Can I Get an FHA Home Loan for a Multi-Unit Property?
June 30, 2023
There’s a wide variety of properties a house hunter can purchase with an FHA mortgage. Condos, manufactured homes, even new construction, which is much simpler these days thanks to the One-Time Close option available from some participating FHA lenders.
It’s easy to assume that the kind of home you can buy is a single-unit residence, but FHA home loan rules permit borrowers to buy properties with up to four living units.
Such FHA home loans are for owner-occupiers only. HUD 4000.1, the FHA single family home loan handbook, contains a rule stating the borrower must begin using the home purchased with an FHA loan within a specified time after closing (usually within 60 days). FHA borrowers must be owner-occupiers for a minimum of one year.
But FHA loan rules also permit owner-occupiers to buy multi-unit properties and rent out the unused living units. This raises an important question about the nature of the rental units-can the borrower convince a participating lender to factor in potential rental income and include it as part of the applicant’s debt-to-income ratio?
It all depends on whether or not the applicant has experience as a landlord or a history or receiving rental income. This would be handled on a case-by-case basis and your loan officer will need additional paperwork or documentation to justify considering such potential income.
Buying a multi-unit property in some cases is just like purchasing a single unit home with an FHA mortgage. Multi-unit properties must meet FHA minimum standards and pass an FHA appraisal, which should not be considered an FHA stamp of approval or a guarantee that the property is free of defects. That is the job of the optional (but very important) home inspection.
Multi-unit properties to be purchased with FHA loans are subject to the usual FHA minimum standards, just as with single-unit residences. Borrowers should expect to pay for the appraisal, negotiate with the seller over the cost of any required corrections or repairs that might be required as a result of the appraisal, and any compliance inspections.
Borrowers will find FHA down payment and credit requirements are the same for single-unit and multi-unit properties, but lender standards may vary. Be sure to ask your loan officer how FHA loans for multi-unit properties may differ with a given lender than from single-family units. State law and other requirements may also be a factor, especially for those interested in becoming landlords after the loan has closed.
------------------------------
RELATED VIDEOS:
A Few Tips About Your Fixed Rate Mortgage
Good Credit History Helps Get FHA Loans
Annual Income Requirements for FHA Loans
It’s easy to assume that the kind of home you can buy is a single-unit residence, but FHA home loan rules permit borrowers to buy properties with up to four living units.
Such FHA home loans are for owner-occupiers only. HUD 4000.1, the FHA single family home loan handbook, contains a rule stating the borrower must begin using the home purchased with an FHA loan within a specified time after closing (usually within 60 days). FHA borrowers must be owner-occupiers for a minimum of one year.
But FHA loan rules also permit owner-occupiers to buy multi-unit properties and rent out the unused living units. This raises an important question about the nature of the rental units-can the borrower convince a participating lender to factor in potential rental income and include it as part of the applicant’s debt-to-income ratio?
It all depends on whether or not the applicant has experience as a landlord or a history or receiving rental income. This would be handled on a case-by-case basis and your loan officer will need additional paperwork or documentation to justify considering such potential income.
Buying a multi-unit property in some cases is just like purchasing a single unit home with an FHA mortgage. Multi-unit properties must meet FHA minimum standards and pass an FHA appraisal, which should not be considered an FHA stamp of approval or a guarantee that the property is free of defects. That is the job of the optional (but very important) home inspection.
Multi-unit properties to be purchased with FHA loans are subject to the usual FHA minimum standards, just as with single-unit residences. Borrowers should expect to pay for the appraisal, negotiate with the seller over the cost of any required corrections or repairs that might be required as a result of the appraisal, and any compliance inspections.
Borrowers will find FHA down payment and credit requirements are the same for single-unit and multi-unit properties, but lender standards may vary. Be sure to ask your loan officer how FHA loans for multi-unit properties may differ with a given lender than from single-family units. State law and other requirements may also be a factor, especially for those interested in becoming landlords after the loan has closed.
------------------------------
RELATED VIDEOS:
A Few Tips About Your Fixed Rate Mortgage
Good Credit History Helps Get FHA Loans
Annual Income Requirements for FHA Loans
Do you know what's on your credit report?
Learn what your score means.
