Are you considering the purchase of a duplex to offset a portion of your interest rate? If so, you aren’t alone. Data shows that the U.S. is building 50% more multifamily homes compared to pre-pandemic levels. Demand for multiplexes is up, and for good reason. In this article, we’ll explore the basics of multiplexes, including the benefits and financing requirements.
What are Multiplexes?
Multiplexes are homes that two or more families are able to live in. This can include townhomes, duplexes, triplexes, and quadplexes. Apartment and condo buildings can also be referred to as multiplexes. Multiplex homes are also known as multifamily homes.
This type of home purchase will continue to gain popularity with homebuyers in 2024 because of the cost-saving opportunities. Multifamily homebuyers don’t need to worry about renting out a room in a single-family home for a few hundred dollars a month. Instead, they can become a landlord and rent out a completely separate dwelling in the home.
How are Multiplexes Beneficial?
Multiplexes hold numerous benefits for homeowners. For one, you are able to generate consistent rental income each month, helping you offset higher purchase prices and rising interest rates. For example, if your monthly payment for a duplex is $3,000 a month, but you are able to rent out half for $1,000 a month, your true mortgage payment comes down to $2,000. This makes owning a home more affordable.
Additionally, multifamily homes can help you convert to investor status once it’s time to purchase a new house. Instead of selling the duplex or triplex, you can bring in more tenants, generating extra income each month.
Furthermore, many lenders allow you to utilize future rental income on your mortgage application. Increasing your income by $1,500 a month can be the difference in qualifying for a $300,000 and a $350,000 home. Multiplexes offer the ability to comfortably afford a mortgage, especially as housing prices and interest rates continue to climb.
Are There Different Purchase Requirements?
Simply put, yes, multifamily homes have different qualification requirements. If you plan on living in one of the units, you won’t be subject to the general requirement of 25% down on an investment property. Instead, you might qualify for just 3% down under certain first-time homebuyer programs.
Moreover, you will need to apply for a multifamily home loan. Most loan providers specialize in single family homes, which is why it’s important to find a lender that can offer you multifamily home loan options.
You will also need to pass other general qualifications by remitting past tax returns, your credit score, and furnishing information about a downpayment. However, if you plan on using future rental income as a part of your loan qualification, you might need a signed lease before you close on the property.
High-interest rates don’t have to preclude you from entering the real estate market, especially when buying multifamily homes is an option. To see if you qualify for a multifamily loan, contact one of our loan experts at Texas Republic Bank today.