will have their own checklist of what they want, which might include:
• Listing price
• Number of bedrooms and bathrooms
• Storage space
• Floorplan
• Plot of land
• Deck and porch
• Garage and driveway
It could help to take photos or notes while touring a home to refer to them long after you’ve left the property.
7. Choose a House and Bid
Found a place and ready to make an offer? Time to get a home loan in order. Luckily, buyers will have a good idea of what they can offer on a property based on their finances with the upfront legwork.
Your agent can help with negotiating a house price.
How to make an offer? It pays to understand comps and the temperature of the market, and then:
• Figure out the offer price
• Determine fees
• Budget for an earnest money deposit
• Craft contingencies
With an offer drawn up, it’s time to submit it to the seller and wait for the next steps.
8. Review the Process and Get Ready to Move
Buying a single-family home isn’t a done deal once an offer is submitted. Typically there will be a back and forth, perhaps over offer price or contingencies.
Once everything is agreed on, and the inspection is resolved, it’s time to tally moving expenses and pack up.
9. Head to Closing and Move Into Your New Property
The final part of buying a single-family home is closing day. During closing, the buyer and seller meet with their agents to go over paperwork, and settle any outstanding costs, and formally turn over property ownership.
Next, it’s just moving everything in and settling in. Even after closing, homeownership may feel overwhelming, but there are plenty of resources to make it easier.
Ready to Buy a Home Quiz
The Takeaway
Ready to buy a single-family home? The process before you may seem daunting, especially if it’s your first home purchase. But if you break it down to small steps and keep your budget and dream-house priorities top of mind, home sweet home may be closer than you think.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
How much does it cost to buy a single-family home?
Zillow put the typical value of a single-family home at $354,000 in April 2024. New construction costs more. The median sales price of new houses sold in February 2024 was $400,500, according to the U.S. Census Bureau.
Can you buy a single-family home with no money down?
If a buyer qualifies for a mortgage backed by the Department of Veterans Affairs or Department of Agriculture, or one issued directly by those agencies, they may be able to purchase a home with no down payment.
What are the most important things to consider when buying a house?
Location (including property tax rate, quality of schools, walkability, crime rate, access to green space, and the general vibe), your ability to cover all the costs, duration of your stay, and square footage may be important.
How much should you have in savings to buy a single-family house?
You’ll need to have enough to cover a down payment, closing costs, and moving fees while ideally preserving an emergency fund.
Photo credit: iStock/jhorrocks
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SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Multifamily property has the power to generate cash flow and build wealth. Yet it also has the power to drain you of your free time and become the biggest money pit of your life.
If you’re looking to buy a multifamily property and avoid common headaches, you have your research cut out for you.
What Is a Multifamily Property?
Multifamily property consists of multiple units in a single building. This includes duplexes, triplexes, fourplexes, condominium buildings, student housing, apartment complexes, age-restricted communities, low-income housing, and townhomes. The units in a full multifamily housing property must have separate entrances, kitchens, bathrooms, and utility meters.
Multifamily property investing has declined in the year ending November 2023, due in part to concerns about interest rates, but multifamily properties are still a popular investment vehicle. There’s a reason that individual investors gravitate toward two- to four-unit properties, other than ease of management. Residential loans of 30 years with a fixed rate are available for properties with one to four dwelling units. FHA, VA, and USDA loans are available for those properties if they are owner-occupied.
For five or more units, a commercial loan is required. Commercial loans usually come with a higher down payment requirement, higher interest rate, and a shorter term, meaning significantly higher mortgage payments. 💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.
First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.
Why Buy a Multifamily Property?
Buying a multifamily home can jump-start your own real estate portfolio and investment portfolio. Here’s how.
Recommended: First-Time Homebuyer Guide
Income From Flipping
Multifamily homes can be improved and then resold for a profit, or ”flipped.” Buying a multifamily property, remodeling, and then reselling can be even more profitable than flipping single-family homes because as you remodel, you can increase rents.
Once you increase rents, the property becomes more valuable, both in terms of monthly income, cash flow and overall worth.
The ‘BRRRR’ Method
BRRRR stands for buy, rehab, rent, refinance, repeat. An investor buys a property, renovates it, and rents out the newly refurbished units for more money. After that, they can refinance the property to take out extra cash to buy a new property to renovate.
This method works well with larger multifamily properties because the rehabbing of multiple units can be done while other units that are not being renovated can still bring in some income.
Cash Flow
Multifamily homes were designed for cash flow. Space and amenities are optimized to bring in money for the investor. On the other hand, single-family homes are designed for comfort. The added space of a single-family home may not bring as high of a return as a multifamily property.
Quick Portfolio Expansion
Buying multifamily properties allows investors to acquire multiple units with one transaction, so they may have a favorite in the single-family vs. multifamily comparison. Additionally, investing in multifamily properties can allow an investor to quickly generate income, which could be enough to acquire more properties.
Reduced Risk
A multifamily property lessens risk exposure. When you have single-family homes, vacancies have a bigger effect on your monthly cash flow. With one or more multifamily properties, the risk is spread across a number of properties. In other words, there are units still rented that can help cover the costs of the units that are vacant.
Analyzing the Investment Potential of a Multifamily Property
Investors can use a number of methods to determine if it makes sense to buy a multifamily property or not. Here are some of the most common calculations you can use to make that determination for yourself.
Cash Flow
In real estate investing, cash flow is money that’s generated by the property and money spent on the property. Positive cash flow means income exceeds expenses. You could also call it profit.
Investors have differing amounts that they consider acceptable. Some real estate investors bank on the appreciation of the property instead of the amount of cash flow.
The 1% Rule
The 1% rule states that the gross rents should be 1% or more of the purchase price. The 1% rule is hard to apply in high-income areas where the purchase price of a property is high relative to the rents it generates.
Gross Rent Multiplier
The gross rent multiplier (GRM) is a ratio: the fair market value of a property divided by its gross annual rents. It doesn’t take expenses into consideration and is meant to be a simple calculation to determine if a property is worth exploring further. If you’re comparing two properties for purchase, the one with the lower GRM may be the better investment.
Cash on Cash Return
The cash on cash return is the annual amount earned compared with the amount of cash invested. It’s expressed as a formula: annual net cash flow divided by cash investment. This is helpful for investors who want to know how much cash is brought in by their cash investment each year.
Capitalization Rate
The capitalization rate, or cap rate, is the amount of net operating income divided by the purchase price. This number indicates how long it will take to get back all your money in an investment.
Recommended: What Is Cap Rate and How Do You Calculate It?
Internal Rate of Return
The IRR measures the rate of return over an amount of time. It takes into account both cash flow and expected appreciation.
Recommended: Mortgage Payment Calculator
How to Buy a Multifamily Property
You may be able to use 75% of documented rental income to help finance mortgage interest on your loan. And again, multifamily homes with four or fewer units can be financed more traditionally, while five or more units require a commercial mortgage.
Getting preapproved for a mortgage for your multifamily investment property is one of the best things you can do to get started. After a mortgage officer has examined your finances and greenlighted an amount, you can go shopping for your multifamily investment properties.
Find a Multifamily Home
To narrow your search for a new multifamily property here, you’ll want to decide what it is you’re looking for. Keep a few of these factors in mind:
• Location: Do you have an area that you have expertise in? Are you going to manage the property yourself? These are some questions you’ll want to ask yourself to determine if you can buy a multifamily property near or far.
• Price range: After you’ve looked at where you want to potentially invest, you’ll get a good sense of what properties will cost by looking at real estate listings. Keep in mind that you can count 75% of documented rents toward the purchase price for many loan types, so the price you’ll be looking at will be much different than if you were looking for a single-family home.
• Type of property: Are you looking for a fourplex or an apartment complex? Duplex or 55+ community? There are a lot of choices to make between different property types and whether or not they’ll bring you a profit.
• Profit potential: Are you looking to invest for appreciation or cash flow? Many properties with a lower price tag in the Midwest may be better for cash flow, while properties on the West Coast may appreciate more. Take a look at both and decide on your investment strategy.
• Condition: Do you have the resources and team in place to take on a multifamily property that needs a lot of work? Or would you rather have something turnkey? You’ll want to be sure you know what resources you can commit to the project before you get in over your head.
Choose a Loan
The type of rental property used may determine what type of loan you’re able to get. If this is your first rental, you may want to consider living in one of the units so you can qualify for owner-occupied financing, which usually comes with lower rates and down payment requirements.
Choose a lender that can answer your questions about mortgages.
Make an Offer and Close
Working with a real estate agent, you’ll submit a competitive offer for the property you’ve chosen. Some buyers use cash to make the most competitive offer, while others need financing.
Renovate and Get Ready for Your Tenants
No matter what class of property you buy, the rental units will almost always require some work. Whether it’s a simple clean or a major renovation, these things are both tax-deductible and will improve the value, not to mention rentability, of your property.
Create a Management Plan
To make sure you’re running a business, and it’s not running you, you need to have a solid plan in place for how the rentals will be managed. How are repairs going to be taken care of? What’s your process when a rental turns over? How are you going to keep up with laws and ordinances?
Having a plan helps. Even so, you’ll learn as you go and will need to adjust this plan. 💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.
The Takeaway
How to buy a multifamily property? Do your research and choose a property that you’ll have the ability to finance and manage. Investing in rental properties and multifamily investing is not easy, but it can generate cash flow and create family wealth.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Is buying a multifamily property a good investment?
Finding a multifamily property that is a good investment will depend on the investor’s analysis of the property. This can include the price, condition, gross rent multiplier, capitalization rate, and a number of other factors that will make renting the units successful.
What are the different kinds of multifamily properties?
• Duplexes, triplexes, fourplexes
• Townhouses
• Apartment buildings
• Condominiums
• Bungalow courts
• Mixed-use buildings
• Student housing
• Age-restricted housing units
• Low-income housing units
What is the best way to finance a multifamily home?
Some would argue that an FHA loan with 3.5% down is one of the best ways to finance a home with up to four units. The owner must live in one of the units to qualify for this type of financing.
Photo credit: iStock/Andrey Sayfutdinov
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
WASHINGTON, D.C. (April 26, 2024) – Homebuyer affordability declined in March, with the national median payment applied for by purchase applicants increasing slightly to $2,201 from $2,184 in February. This is according to the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time – relative to income – using data from MBA’s Weekly Applications Survey (WAS).
“Homebuyer affordability conditions remain volatile as recent economic data continues to show that the economy and job market are strong. These factors will keep mortgage rates at elevated levels for the near future, sidelining some prospective buyers from entering the housing market,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “While rates remain elevated and housing supply is low, we do expect to see renewed activity as mortgage rates decline to low-to-mid 6 percent range by the end of the year.”
An increase in MBA’s PAPI – indicative of declining borrower affordability conditions – means that the mortgage payment to income ratio (PIR) is higher due to increasing application loan amounts, rising mortgage rates, or a decrease in earnings. A decrease in the PAPI – indicative of improving borrower affordability conditions – occurs when loan application amounts decrease, mortgage rates decrease, or earnings increase.
The national PAPI (Figure 1) increased 0.8 percent to 174.2 in March from 172.8 in February. Median earnings were up 3.5 percent compared to one year ago, and while payments increased 5.2 percent, the strong earnings growth means that the PAPI is up 1.6 percent on an annual basis. For borrowers applying for lower-payment mortgages (the 25th percentile), the national mortgage payment increased to $1,488 in March from $1,473 in February.
The Builders’ Purchase Application Payment Index (BPAPI) showed that the median mortgage payment for purchase mortgages from MBA’s Builder Application Survey increased to $2,556 in March from $2,534 in February.
Additional Key Findings of MBA’s Purchase Applications Payment Index (PAPI) – March 2024
The national median mortgage payment was $2,201 in March—up $17 from February. It is up by $108 from one year ago, equal to an 5.2% increase.
The national median mortgage payment for FHA loan applicants was $1,898 in March, up from $1,872 in February and up from $1,755 in March 2023.
The national median mortgage payment for conventional loan applicants was $2,222, up from $2,194 in February and up from $2,145 in March 2023.
The top five states with the highest PAPI were: Nevada (261.5), Idaho (256.9), Arizona (229.9), Florida (219.1), and Washington (218.2).
The top five states with the lowest PAPI were: Connecticut (128.5), Louisiana (130.7), Alaska (137.3), DC (138.6), and New York (138.6).
Homebuyer affordability decreased for Black households, with the national PAPI increasing from 179.0 in February to 180.4 in March.
Homebuyer affordability decreased for Hispanic households, with the national PAPI increasing from 165.1 in February to 166.4 in March.
Homebuyer affordability decreased for White households, with the national PAPI increasing from 175.5 in February to 176.8 in March.
About MBA’s Purchase Applications Payment Index
The Mortgage Bankers Association’s Purchase Applications Payment Index (PAPI) measures how new mortgage payments vary across time relative to income. Higher index values indicate that the mortgage payment to income ratio (PIR) is higher than in a month where the index is lower. Contrary to other affordability indexes that make multiple assumptions about mortgage underwriting criteria to estimate mortgage payment level, PAPI directly uses MBA’s Weekly Applications Survey (WAS) data to calculate mortgage payments.
PAPI uses usual weekly earnings data from the U.S. Bureau of Labor Statistics’ Current Population Survey (CPS). Usual weekly earnings represent full-time wage and salary earnings before taxes and other deductions and include any overtime pay, commissions, or tips usually received. Note that data are not seasonally adjusted.
MBA’s Builders’ Purchase Application Payment Index (BPAPI) uses MBA’s Builder Application Survey (BAS) data to create an index that measures how new mortgage payments vary across time relative to income, with a focus exclusively on newly built single-family homes. As with PAPI, higher index values indicate that the mortgage payment to income ratio (PIR) is higher than in a month where the index is lower. To create BPAPI, principal and interest payment amounts are deflated by the same earnings series as in PAPI.
The rent data series calculated for MBA’s national mortgage payment to rent ratio (MPRR) comes from the U.S. Census Bureau’s Housing Vacancies and Homeownership (HVS) survey’s median asking rent. The HVS data is quarterly, and as such, the mortgage payment to rent ratio will be updated quarterly. The HVS data is quarterly, and as such, the mortgage payment to rent ratio will be updated quarterly. MPRR data was not included in the March 2024 data.
For additional information on MBA’s Purchase Applications Payment Index, click here.
Sales of newly built single-family homes in the United States soared in March despite mortgage rates remaining elevated that month.
New home sales, which make up about 10% of the market, jumped 8.8% last month to a seasonally adjusted annual rate of 693,000, according to government figures released Tuesday. That trounced the 670,000 rate projected by economists, according to a FactSet poll, and was the strongest monthly increase since December 2022.
Sales of new homes increased across the country last month, rising the most in the Northeast region by a robust 27.8% from February.
Meanwhile, sales of existing homes, which make up the vast majority of the housing market, fell 4.3% in March to a seasonally adjusted annual rate of 4.19 million, the sharpest drop in more than a year, the National Association of Realtors reported last week.
Housing market poised to remain difficult
The broader US housing market is expected to remain tough for Americans, with mortgage rates poised to stay well above 6% this year, economists say. The Federal Reserve doesn’t directly set mortgage rates, but its actions do influence them, and the central bank isn’t expected to cut interest rates anytime soon. A persistent undersupply of housing also remains a key pressure point in the market, contributing to low affordability.
Housing inventory has improved in recent months, but supply still isn’t keeping up with demand. This means homebuyers have limited options as some homeowners who locked in a low mortgage rate before the Fed began to hike rates in 2022 largely prefer to not sell their homes.
“Despite high prices and mortgage rates, homebuyers have limited options on the resale market, although resale inventories have improved some over the course of this year,” Gregg Logan, managing director at RCLCO Real Estate Consulting, said in a note Tuesday.
“The willingness of the major homebuilders to utilize incentives such as price reductions, mortgage rate buy-downs and paying buyers closings costs continue to support a healthy pace of new home sales,” he added.
A stalled housing market recovery?
The housing market began the year with some momentum as home sales surged, homebuilder sentiment perked up and inventory levels climbed, but now it seems to have fizzled out.
In addition to the March drop in existing home sales, residential construction of single-family homes also fell that month, declining 12.4% to a seasonally adjusted annual rate of 1.022 million units, according to Commerce Department data released earlier this month. Residential construction fell throughout the country except in the West. Meanwhile, building permits for future construction tumbled 3.7% in March to a five-month low.
Data from the National Association of Home Builders showed that 22% of builders cut homes prices in April, down from 24% in March. Meanwhile, the share of builders who offered a sales incentive edged lower to 57% in April from 60% in March. Sentiment among homebuilders in America held steady in April, NAHB said.
“April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed,” NAHB’s chief economist, Robert Dietz, said in a release.
This story has been updated with additional context.
The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Agriculture (USDA) have settled on new energy-efficiency standards for the construction of new single-family and multifamily homes. This fulfills a requirement laid out in a 2007 law that directs the departments to adopt the most recently published energy-efficiency standards following reviews by the U.S. Department of Energy (DOE) and HUD itself.
The “Adoption of Energy Efficiency Standards for New Construction of HUD- and USDA-Financed Housing” was published on Friday in the Federal Register, and will go into effect on May 28.
The Energy Independence and Security Act of 2007, signed into law by President George W. Bush that December, featured a statutory requirement directing HUD and USDA to “jointly adopt the most recently published energy efficiency standards for single family and multifamily homes, subject to an energy efficiency determination by the [DOE] and a cost-benefit housing ‘affordability and availability’ test by HUD,” according to an announcement from the Federal Housing Administration (FHA).
A preliminary determination was published by HUD and USDA in May 2023, based on energy-efficiency standards developed by the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) and the International Energy Conservation Code (IECC).
These standards will “lower energy costs for owners of newly-constructed homes, benefitting homeowners, FHA, and communities,” the announcement stated. “HUD expects this to be particularly beneficial for low-income and rural homeowners who typically face disproportionately high energy cost burdens.”
The implementation timeline varies based on the type and location of new construction. For FHA-sponsored single-family homes, new construction must comply with the 2021 IECC if building permit applications are submitted 18 months or later following the May 28 effective date.
For new construction in persistent rural poverty areas, as defined by the USDA Economic Research Service, compliance with the 2021 IECC will be required 24 months after the May 28 effective date. Within the next month, USDA will “publish a map of rural areas covered by this extension no later than 30 days after the effective date of this notice.”
FHA will also publish a mortgagee letter with additional implementation details for its single-family programs sometime prior to the May 28 effective date.
This announcement in the latest in a series of actions HUD has announced in pursuit of greater climate resiliency. On Thursday, HUD detailed a slew of actions and initiatives it has undertaken to bolster climate resiliency while supporting green housing initiatives that stem from Inflation Reduction Act funding. It also recently announced plans to combat the effects of extreme heat.
Before browsing properties, talking with a real estate agent, or researching market trends, the first step to homeownership is to save for a down payment. But this is also one of the more challenging and time-consuming aspects of buying a home. According to the National Association of Realtors® Profile of Home Buyers and Sellers, 38% of first-time homebuyers said saving for a down payment was the most difficult step in the home buying process. This is understandable given that the majority of buyers (54%) rely on personal savings to fund their down payment. So if you’re a prospective buyer hoping to get into the market soon, how long does it actually take to save for a down payment?
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To find out how long it would take for a median-income household to save for a down payment, Zoocasa analyzed single-family median home prices in 50 cities across the US and calculated what the 15% down payment would be in each. We then analyzed the median household income in each city, according to the most recent US Census Bureau data, and calculated how many years it would take to save for the 15% down payment, assuming they are saving 10% of their annual income. According to the National Association of Realtors®, in 2023 the median percent down payment for all home buyers was 15%.
You can realize your homeownership dreams the fastest in Buffalo, where it takes 4.9 years to save for a 15% down payment of $33,000. Despite having a moderate median household income of $68,014, Buffalo’s affordable single-family home price – around $170,000 below the national median price of $393,500 – helps to push the city to the top of the list. Pittsburgh and Wichita follow, both requiring 5.2 years to save for a 15% down payment of $31,530 and $31,590 respectively.
Of the top 5 cities requiring the least amount of time to save for a down payment, those in Virginia Beach have the highest median household income at $87,544. This means Virginia Beach buyers require just 5.7 years to save for a 15% down payment of $50,250. Oklahoma City rounds out the top 5, where a 15% down payment of $37,500 and a median household income of $64,251 mean that it will take 5.8 years to save for a down payment.
For the majority of cities, however, it will take prospective buyers more than 8 years to save for a down payment. Even in relatively affordable cities like Albuquerque and Houston, where the median single-family home price is below the national median, buyers will need to save for 8.2 years and 8.6 years respectively. This is largely because, with median household incomes hovering around $60,000 in both Albuquerque and Houston, homebuyers need more time to save compared to those in higher-earning cities like Atlanta or Austin.
With that being said, higher incomes don’t always translate to shorter savings times if the home prices are also exceedingly high. For instance, in San Francisco, the median household income is $136,689 but the median home price is $1,386,500 – nearly 10x the annual income of a household. That means homebuyers in San Francisco will need to save for 15.2 years to be able to come up with a 15% down payment of $207,975. Homebuyers in Boston, Miami, and Los Angeles will require similarly long savings timelines of 15.1 years, 14.7 years, and 14.4 years respectively.
But not all big cities require a long time to save for a down payment. Thanks to its high median household income of $116,068, those in Seattle only need to save for 8.2 years for a 15% down payment of $95,058. Similarly, in Chicago, it would take a median-income buyer 7.1 years to save for a 15% down payment, and in Philadelphia, it would take just 6.5 years.
Want to discuss your options in one of these cities? Give us a call today to learn what properties are available in your budget.
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Real estate investments make money through appreciation and rental income. Real estate can diversify a portfolio and act as a hedge against inflation, since landlords can pass rising costs to tenants. But the down payment on multifamily investment properties? At least 20%, or 25% to get a better rate.
It’s true that eligible borrowers may use a 0% down U.S. Department of Veterans Affairs (VA) loan for a property with up to four units as long as they live there. But those loans serve a relative few and are considered residential financing. Properties with more than four units are considered commercial.
So how can a cash-poor but curiosity-rich person tap the potential of multifamily properties? By not footing the entire bill themselves.
Can You Buy a Multifamily Property With No Money?
When you buy real estate, you typically have two options: Buy with cash or finance your purchase with a mortgage loan.
There are various types of mortgages. If you take out a home loan, you’ll likely need to pay a portion of the purchase price in cash in the form of a down payment. The minimum down payment you make will depend on the type of mortgage you choose — the average down payment on a house is well under 20% — and it will help determine what terms and interest rates you’ll be offered by lenders.
This money needs to come from somewhere, but it doesn’t necessarily need to come from your own savings account. When investors buy multifamily properties with “no money down,” it just means they are using little to no personal money to cover the upfront costs.
If you don’t have much cash of your own, there are several ways that you can fund the purchase of a multifamily investment property. 💡 Quick Tip: Jumbo mortgage loans are the answer for borrowers who need to borrow more than the conforming loan limit values set by the Federal Housing Finance Agency ($766,550 in most places, or $1,149,825 in many high-cost areas). If you have your eye on a pricier property, a jumbo loan could be a good solution.
6 Ways to Pay for a Multifamily Property
Find a Co-Borrower
If you don’t have the money to front the costs of a property yourself, you may be able to partner with a family member, friend, or business partner. They may have the money to cover the down payment, and you might pull your weight by researching properties or managing them.
When you co-borrow with someone, you’ll each be responsible for the monthly mortgage payments. You’ll also share profits in the form of rents or capital gains if you sell the property.
Give an Equity Share
You may give an equity investor a share in the property to cover the down payment. Say a multifamily property costs $750,000, and you need a 20% down payment. An equity investor could give you $150,000 in exchange for 20% of the monthly rental income and 20% of the profit when the property is sold.
Borrow From a Hard Money Lender
Hard money loans are offered by private lenders or investors, not banks. The mortgage underwriting process tends to be less strict than that of traditional mortgages. Depending on the property you want to buy, no down payment may be required.
These loans (also called bridge loans) have high interest rates and short terms — one to three years is typical — with interest-only payments the norm. For this reason, they may be used by investors who may be looking to flip the property in short order, allowing them to make a profit and pay off the loan quickly.
First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.
House Hack
House hacking refers to leveraging property you already own to generate income. For example, you might rent out an in-law suite or list your property on Airbnb.
Another option: You could rent out your primary residence and move into one of the units in a multifamily property you buy. This way, you’d probably generate more income than if you had rented out the unit to a tenant.
Finally, you could hop on the ADU bandwagon if you own a single-family home. Accessory dwelling units can take the form of a converted garage, an attached or detached unit, or an interior conversion. The rental income can be sizable. To fund a new ADU, homeowners may tap home equity, look into cash-out refinancing, or even use a personal loan.
Seek Seller Financing
If you don’t have the cash for a down payment on a property, you may be able to forgo financing from a lending institution and get help instead from the seller.
With owner financing, there are no minimum down payment requirements. Several types of seller financing arrangements exist:
• All-inclusive mortgage: The seller extends credit for the entire purchase price of the home, less any down payment.
• Junior mortgage: The buyer finances a portion of the sales price through a lending institution, while the seller finances the difference.
• Land contracts: The buyer and seller share ownership until the buyer makes the final payment on the property and receives the deed.
• Lease purchase: The buyer leases the property from the seller for a set period of time, after which the owner agrees to sell the property at previously agreed-upon terms. Lease payments may count toward the purchase price.
• Assumable mortgage: A buyer may be able to take over a seller’s mortgage if the lender approves and the buyer qualifies. FHA, VA, and USDA loans are assumable mortgages.
Invest Indirectly
Not everyone wants to become a landlord in order to add real estate to their portfolio. Luckily, they can invest indirectly, including through crowdfunding sites and real estate investment trusts (REITs).
The Jumpstart Our Business Startups Act of 2013 allows real estate investors to pool their money through online real estate crowdfunding platforms to buy multifamily and other types of properties. The platforms give average investors access to real estate options that were once only available to the very wealthy.
REITs are companies that own various types of real estate, including apartment buildings. Investors can buy shares on the open market, and the company passes along the profits generated by rent. To qualify as a REIT, the company must pass along at least 90% of its taxable income to shareholders each year.
As investment opportunities go, REITs can be a good choice for passive-income investors. 💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.
The Takeaway
Buying a multifamily property with no money down is possible if you take the roads less traveled, including leveraging other people’s money. And if you have the means to make a down payment on a property, your first step is to research possible home mortgage loans.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Can I buy a multifamily home with an FHA loan?
It is possible to buy a property with up to four units with a standard mortgage backed by the Federal Housing Administration (FHA) if the buyer plans to live in one of the units for at least a year. The FHA considers homes with up to four units single-family housing. The down payment could be as low as 3.5%. There are loan limits.
A rarer product, an FHA multifamily loan, may be used to buy a property with five or more units. The down payment is higher. You’ll pay mortgage insurance premiums upfront and annually for any FHA loan.
Is a multifamily property considered a commercial property?
Properties with five or more units are generally considered commercial real estate. Commercial real estate loans usually have shorter terms, and higher interest rates and down payment requirements than residential loans. They almost always include a prepayment penalty.
Photo credit: iStock/jsmith
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Average mortgage rates inched lower yesterday. But all that did was wipe out last Friday’s similarly tiny rise.
Earlier this morning, markets were signaling that mortgage rates today might barely budge. However, these early mini-trends often alter direction or speed as the hours pass.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.302%
7.353%
+0.01
Conventional 15-year fixed
6.757%
6.836%
+0.01
30-year fixed FHA
7.064%
7.111%
-0.07
5/1 ARM Conventional
6.888%
8.036%
+0.12
Conventional 20-year fixed
7.199%
7.257%
+0.05
Conventional 10-year fixed
6.663%
6.737%
+0.06
30-year fixed VA
7.292%
7.332%
+0.01
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
This morning’s Financial Times reports, “While the base case remains a reduction in borrowing costs, the options market shows a 20% probability of an increase.” That means most investors think the Federal Reserve will cut general interest rates this year, but they reckon there’s a 20% chance of the central bank actually hiking them. That’s new and scary.
Although the Fed doesn’t directly determine mortgage rates it has a huge influence on the bond market that does. And I very much doubt mortgage rates will fall consistently before the Fed signals that a cut in general interest rates is imminent. And a Fed rate hike is likely to send mortgage rates much higher: maybe back up to 8% or beyond.
So my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes edged down to 4.6% from 4.64%. (Good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were rising this morning. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices decreased to $81.59 from $82.06 a barrel. (Good for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices fell to $2,333 from $2,350 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Because gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — climbed to 40 from 33 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So, lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to be unchanged or close to unchanged. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
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What’s driving mortgage rates today?
Today
This morning’s two April purchasing managers’ indexes (PMIs) will likely be good for mortgage rates. These “flashes” (initial readings and subject to revision) are both from S&P.
Here are this morning’s actual numbers in bold, alongside the prepublication consensus forecasts, according to MarketWatch, together with the March actual figures:
Services PMI — 50.9 actual; 52 expected; 51.7 in March
Manufacturing PMI — 51.1 actual; 52 expected; 51.9 in March
You can see that the PMIs were worse than expected, which is typically good news for mortgage rates.
Tomorrow
Tomorrow’s durable goods orders for March rarely affect mortgage rates. And they’d need to contain some pretty shocking data to do so tomorrow.
Markets are expecting those orders to have risen by 2.6% in March compared to a 1.3% increase in February. They’ll probably need to be significantly higher than 2.% to exert upward pressure on mortgage rates and appreciably lower to push them downward.
The rest of this week
Nothing has changed since yesterday concerning economic reports due on Thursday and Friday. So, I’ll repeat what I wrote yesterday:
We’re due the first reading of gross domestic product (GDP) for the January-March quarter on Thursday. And that could have a larger effect than PMIs and durable goods orders, depending on the gap between expectations and actuals.
But Friday’s personal consumption expenditures (PCE) price index for March is this week’s star report. That’s the Federal Reserve’s favorite gauge of inflation. And it could certainly affect mortgage rates, possibly appreciably.
The next meeting of the Fed’s rate-setting committee is scheduled to start on Apr. 30 and last two days. So, the PCE price index will be the last inflation report it sees before making decisions.
And index that shows inflation cooling could change the mood at that meeting. True, it’s vanishingly unlikely that a cut to general interest rates will be unveiled on May 1 no matter what.
But a PCE price index that shows inflation cooling could help the Fed to move forward with cuts earlier than expected, which should cause mortgage rates to fall. Unfortunately, one that suggests inflation remains hot or is getting hotter could send those rates higher.
I’ll brief you more fully on each potentially significant report on the day before it’s published.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Apr. 18 report put that same weekly average at 7.1%, up from the previous week’s 6.88%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Mar. 19 and the MBA’s on Apr. 18.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.7%
6.7%
6.6%
6.4%
MBA
6.8%
6.7%
6.6%
6.4%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
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You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
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Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
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Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
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How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
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Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
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Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.