FHA Loan Question Regarding 75%

[Mark Malevskis]

Hello all, 

I had a question about the FHA 3.5% down payment loan. To my understanding, for instance if it is a 4 unit property, to qualify for this loan, 3 of the 4 units must cover the entire mortgage.

Does anyone know the exact requirements in terms of what 3 of the 4 units have to cover. Is it just mortgage, or PITI (principal, interest, taxes, and insurance)?

As far as I understand my income, does not really matter, if 3 units cannot cover the mortgage. 

I am a little confused on this, any clarification would be great. 

Thank you, 

Mark

[Chris Mason]

Originally posted by @Josh Dillingham:

I haven't heard of a self-sufficiency test for an FHA loan. this is surprising to me as properties with 4 units or less are treated like single family homes by banks so the rents they will generate don't come into play as they would with a large multifamily. when I bought a 3 unit with an FHA loan they never mentioned a self sufficiency test, but they did verify my income and savings to ensure I personally could cover the mortgage.

The self sufficiency test can't be done until the appraisal is back, and appraised market rents often have little bearing on true market rents (sometimes too high, sometimes too low), so it's common not to let the borrower know about this test (or many of the 100 other tests and boxes that must be checked) unless there's a problem. No use worrying about what you can't control... this isn't like "don't quit your job" or "don't finance a new car" where you can do - or not do - something that will impact the final outcome. The only thing you can do is get a good deal on the sticker price relative to rents, which you did, so the property passed the test without issue, and there was no reason to let you know that there is this specific worksheet (among 100 others) in your FHA loan file. :)