Financing 4 Plex with FHA guidelines

[John Chea]

Emailed to my loan officer today about an FHA Loan on a 4 Plex I planned to occupy. She has said some things that have me a bit confused.

"Yes we could actually do FHA with 3.5% down. You would have to occupy the entire property as your primary residence"

"If you are planning on renting it out, then you would need to purchase as an investment property. A couple questions for you to know if primary residence is an option, is it currently rented out & would any of the renters be staying? If any renters are staying, we would 100% have to proceed with the investment property purchasing guidelines."

It sounds like I won't be able to rent out the other units under FHA loan. Is this accurate?

[Roy N.]

I think there are mixed wires here.

As long as you live in one of the units of a residential property (1-4 units), then you should be eligible for an FHA loan (provided you meet the other criteria).

I've read conflicting criteria, some saying only 1 - 2 units are eligible for a 3.5% down payment while 3 -4 unit are 5% or more.  Others indicate that any residential property 1 - 4 units is eligible for a 3.5% down payment.

It's quite possible, individual lenders have their own policies which further restrict what they will lend as an FHA loan.

As an outsider, my familiarity with FHA loans is limited to confirming I'm not eligible and comparing them to the CMHC lending programme in Canada.

@Bill Gulley probably mutters the lending requirements in his sleep ;-)

[Edward A.]

Originally posted by @John Chea:

Emailed to my loan officer today about an FHA Loan on a 4 Plex I planned to occupy. She has said some things that have me a bit confused.

"Yes we could actually do FHA with 3.5% down. You would have to occupy the entire property as your primary residence"

"If you are planning on renting it out, then you would need to purchase as an investment property. A couple questions for you to know if primary residence is an option, is it currently rented out & would any of the renters be staying? If any renters are staying, we would 100% have to proceed with the investment property purchasing guidelines."

It sounds like I won't be able to rent out the other units under FHA loan. Is this accurate?

No, this is not accurate. As mentioned, different lenders have their own criteria. But generally, you can go the FHA route with a 1-4 unit property.

Keep communicating with different lenders to learn more about the whole process. Talk to at least 5 and you'll learn what is specific for a particular lender and what is allowed by FHA that most lenders follow.

[Jerry Padilla]

@John Chea

There are very specific guidelines with FHA. It must be your primary residence and you occupy one of the four units. The rental income or projected rental income (determined by appraiser) must support the mortgage payment minus a 25% vacancy factor as well. I am glad to forward more info on FHA financing to you.

[Steve Bracero]

@John Chea I believe an FHA loan you only have to live in one of the four units.... Talk to a few for lenders and see what they can do for you