Can I use the rental income if I bought a 4 unit with FHA?

4 Replies

I am getting pulled in all kinds of directions with really knowing if I can purchase a 4 unit as my primary residence with a FHA loan and be able to use the rental income as part of my DTI? Has anyone done this recently? I would love your feedback! Thank you :)

@Melissa Harris - I haven't been a mortgage broker in years. But from what I recall, FHA works similar to a conventional loan in this matter. They let you count the income from the other 3 units as qualifying income. But keep in mind they only count something like 70%. As an example, if all the units rented for $1,000 each, they might only count $2,100 towards qualifying income. This is to count for vacancy, repairs, etc.

Again, I haven't been in the mortgage business in a long time, but I also believe with a 4 unit, FHA caps the loan amount at 90%. I could be wrong, but its worth you doing some research on.

They will do a 4 unit with 3.5% down. They will use 75% of projected rents for your DTI. Projected rents being the lower of appraised rent or current rent (if current leases are in place). I just went through the process on a 4 unit that I did not end up buying. These are the numbers they used. A 3 or 4 unit must also meet the self sufficiency rule (75% of total projected rent must cover PITI plus mortgage insurance).

@Andrew Kerr thank you for your response! Yeah that is what I have heard alot too but 1 of my lenders that I refer out to alot of my clients, was telling me that I would not be able to use ANY of the rental income until I show it on my tax returns for 2 years. But then again she has never closed on a multifamily before, she has only done single families and single condos. I went and talked with another lender that has done these type of loans and he is telling me what you told me. So this helps me know that I need to shop around a little bit more on lenders and see if I can get more of the same answers. 

@Jeff Brower great information! I am happy to hear that you have actually gone through a similar situation and you are verifying that they do use 75% of projected rents for my DTI. I will have to shop around to find more lenders that do more of these type of deals and go from there! Thanks again.

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