Buying a Multi-Unit Home With an FHA Mortgage
October 12, 2022
Many new house hunters consider purchasing property with an FHA mortgage loan that is bigger than they currently need-they anticipate a bigger family, needs for a hobby room or home office, etc.
Depending on your financial needs and goals, buying a multi-unit property with an FHA mortgage makes sense. After all, the FHA down payment requirements and FICO score rules are the same whether you are buying a single-unit home as a starter home or when purchasing a property with as many as four living units.
FHA Loan Rules for Multi-Unit Properties
The FHA loan rules for purchasing a multi-unit property as a first-time home buyer or experienced homeowner can be found in HUD 4000.1. FHA loan rules permit the purchase of a home with no more than four living units.
Occupancy is a requirement for any property you buy with an FHA single-family mortgage loan whether you are a first-time buyer or not. FHA loan rules require a minimum of 3.5% down, though seller contributions to closing costs (when negotiated with the seller) can help a new borrower better afford that down payment.
FHA loans state that it’s permissible to rent out the unused living units in your new home but you are required to live in one of the units as your primary residence, and your rental agreement must be long-term. No Air b-n-b operations are permitted with homes purchased with an FHA mortgage.
Those who want to use the home for Air b-n-b type rentals would need to refinance the FHA mortgage into a conventional loan to do so.
Multi-Unit Properties and FHA One-Time Close Construction Loans
Did you know that first time home buyers are eligible to apply for an FHA construction loan to have a home built from the ground up? FHA loan rules technically permit multi-unit properties to be financed for construction with an FHA mortgage, but you will need to check with your loan officer to see if this is permitted by the lender.
Some lenders will only allow the construction of single-unit properties with an FHA One-Time Close loan, also known as an FHA construction-to-permanent loan. Some, but not all lenders may allow these construction loans for the purpose of buying a modular or manufactured home and having it assembled on the lot where it will be affixed to a permanent foundation.
You will need to ask your lender if these options are possible based on that financial institution’s standards.
FHA, VA, and USDA: One-Time Close Loans
Want More Information About One-Time Close Loans?
We have done extensive research on the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
FHA.com provides information and connects consumers to qualified One-Time Close lenders to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.
Contact Us: Send Us Your Request – Spam Safe
Please send your email request to [email protected] which authorizes FHA.com to share your personal information with one mortgage lender licensed in your area to contact you.
1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $1,000,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
Depending on your financial needs and goals, buying a multi-unit property with an FHA mortgage makes sense. After all, the FHA down payment requirements and FICO score rules are the same whether you are buying a single-unit home as a starter home or when purchasing a property with as many as four living units.
FHA Loan Rules for Multi-Unit Properties
The FHA loan rules for purchasing a multi-unit property as a first-time home buyer or experienced homeowner can be found in HUD 4000.1. FHA loan rules permit the purchase of a home with no more than four living units.
Occupancy is a requirement for any property you buy with an FHA single-family mortgage loan whether you are a first-time buyer or not. FHA loan rules require a minimum of 3.5% down, though seller contributions to closing costs (when negotiated with the seller) can help a new borrower better afford that down payment.
FHA loans state that it’s permissible to rent out the unused living units in your new home but you are required to live in one of the units as your primary residence, and your rental agreement must be long-term. No Air b-n-b operations are permitted with homes purchased with an FHA mortgage.
Those who want to use the home for Air b-n-b type rentals would need to refinance the FHA mortgage into a conventional loan to do so.
Multi-Unit Properties and FHA One-Time Close Construction Loans
Did you know that first time home buyers are eligible to apply for an FHA construction loan to have a home built from the ground up? FHA loan rules technically permit multi-unit properties to be financed for construction with an FHA mortgage, but you will need to check with your loan officer to see if this is permitted by the lender.
Some lenders will only allow the construction of single-unit properties with an FHA One-Time Close loan, also known as an FHA construction-to-permanent loan. Some, but not all lenders may allow these construction loans for the purpose of buying a modular or manufactured home and having it assembled on the lot where it will be affixed to a permanent foundation.
You will need to ask your lender if these options are possible based on that financial institution’s standards.
FHA, VA, and USDA: One-Time Close LoansWant More Information About One-Time Close Loans?
We have done extensive research on the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
FHA.com provides information and connects consumers to qualified One-Time Close lenders to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.
Contact Us: Send Us Your Request – Spam Safe
Please send your email request to [email protected] which authorizes FHA.com to share your personal information with one mortgage lender licensed in your area to contact you.
1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $1,000,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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