House hacking with FHA

4 Replies

I recently read an article that stated FHA would allow possible rents as part of loan consideration. I was told by a loan officer that this is not the case.

Does anyone have any knowledge of this? Has anyone use an FHA loan for house hacking and if so was possible rent taken into consideration?

Im not sure if it was in reference to FHA specifically, but I recently spoke with a local lender in a similar vein.

The lender mentioned, when pre-approving me, that for an income (owner occupied duplex) property, my pre-approval would be based on market rents for the property, rather than my income.

Basically, I can get pre-approved for whatever I want, so long as the market study comes back with supportive rents.

I was surprised at this, and maybe even slightly alarmed. It was my understanding that properties with less than 5-units are treated as residential, and therefore income based lending.

Can anyone provide some color on this?

Sidenote: the lender also said rates (on small multis) are much better with FHA financing than with Conventional (PMI not included).

@Tyson Hartley & @Mitch H.

Generally the income qualification for the loan would be decided by the lending institution. In my experience it is very unlikely that a lender would take into account the rental income, unless they were already leased units. Some lenders, like Mitch said, will do a market report to determine what rent should be, but in my experience that is more used to judge the viability of the loan, not to raise the limit of what can be borrowed. Generally if you don't have tenants in place, and sometimes even if you do, don't count on your lending institution to include that income for purposes of approval. 

Adam

I just closed in CO on a 3-unit home in February. The lender would have used the existing leases as part of my qualification had I not had enough regular income on my own to qualify. The other lender I worked with mandated providing the rental income information. As long as you owner occupy, the way rents are used is up to your lender as far as I know.

If you need to use rents to qualify for a loan, you probably want to try a mortgage broker vs. a bank loan officer.  A mortgage broker should be able to offer a broader range of products.

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