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    New Loan Limits and 5% Down Loans for Income Properties in 2024

    December 14, 2023

    By: Richard Haynes

    With the Manhattan Beach Fireworks show taking place this past Sunday, it is safe to say that the South Bay is now in full holiday season mode.

    In the blink of an eye, we will be kicking off 2024 and a brand-new year.

    As such, I want to share annual financing updates that are helpful for buyers looking to make property purchases more affordable, as well as helping owners fetch top dollar when listing.

    This year-end, I have not one but TWO big updates in the lending world that will be exciting news for the home marketplace in 2024.

    The quick twofold summary:

    1. Climbing limits for conforming loans
    2. New 5% down Fannie Mae loans for owner-occupied income properties

    Let’s jump into it.

    Updated 2024 Conforming Loan Limits

    What has become an annual release over the past few years has occurred yet again….the Federal Housing Finance Agency (FHFA) has raised conforming loan limits to keep pace with inflation and the housing market.

    I am a big fan of these increases because there was once a time when conforming loan limits were stagnant for years, not allowing many homebuyers to keep pace with the rising home market.

    Additionally, not only does it help more buyers, but it does drive the housing market with more access to financing, which in turn creates liquidity for homes which helps to grow housing prices over the long run.

    That said, below are the new loan limits for high-cost areas (for context…the South Bay is a high-cost area).

    • $1,149,825 – One Unit
    • $1,472,250 – Two Units
    • $1,779,525 – Three Units
    • $2,211,600 – Four Units

    Without boring you with last year’s list of limits, these new numbers are around a 5.5% increase compared to last year’s numbers.

    This is always a welcomed increase and the right thing to from the FHFA to help homebuyers.

    If you want to use this to your advantage when planning around your real estate portfolio, then be sure to study single-family housing markets that are around the one-unit limit, or of course income property targets that might be around the new loan limit price points.

    What’s interesting, if you look at the North Redondo income property market, you will see two-to-four-unit properties trading around the loan limit prices. I don’t think that is coincidence! These limits really do drive or support property prices.

    New 5% Down Fannie Income Property Loan
    Next up, is a more exciting program in my mind.

    Last month Fannie Mae introduced a new 5% down loan program to owner-occupied buyers searching for income properties. The details are awesome so you will want to keep reading.

    This new program is aimed at people who want to invest in income property but also enjoy the benefits of home ownership – essentially killing two birds with one stone.

    In the past, we have had clients that have put 15% to 30% down on income properties to qualify as an owner-occupant. Furthermore, low down options were mostly limited to FHA loans with 3.5% down.

    And while the 3.5% down FHA loan is great, it really is only useful for duplexes.

    The reason being is that FHA made triplex and fourplex buyers qualify with a “self-sufficiency” test. In a nutshell, it means that buyers need the property to cash flow without their income or their owner-occupied unit included.

    In layman’s terms, if you bought a triplex with 3.5% down, the property needed to cash flow with just two units. This is essentially impossible to do in the South Bay and greater Los Angeles, not to mention most population centers in California.

    While we recently had a successful owner-occupied 3.5% down FHA duplex transaction in Lomita Pines last year, those clients would have had even more buying power to go after triplexes and fourplexes, probably in even more expensive locations like Redondo Beach, if the “self-sufficiency” test did not exist.

    The beauty is that those clients (and future clients) will now have that opportunity to buy three and four unit properties if they so choose.

    Finally, this new program can also be applied to refinances.

    The only downside is that Fannie Mae is not allowing for high-cost loan limits like the above section. So, that does limit things here as many triplexes and fourplexes are expensive throughout the South Bay.

    That said, it is a step in the right direction and hopefully in the future they will allow for high-cost loan limits if the program is successful.

    For now, these are the loan limits on 5% down loans with Fannie Mae:

    • $929,850 – Two Units
    • $1,123,900 – Three Units
    • $1,396,800 – Four Units

    I urge many of my clients to consider owner-occupying units as a great way to afford the South Bay housing market and to essentially “house hack” a great long-term cash flow investment with appreciation over time.

    Consider occupying a unit in a triplex or fourplex and using that rental income and your earned income to qualify for a low, 5% down mortgage.


    If you are interested in the above loan programs, I am happy to send you fabulous income property examples on how you can use these updated and new loan programs to your advantage.

    Additionally, property owners looking to sell should prepare their unit listings to appeal to owner-occupied buyers in these loan programs as they will likely net higher prices and more efficient sales.

    While many get lost in the luxury pricing of South Bay homes, there are plenty of duplex, triplex, and fourplex options in the Beach Cities, Torrance, and other great areas of the South Bay where you can cash in on these fabulous loan programs to create long-term wealth.

    Happy Holidays and I will see you next week for my final blog post of 2023.


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