FHA for single family condo vs FHA for duplex/triplex

Philadelphia, PA · Member since 2022 · 37 posts · 15 votes

This might be an obvious answer but which would be more feasible for someone that doesn't have a lot of money to put down; Using my FHA loan to purchase a large 1bd 1bth condo and renting it out both longterm/shorterm or Using my FHA loan for a duplex/triplex and house hack?

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Erik Browning

Lender · CO CA TX WA ID OR · Member since 2020 · 419 posts · 542 votes

Hey @Nicholas Williams good question, there is another layer on top of buying a triplex/4-unit with FHA vs. a duplex. It's called The Self-Sufficiency Test.

The Self-Sufficiency Test is only for 3-4 units; a duplex does not need to pass this test.

Also, this is for FHA ONLY.

You first start out with finding the total monthly payment: Principal, Interest, Taxes, Insurance, FHA's Mortgage Insurance Premium (MIP), and HOA dues (if any)

Then find out the fair market value of all rents. Either the appraiser will do this for you OR if there are existing lease agreements, those can give you the value.

Then you must multiply the fair market value of all rents by 0.75. Why 0.75? Because you are going to live in one (required owner occupancy), but also because the FHA is accounting for vacancies.

Lastly, you divide the total monthly payment / the fair market value of all rents.

If the value you get by that calculation is < 100%, you will qualify for the loan

If the value you get by that calculation is > 100%, you DO NOT qualify for the loan

The property needs to be able to sustain itself. Again, this is for FHA 3 and 4 units. You can use this when searching for prospective properties prior to reaching out to your lender. Also you can do it yourself in a handy calculator I created. Send me a DM and I'll send it over to you >> it looks like this:

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Aaron Gordy
Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
4y
@Nicholas Williams easy choice. Fha loan for the duplex. With a simple duplex you can learn the business of rental properties with the rental unit and your housing expense will be offset by the rent from the other side. Also don't forget about the tax benefits
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Andrew Garcia
Lender · Charlotte, NC · Member since 2022 · 739 posts · 410 votes
4y
Hi @Nicholas Williams, either way, it would be the same percentage of money down.
The amount would depend on the purchase price, not the property type.
A 1/1 condo should have a lower purchase price than a duplex or triplex.
You should be aware that if you are using an FHA loan, you will need to occupy the condo as your primary residence for at least one year.
Hope this helps! Let me know if I can be of any assistance.
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Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
4y
@Nicholas Williams-usa a FHA loan for a duplex/triplex and house hack...if you decide to buy the smaller condo - using conventional loan is likely better way to go

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
4y
@Nicholas Williams In many areas, the majority of condos are not eligible for fha, and many not eligible for conventional financing, due to investor owned percentages, reserves, renewal of fha certification, etc.
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Erik Browning
Lender · CO CA TX WA ID OR · Member since 2020 · 419 posts · 542 votes
4y
Hey @Nicholas Williams good question, there is another layer on top of buying a triplex/4-unit with FHA vs. a duplex. It's called The Self-Sufficiency Test.
The Self-Sufficiency Test is only for 3-4 units; a duplex does not need to pass this test.
Also, this is for FHA ONLY.
You first start out with finding the total monthly payment: Principal, Interest, Taxes, Insurance, FHA's Mortgage Insurance Premium (MIP), and HOA dues (if any)
Then find out the fair market value of all rents. Either the appraiser will do this for you OR if there are existing lease agreements, those can give you the value.
Then you must multiply the fair market value of all rents by 0.75. Why 0.75? Because you are going to live in one (required owner occupancy), but also because the FHA is accounting for vacancies.
Lastly, you divide the total monthly payment / the fair market value of all rents.
If the value you get by that calculation is < 100%, you will qualify for the loan

If the value you get by that calculation is > 100%, you DO NOT qualify for the loan
The property needs to be able to sustain itself. Again, this is for FHA 3 and 4 units. You can use this when searching for prospective properties prior to reaching out to your lender. Also you can do it yourself in a handy calculator I created. Send me a DM and I'll send it over to you >> it looks like this:
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