FHA Loans Re: Multifamily Home

2 Replies

Hi All,

I am new to real estate investing and I'm having trouble finding some information about FHA loans, so maybe someone here with some experience can help?

I am looking to purchase a building with 4 units and occupy one of the units myself. I saw that FHA loans can enable the buyer to obtain a mortgage with a smaller down payment(3.5%). This intrigued me because it will give me some flexibility if I choose to make another deal, basically I don't want to tie up a lot of money if I don't have to. Is this a good reason to pursue an FHA loan?

When applying for an FHA loan certain requirements must be met in order to obtain the loan. The requirement in question is: Mortgage Payment Expense to Effective Income

the max ratio is 31%

Can one include rental income from the other units in the building in their "effective income"?

Yes, if your building has 4 units it is eligible for financing with an FHA loan, which do have low down payments. This is one of the cheapest ways to get started with less money down. The FHA just lowered the mortgage insurance premiums as well, making it an even better option.

There is also the Conventional 97 loan program that Fannie Mae just brought back. That involves a 3% down payment. You'll want to consider the pros and cons of both and see what you can qualify for. I think the FHA loan might still be easier to qualify for.

Thanks Nathaniel.  I will look into Fannie Mae for the alternatives that you suggested.

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