The Rise of the Multi-Unit Property: Prepping Mortgage Professionals

The Mortgage Bankers Association released a surprising report last year indicating positive trends for multi-unit property opportunities and commercial mortgages.

While there are a number of explanations for the uptick in these property purchases, mortgage professionals need to be prepared for the increase in multi-unit and commercial lending, which can vary greatly from its single-residence counterpart. Understanding the rise of multi-unit property and how it affects the bottom line means you’re ready to engage customers who want to take advantage of rental income and favorable market conditions.

It makes sense that real estate investors would snap up multi-family homes and properties. Multi-unit properties mean the opportunity for even more revenue, thanks to super-low prices paired with a national housing shortage. The result is near-perfect conditions for even newbie investors to dabble in multi-unit properties.

As for mortgage professionals, it’s all about the details and potential risk. Mortgage and financing terms differ between properties with two to four units, which are still considered residential, and properties with five or more units, which are considered a commercial property. Terms are typically simplified and more favorable for residential properties, as they can be written as more traditional loans. Commercial properties, on the other hand, can be a little trickier because of the need for obtaining commercial lending to secure financing.

Mortgage professionals know there’s typically more risk involved in investment and income properties like multi-unit opportunities. That’s because repayment usually rests upon the rental income, which isn’t always a sure thing. Lenders need to look for optimal buyers — those with investment experience and stellar credit histories — to minimize risks related to inexperience or past missteps. A buyer who offers a sizable down payment and a rental property income assessment is your best bet for establishing more favorable mortgage terms and reducing your risk as a lender.

As long as the real estate market conditions remain favorable, lenders can count on seeing more multi-unit applications on their desks. By minimizing risk and creating terms to protect the integrity of your portfolio, it can be a valuable piece of the mortgage market that you can’t afford to miss.

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