FHA Self-Sufficiency Provision

[Francisco Feliz]

Hi everyone,

Is anyone familiar with the self-sufficiency test on FHAs with respect to buying a multi-family? I was told that it's a recent-ish provision that has made several FHA loans fall through. Apparently, 75% of "market rents" for the property needs to be greater than the PITI + PMI. Does anyone know what market rents FHA appraisers use and if we have any influence in showing them data for appropriate market rents? Also, is it true that they only count the bedrooms and the not the bathrooms for the rents? May have just misheard, since that sounds entirely unfair to me.

[Logan Allec]

I put together a spreadsheet here to help potential house hackers quickly analyze whether or not a 3- or 4-unit property qualifies under the self-sufficiency rule.  Remember, this rule only applies to triplexes and fourplexes; SFRs and duplexes do not have this requirement.  Also, the rule is 75% in some states and 85% in others, so make sure you toggle for that.

Determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search, especially in expensive markets like yours (Mass.) and mine (Cali.).  But it can be done.  You may just have to look a bit off the beaten path like I did--my 4-unit house hack is out in the boonies (about 50 miles from the heart of LA), but I got into it for a measly $15k down + $10k in repairs.  It probably won't appreciate like stuff in the middle of LA--though who knows what 30 years can do--but it beats kicking money out the door every month for rent.