Dear Primary Residence 2-4 Unit Buyers

This Conventional loan update got buried in Fannie Mae's other bulletins, and it's worth calling out.

If you're not yet familiar with automated underwriting systems (AUS), all lenders submit your electronic loan file to AUS for a real-time decision (with rare exceptions). Human underwriters are required for final approval, so they come in later.

DU is Desktop Underwriter, which is the main AUS for approving Conventional loan files. This update relates to new logic programmed into DU over the weekend of November 18th.

There are a couple of updates, with the most notable directed to multi-unit home buyers purchasing a Primary residence. Whether using a standard Conventional loan or HomeReady (income caps), this update is split between two scenarios: 2 unit and 3-4 unit.

• For 2 unit purchases the required down payment relaxes from 15% to 5%.
• 3-4 unit purchase transactions get an even bigger gift. Previously requiring 25% down, these transactions only require 5% down.

That is, 5% becomes the minimum down payment, standardized across all 2-4 unit owner-occupied purchase transactions.

While that's specific to multi unit properties, there are plenty of programs that require 3% or less for 1 unit purchases (USDA, for one).

Since this change was smothered in other bulletins, your preferred lender might not know about it but we've got your back. Here is the official announcement (PDF): DU Version 11.1 Nov Update

Get a head start on your competing multi-unit home buyers! Many buyers with 5% down will contemplate changing search criteria from 1 unit to 1-4 units.

Since this update takes effect on 11/18/23, leverage your advanced knowledge of these new guidelines to rework your financing scenario. Mortgage News Daily's calculators are always hungry for numbers, so please feed them.

Sorry, investment property buyers. I don't have any guideline updates for investors just yet. Stay tuned.