Fourplex Investing Using an FHA Loan
Hey BP! I have a question for anyone who understands FHA loans. My wife and I are looking to use an FHA loan to purchase a fourplex somewhere in Salt Lake or Utah County, but fourplexes are a little out of our price range. So here's my question: can I partner up with someone to buy the fourplex and still use the FHA loan? If so, does that person also have to be a first time homebuyer?
This question is best to ask your lender that you are pre-approved through. If you are still looking for lenders I know a few in the area as well.
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Real Estate Agent Utah (# 12669906-SA00)
I'm a lender! With FHA it needs to be a primary residence. Also for a 4-unit it needs to cashflow. This means the total rents on the property (for all 4 units) discounted to 75% per lending law need to be greater than your total PITIA payment. So to clarify, you cannot partner with someone unless you are living in it together. :)
Quote from @Madeline Malinovsky:Just for my knowledge as well. Do you mean living in it as in the same unit or just same property?
I'm a lender! With FHA it needs to be a primary residence. Also for a 4-unit it needs to cashflow. This means the total rents on the property (for all 4 units) discounted to 75% per lending law need to be greater than your total PITIA payment. So to clarify, you cannot partner with someone unless you are living in it together. :)
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Real Estate Agent Utah (# 12669906-SA00)
"Regarding down payments, theoretically a cosigner can help with a down payment for a homebuyer. However, most loan programs allow for gift funds from family so there’s really no reason to go through the trouble of having the family member cosign if they’re not required to."
https://www.swansonhomeloans.c....
You should be okay given the recent increases but FHA loan limits for Salt Lake and Utah County sit right around a million.
Salt Lake- $1,006,250
Utah- $977,500
Let me know if you have any more specific questions. I love talking real estate.
Hey Andrew, great question! The answer is no. They do not need to be first time homebuyers to partner up with you on a fourplex deal. The FHA loan is often marketed as a product for first time buyers because of the low down payment requirements but first time buyers and repeat buyers can leverage an FHA loan.
Feel free to reach out with any other questions!
Quote from @Carl Davis:Hi Carl - you do not need to live in the same unit! But all parties do need to occupy.
Quote from @Madeline Malinovsky:Just for my knowledge as well. Do you mean living in it as in the same unit or just same property?
I'm a lender! With FHA it needs to be a primary residence. Also for a 4-unit it needs to cashflow. This means the total rents on the property (for all 4 units) discounted to 75% per lending law need to be greater than your total PITIA payment. So to clarify, you cannot partner with someone unless you are living in it together. :)
@Lorenzo Prieto and @Logan McKay Zylstra I didn't realize there were limits to the FHA loans based on the number of units. I also thought that FHA loans were limited to first-time homebuyers. I was wrong. Great info!
Correct, you can use FHA loans for job changes, marital status changes, kids being born, etc. There are specific guidelines and exceptions to using FHA. In personally used an FHA loan on my second house hack.
Keep in mind that there is FHA insurance that is different from PMI and cannot be removed for the life of the loan. On my 525k purchase price it is costing me about $300 per month.
Quote from @Madeline Malinovsky:
Quote from @Carl Davis:Hi Carl - you do not need to live in the same unit! But all parties do need to occupy.
Quote from @Madeline Malinovsky:Just for my knowledge as well. Do you mean living in it as in the same unit or just same property?
I'm a lender! With FHA it needs to be a primary residence. Also for a 4-unit it needs to cashflow. This means the total rents on the property (for all 4 units) discounted to 75% per lending law need to be greater than your total PITIA payment. So to clarify, you cannot partner with someone unless you are living in it together. :)
Is this specific to FHA? I am currently buying a property with a 5% down conventional owner occupied loan and my partners will live in it, but I will not. Maybe there is away around all parties living in the property on the FHA as well. @Andrew Jensen, let me know if you want me to send you my lenders info.
Quote from @Masyn Grant Barney:
Quote from @Madeline Malinovsky:
Quote from @Carl Davis:Hi Carl - you do not need to live in the same unit! But all parties do need to occupy.
Quote from @Madeline Malinovsky:Just for my knowledge as well. Do you mean living in it as in the same unit or just same property
I'm a lender! With FHA it needs to be a primary residence. Also for a 4-unit it needs to cashflow. This means the total rents on the property (for all 4 units) discounted to 75% per lending law need to be greater than your total PITIA payment. So to clarify, you cannot partner with someone unless you are living in it together. :)
Is this specific to FHA? I am currently buying a property with a 5% down conventional owner occupied loan and my partners will live in it, but I will not. Maybe there is away around all parties living in the property on the FHA as well. @Andrew Jensen, let me know if you want me to send you my lenders info.
For conventional financing, all parties are not required to live in the property. Conventional financing allows "non occupied co-borrowers", so long as some parties on the loan are occupying the home, it can be closed as a primary residence (allowing a 5% down payment). There is also no cashflow rule with conventional financing.
@Madeline Malinovsky Makes sense. Thanks for the clarification.