Financing A 2–4 Unit In Ravenswood

Thinking about buying a two to four unit in Ravenswood so rent from the other flats helps cover your mortgage? You’re not alone. These classic Chicago two and three flats are common here, and financing them follows a few special rules that can work in your favor. In this guide, you’ll learn which loans fit, how lenders count rental income, what appraisers look for, and which local programs can help with your down payment. Let’s dive in.

Why 2–4 units fit Ravenswood

Ravenswood is a North Side neighborhood known for pre-war two flats, three flats, and small apartment buildings that line its tree-shaded streets. That means you’ll find plenty of 2–4 unit options that lenders recognize as small residential income properties. Ravenswood’s housing stock makes this property type a natural fit.

Zoning and legal unit count matter. Chicago’s RT and RM districts typically allow two, three, or four flats by right, while many RS blocks are single family. Always confirm the property’s zoning and legal unit count early, since lenders and appraisers rely on it. You can review the Chicago Zoning Code overview as a starting point.

Short-term rental rules are strict in Chicago and often require owner occupancy in 2–4 unit buildings. If you plan to use FHA or VA financing, that owner-occupant requirement aligns with the loan programs.

Loan options at a glance

Conventional conforming loans

Conforming loans are popular because they follow standardized rules and often offer competitive rates. For 2025, the baseline multi-unit loan limits are: 2 units $1,032,650, 3 units $1,248,150, and 4 units $1,551,250. Verify limits for your exact address. You can review the 2025 conforming loan limits here.

Fannie Mae also updated its automated underwriting in late 2023, which led many lenders to offer lower down payment options for owner-occupied 2–4 unit purchases. In practice, some conventional programs go as low as 5 percent down for qualified buyers, subject to lender overlays and reserves. See coverage of the Fannie Mae LTV update.

FHA for owner-occupants

FHA insures mortgages for 1–4 unit properties when you live in one unit. The minimum down payment is 3.5 percent, and FHA 203(k) can finance needed rehab, which is helpful with older Ravenswood buildings. Check county loan limits and program details in HUD’s 2025 FHA announcement.

VA for eligible veterans

Qualified veterans can finance 2–4 unit homes with VA when they occupy one unit. Down payment can be zero for eligible borrowers, subject to entitlement, loan limits, and lender overlays.

Portfolio, jumbo, and investor loans

If you will not occupy a unit or need to borrow above conforming limits, portfolio, jumbo, or investor-focused programs may fit. Expect higher down payments and different underwriting standards, including debt service coverage ratio evaluation, for purely investment loans.

Renovation financing

If the building needs work, consider FHA 203(k) or a conventional renovation option like HomeStyle Renovation. Availability and terms vary by lender. Explore HUD’s overview of FHA-related programs, including rehab options.

How lenders underwrite 2–4 units

Using rental income to qualify

If you will live in one unit, most programs allow projected or documented rent from the other units to help you qualify. Lenders follow specific documentation standards, such as Form 1007 (Comparable Rent Schedule) and Form 1025 (Small Residential Income Property Appraisal). Review Fannie Mae’s rental income guidance to understand what documentation is expected.

Down payment and reserves

• FHA owner-occupied 2–4 units: 3.5 percent down, and lenders may require reserves for three and four unit properties.
• Conventional owner-occupied 2–4 units: some lenders offer as low as 5 percent down after the recent DU updates, but many require 6 to 12 months of PITI in reserves and stronger credit.
• Non-owner investor loans: typically larger down payments, often 15 to 25 percent or more.

Appraisal and income approach

For 2–4 unit properties, appraisers may develop both a sales comparison and an income approach. Expect Form 1025, a rent schedule, and requests for current leases if tenants are in place. Your lender may also ask for a rent roll to validate cash flow assumptions.

Property condition and repairs

Older Chicago buildings can trigger additional repairs to meet minimum property standards, especially with FHA. In some cases, lenders set aside repair escrows or require work before closing. When the scope is larger, financing the rehab with 203(k) or a conventional renovation product can keep the deal moving.

Budget the true monthly cost

Build a realistic operating budget before you write an offer. Include property taxes, insurance for multifamily, maintenance and reserves, utilities you will cover, any management fees, and a vacancy allowance. For taxes, review parcel-level history and appeals trends using the Cook County Assessor’s resources.

Assistance and local resources

Cook County Down Payment Assistance

Cook County’s Down Payment Assistance pilot provides subsidies equal to 5 percent of the purchase price up to $25,000 for eligible buyers. Funds are limited and often released in rounds. Many programs require owner occupancy. Check the current status on the county’s Down Payment Assistance Program page.

IHDA statewide programs

The Illinois Housing Development Authority offers “Access” down payment assistance options that can be paired with FHA, VA, or conventional loans for primary residences. Confirm property type and income limits with an approved lender. See IHDA’s lending programs.

A game plan for Ravenswood buyers

1. Get preapproved with a lender experienced in Chicago 2–4 unit loans. Ask about: rental income treatment, reserve requirements, appraisal forms, and any local overlays.
2. Confirm zoning and legal unit count. Order a zoning and permit check early to avoid surprises that can affect financing.
3. Underwrite the rents. Collect existing leases, and review market rent support. Plan for a conservative vacancy factor.
4. Model total payment and operating costs. Use recent Cook County tax history, estimate insurance, and set aside maintenance and reserves.
5. Pick your product. Compare conventional vs FHA vs VA vs portfolio based on down payment, limits, and whether you will occupy a unit.
6. Plan for appraisal and inspections. Prepare unit access and documents appraisers will request, and decide early if a renovation loan is needed.

Tips for Ravenswood sellers of 2–4 units

• Gather leases, rent rolls, and utility breakdowns for each unit. Buyers’ lenders will ask for them.
• Confirm legal unit count and zoning. Correcting an illegal unit late can derail financing.
• Address safety or deferred maintenance items that could trigger lender repairs. A clean inspection helps the appraisal and timeline.
• Provide recent tax bills and note any appeals. This helps buyers build accurate operating budgets.

Ready to run numbers on a specific building or talk through loan paths and timing? Connect with John Lyons for neighborhood-specific guidance and a clear plan from preapproval to closing.

FAQs

How much down payment do you need for a 2–4 unit in Ravenswood?

• For owner-occupants, FHA allows 3.5 percent down and many conventional programs offer as low as 5 percent, subject to lender overlays and reserve requirements. Pure investor loans typically require larger down payments.

Can rental income from other units help you qualify?

• Often yes. Lenders may credit projected or documented rent when you will live in one unit, but they require specific forms and may limit the amount if you lack rental history.

What loan limits apply to small multi-unit homes in Chicago?

• For 2025 baseline conforming limits: 2 units $1,032,650, 3 units $1,248,150, 4 units $1,551,250. Check limits for your exact address and loan type.

How are 2–4 unit appraisals handled?

• Appraisers typically use both sales comparison and income approaches, along with a rent schedule. Expect forms tailored to small income properties and requests for leases if occupied.

Can you use down payment assistance to buy a 2–4 unit?

• In many cases, yes, if you will occupy one unit and meet program rules. Cook County and IHDA offer assistance programs that can pair with common loan types for primary residences.