Bank FHA requiring 25% down

2 Replies


So I have been planning on purchasing my first property ever. My plan has been to buy a duplex or a triplex, be an owner occupant in one of the units, and put 3.5% down. Thinking this is very common with many banks I was hopeful. Iv come to find most of the banks I have talked to will require me to put down 25% regardless of occupancy, saying it's a new rule ALL banks are using. Has anyone els run in to this recently?



Hello Emerson, per FHA guidelines owner occupied 1-4 Units maximum LTV (Loan to Value) is 96.5%. You are good with 3.5% down. However with 3 & 4 unit properties there is an additional requirement - Self-Sufficiency test:

"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). The PITI divided by the monthly Net Self-Sufficiency Rental Income may not exceed 100 percent for three- to four-unit properties.

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."

In other words your Gross Monthly Rent x 75% or Gross Monthly Rent minus expenses (similar to income statement) has to be greater than monthly mortgage payment (Principle, Interest, Taxes, Insurance). 

Hope this helps :)

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