Lenders for an FHA 4plex with 3.5% down?

12 Replies

I've been running into a wall where the lenders I've contacted about getting an FHA loan for a multifamily will only work with duplexes maximum with a 3.5% down payment - for a 3/4-plex, they require 20-25% down. From reading these forums for a few years, I feel like that's got to be an anomaly, so I'm wondering if anyone can point me in the direction of a good lender/contact who can finance 3/4-unit multifamilies with a 3.5% FHA loan?

Originally posted by @Steven Picker:

@David A. As long as you are living in one of the units as your primary residence it qualifies for FHA.

Right, unfortunately the issue I'm running into is banks won't work with 3/4-plexes with a 3.5% down payment. They'll take on FHA loans for 3/4-plexes, but at 20-25% down payment.

 

I see you are in CT. Are there even 3/4 units that exist that meet the FHA Self Sufficiency test? That might be the issue you are running into unknowingly.

Originally posted by @Russell Brazil :

I see you are in CT. Are there even 3/4 units that exist that meet the FHA Self Sufficiency test? That might be the issue you are running into unknowingly.

I don't think so - again, the banks are straight-up telling me that for a 3/4-plex FHA purchase, I need to put 20-25% down. I'm encountering this in the pre-approval process.

 

@David A. The other part still remains, are there 3/4 units in your location that meet the self sufficiency test? Because there is no point in attempting to buy a 3/4 unit with FHA if none that meet the test exist in your market. In most high priced markets, the properties wont meet the test.

Originally posted by @Russell Brazil :

@David A. The other part still remains, are there 3/4 units in your location that meet the self sufficiency test? Because there is no point in attempting to buy a 3/4 unit with FHA if none that meet the test exist in your market. In most high priced markets, the properties wont meet the test.

There are, but again - I'm running into this in pre-approval, before the banks are asking me where I'm looking or what my price range is, I'm just finding most banks I've tried working with will not lend at 3.5% down on 3-4plexes. 

Originally posted by @Russell Brazil :

I see you are in CT. Are there even 3/4 units that exist that meet the FHA Self Sufficiency test? That might be the issue you are running into unknowingly.

 What is a 3/4 unit ? never heard of it  duplex.triplex,quadplex  3/4?

@David A. Essentially, FHA is stricter when it comes to 3-4units, and they want to ensure that 75% of the income will be more than the monthly mortgage payment.

For instance, if the total rent you get is $1,000, then the mortgage should not be more than $750 and of course, you must prove that you will occupy one out of the 4 units. (Self-Sufficiency Test)

To conclude, yes, you may be facing this issue at the pre-approval stage because the lenders are anticipating the self-sufficiency issue hence the roadblock. I'm sure if you are able to meet the criteria and find a mortgage broker who can help you along, then you can make something happen with some persistency. 

@David A.

Are you trying to use a co-signer?

FHA requires that large of a down payment when using a co-signer on a multi-family property.

You can do just 3.5% down if you are not using a co-signer on a 3-4 unit. 

I'm not in need of a co-signer and can definitely meet the 75% rule. If anyone can forward me names of banks who will lend at 3.5% down, I'd appreciate it!