Buying owner occupied 4-plex with FHA or VA loan

[Lyuba Barrington]

Hello everyone!

I think I've read everything (on BP forums) regarding 4-plex bought by owner-occupant.

Question: Does anyone have recent experience with VA or FHA loan on a property like that?

My buyer is concerned about his cash to closing requirements, which are hitting close to 10% on 280K loan.

Apparently - regular SFH 6% seller assistance allowance for FHA loans is not applicable in 4-plex situation - hence full closing costs to pay. There is also 3 month PITI reserve requirement. Can anyone comment on that please?

Also - how would FHA compare to VA zero % loan - in regards cash to closing calculation (for another potential buyer). I assume there are all kind of restriction on closing costs as well.

Thanks in advance!

[Lyuba Barrington]

Originally posted by @Bryan O.:

FHA 3-4 Units

(3) Three to Four Unit A three- to four-unit Property is a Single Family residential Property with three to four individual dwellings. The Mortgagee must obtain a completed form HUD-92561.

Self-Sufficiency Rental Income Eligibility

(a) Definition Net Self-Sufficiency Rental Income refers to the Rental Income produced by the subject Property over and above the Principal, Interest, Taxes, and Insurance (PITI).

(b) Standard: The PITI divided by the monthly Net Self-Sufficiency Rental Income may not exceed 100 percent for three- to four-unit Properties.

(c) Calculation Net Self-Sufficiency Rental Income is calculated by using the Appraiser’s estimate of fair market rent from all units, including the unit the Borrower chooses for occupancy, and subtracting the greater of the Appraiser’s estimate for vacancies and maintenance, or 25 percent of the fair market rent.

Essentially - for 4-unit building - the most $$ of self-sufficiency income is in fact the income from 3 non-owner units @ market rate. So.. I did remember the rule backwards. It seems to prohibit projected rental loss instead. Yes - VA loan would fare better in this case.