FHA Loan on a 4-plex?

Question

Upen Patel · Answer

@Lindsey Iskierka FHA loan is for owner occupied properties only. So the borrowers would have to owner occupy it for a min of 1 yr. If you are looking to buy the property as investment, then you can't qualify for a FHA loan or any other low down payment loan. For a 4-unit investment you have to put 25% down to get a Fannie/Freddie loan.

Upen Patel · Answer

The down payment has to come from you. Your funds can come from many sources - savings, investment, HELOC, HML/PML by putting up other property(s) as collateral. The point being that there can't be any other source of funding on the property you are getting the loan.

Brandon Sturgill · Answer

@Lindsey Iskierka Absolutely! It works essentially the same as a SFR. Just keep in mind that you  will need to certify a 1-yr owner occupant period...

...you can re-fi out of FHA and eliminate the original restrictions...there are a lot of lenders offering a 5% conventional now...it will save you on the upfront Mortgage Insurance Premium (MIP) associated with a FHA loan...and no owner occupant requirement. Just search for a knowledgeable lender and they can walk you through the entire process.

Preston Schmidt · Answer

Only Owner occupied duplex, triplex, and quad plex's work via FHA.

Albert Bui · Answer

Hi Lindsey,

If you're from long beach and this property is in Minneapolis then it will have to be non owner occupied.

If you take it on with private or hard money you might be able to buy it below market, repair, then refinance it out with a conventional loan after but make sure your loan payoff will be at 75% LTV or lower so that you wont have to bring in any extra cash to pay down the loan to 75% LTV.

Max LTV for fourplex is 75% for rate term refinance no matter if its primary residence or non owner occupied.

FHA will not be an option in 99.9% of cases since you'll have to prove occupancy and being over 2000 miles away won't exactly help unless you're a pilot and you fly in and out of LAX or LBX into Minneapolis, MN every other day and can prove you'll be living there the predominant portion of the year along with many other FHA requirements like self sufficiency rule, 3 months reserves PITIA, and etc.

If you have any additional questions

George Despotopoulos · Answer

@Riquelmi De La Rosaq gives you some good info in his post @Lindsey Iskierka I wanted to quickly chime in so you know for future deals.

Your recent post seemed like you were asking if you could obtain two sources of financing on one property, with one source for funds being a private lender or hard money lender. Please correct me if I misread, but I just wanted to clarify that it would be unusual for this occur as many private and hard money lenders have a requirement that they are the first lien-holder on the property (in other words their lien is the first one recorded in the property records and above all else). Also, usually, after becoming the first lien holder, the lender, through their closing documents which you sign and acknowledge, typically does not allow for subordinate financing. This means that as a condition of them funding your loan, you promise to not purposefully put any other liens on the property after you close. If you do, you risk acceleration of the debt and subsequent foreclosure.

This question comes up often, so even if I'm mistaken perhaps it will help others on the forum. We see this come up when a borrower purchasing a property wants to finance partly with the seller and partly with us. Almost always the seller will want to have a mortgage on the property, as security for their loan, until it is paid off. While in theory it would be a great way for a purchaser to fund their deal, we as a lender wouldn't allow it. This is for many reasons, but primarily it increases risk and exposure to us the lender.

Riquelmi De La Rosaq · Answer

If you are going with Fannie? No, Fannie wants you to have the 25% down plus 6 months reserves for a 4-plex. This means you can't have the seller hold a note for part or all of the down payment. You can't use HM or PM either. Now IRA/Annuity/Savings are all good. But you must show proof that it's coming from those accounts so have statements ready showing that the money has been in those accounts for months.

Lindsey Iskierka · Answer

@Upen Patel

I understand now the requirement to live in the property for a minimum of 1 year.  We'll have to strategize another way to acquire financing.  If we were to do 25% down with the down payment coming from a private lender or hard money lender, would that be approved? Or does it have to come from personal accounts/IRA/savings, etc?

Lindsey Iskierka · Answer

It's out of state in Northern Minnesota. It's the next city we'd like to invest in and purchase rental property.

Kyle Murphy · Answer

@Lindsey Iskierka is the property in socal or out of state?

FHA Loan on a 4-plex?

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