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.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.