Property Management Required For FHA?

Question

I found a 4-unit I want to buy with FHA to house hack. I'm a first time home buyer. My lender pre-approved me for it, but says that it's an FHA requirement for someone with less than 2 years of property management experience to use a property management company to manage any units they want to count income from into the debt to income ratio. I don't qualify for the property without the rental income.

Is this really a requirement? I’ve never heard of this before? Is there any way to get around hiring a property manager for a building I live in?

Lumi Ispas · Answer

@Art Maydan, that's a peculiar rule your lender has. Just changed your lender. Use @Brie Schmidts or PM and I'll send you someone also.

Art Maydan · Answer

My wife just got off the phone with the FHA help desk. They said to have the lender check the 4000.1 handbook. There is NOTHING that states you need a property management company.

Brie Schmidt · Answer

never heard of it either and I have had dozens of buyers house hack for their first using FHA.  PM me and I'll give you my lender's info

Nnabuenyi Anigbogu · Answer

I would use your current preapproval and place an offer today. After your contract is accepted you are not required to use that same lender. You can go and apply with another lender if they are not willing to work with you.

Also FYI if you have your documents in order, a good loan officer can get you a preapproval in one hour or less. It wont be a fully underwritten pre approval (most people don't get this anyway) it will be just a regular loan officer preapproval.

Art Maydan · Answer

So I can’t find anything about property management being an FHA requirement. My lender hasn’t sent me the information like he said he would over an hour ago. My broker says they received a verbal offer already and we should make an offer today, but won’t tell me why.

I feel like I’m being dicked around here, but this is a great deal I don’t want to miss out on and I don’t think I have time to find and get pre-approved from another lender today. This is a great deal and I don’t want to miss out. We might not find anything like this by August, when we have to have a Chicago address for my wife to be a teacher here. I don’t want to get locked into a lease and have to wait a year to buy.

If I go along with this, how enforceable is the property management clause? Can’t I just get a property manager and fire them in a few months? What would you do in my shoes?

Nnabuenyi Anigbogu · Answer

This is most definitely not a requirement i have ever heard of and i have utilized FHA for a 3 unit. It might just be an overlay by the bank the lender is working for. If they will not budge on this then best bet is to find another lender. Let me know if you need recommendations.